I sold about $10k worth of stock (mutual funds). This money was left to me as a gift by a family member before she passed to avoid additional taxation. Will I only pay capital gains/losses or will I need to pay normal income tax on it, ie 15% (or more/less depending on my bracket)?
Garret - the key language in your question "...before she passed" is what should determine the tax treatment. You are required to determine the gain or loss on the the funds by comparing the sale price with the original cost basis. For gifted property, this is usually the original acquisition price before it was gifted to you. It is referred to as the carryover basis and applies in a case of regularly gifted property, including stocks and other securities. If you had inherited the securities, there would typically be a step-up in basis to the current market value at the time of the decedent's passing, which benefits the tax payer in most cases. The tax rate, however, will be the capital gains tax rate that applies (either short-term or long-term, depending on the holding period), not the ordinary income rate. Keep in mind that this answer should not be considered tax advice, and you are encouraged to consult with your own tax advisor.
One thing to consider is that the markets were slammed in 2008, and didn't start to rebound right away. You may not have to pay as much taxes as you think. Also, how will the IRS find the cost basis?