Stock – How do capital gains work for transferred stock?
By admin in Finance FAQ | 4 comments
Stock Question by stephymarie13: How do capital gains work for transferred stock?
I received IBM stock as a gift from my grandmother (under the taxable gift amount). We cashed the stock in shortly after. When we went to have our taxes prepared, we were told we would need the cost basis from when my grandmother purchased the stock. When I called IBM, they told me I would only need the cost from the date of transfer. Who is accurate?
Best answer:
Answer by tro
since it was gift to you, your basis is 0
had you inherited the stock the basis at the transfer would be effective but you say this is a gift, and I don’t know anyone who pays for a gift (other than Jesus Christ)
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Wayne Z | Dec 29, 2011 | Reply
Gifts are valued at the price that the person who gave them to you paid?
Inheritances are valued as of the date of death.
Your tax preparer is correct.
mrreliable3599 | Dec 29, 2011 | Reply
The recipient’s cost basis of stock received as a gift is the lower of cost or Fair Market Value at the time of the gift.
A person on the phone at IBM is not going to understand tax law, which is obvious from their erroneous advice.
I use “Historical Stock Quotes” often. Especially in situations like this, where the actual cost of the stock might not be available because it was so long ago, if you can come up with a date, you can search for historical stock quotes to find out what the price was on a given day.
Try http://bigcharts.marketwatch.com/.
KlemKiddleHopper | Dec 29, 2011 | Reply
Granny can claim from purchase price to transfer price (to you) loss or gain
You would value the stock on the effective date of transfer to you and the value
when you received payment for the stock – if more than date of transfer you have
a capital gain – if less – you have a loss -
Most likely the little time you kept the stock – there was not that much change in
value
kelby7670 | Dec 29, 2011 | Reply
The tax preparer is correct. You need to check historical quotes for the stock and figure out the best you can how much your grandmother paid for the exact stock that she gave you. That is it’s basis. I am sure that IBM did not understand you question.
This year I sold some stock that my grandfather bought in 1912. The basis of the stock was its value in 1969 when my mother inherited it because inheriting stock does change it’s basis to the value at that time. When she gave it to me in1985, it’s basis did not change. It ended up that the basis dropped below 0 due to non-dividend distributions. That’s like saying I was paid to take the stock.