Question about cost basis

[isis297]

What is the name of your state (only U.S. law)? NY

When my mom died, some stocks she had with MetLife were transferred to me. I needed to sell them.

My tax preparer asked me to call them and find out what the cost basis is because she isn't sure if I'm supposed to be taxed on the net proceeds. (That's what the 1099B form days and no federal income tax was withheld.)

When I called MetLife, they said if I had bought the stocks it would be on the whole thing but when they are acquired through after death transfer that changes the cost basis. They aren't allowed to say anything else except to ask our tax preparer.

So how do I find out what the cost basis is? Do I get to write off the $100 fee I had to pay for not having access to someone with a Gold Medallion Seal?

Thank you.

 

[tranquility]

Look to the stock market on the date your mother died. Take the average between the high and the low price point (Add them together and divide by two.) of that day as your basis. You might have to look to see if the stock split or otherwise changed numbers (Perhaps through dividend reinvestment.) during the time you held it to make sure. As to the $100, at best (At best as we might claim tax prep fees.) you will put it under miscellaneous on schedule A. How much do you have in miscellaneous deductions now?

 

[isis297]

She died on a Saturday so I'm guessing I use Friday's numbers. If so, they went down in value between them and when they sold. How do I manage that?

Also, I just found on the form where it says "Cost Basis Method: FIFO". Does that affect anything?

I'm not sure I have any other miscellaneous fees.

 

[isis297]

And I use the day she died, not when they were "officially" transferred, right?

 

[tranquility]

She died on a Saturday so I'm guessing I use Friday's numbers. If so, they went down in value between them and when they sold. How do I manage that?

Then, I would use Friday's closing.

Also, I just found on the form where it says "Cost Basis Method: FIFO". Does that affect anything?

Nope, the step up in basis happened all at the same time.

I'm not sure I have any other miscellaneous fees.

Then, I would count the $100 as a learning experience.

And I use the day she died, not when they were "officially" transferred, right?

Yes.

 

[tranquility]

FIFO is first in, first out. That means if she bought stock on multiple days, you use the basis from each purchase date, from the first batch through to the last when making a list of the basis.

The stock was transferred to the OP with the death of her mother. The basis is stepped up at the time of death. FIFO is irrelevant to the OP's determination of her basis. (Absent dividend reinvestment or the like.)

 

[isis297]

So what do I use as the cost basis especially in light of the value going down?

 

[OHRoadwarrior]

http://www.kiplinger.com/article/taxes/T055-C001-S002-cost-basis-for-inherited-stock.html

The FIFO method would be more for large estates This answers your last question also.

 

[tranquility]

http://www.kiplinger.com/article/taxes/T055-C001-S002-cost-basis-for-inherited-stock.html

The FIFO method would be more for large estates This answers your last question also.

No. Stop it. You are not helping.

All the article says is that an alternate valuation date of six months after death can be chosen. Not by the beneficiary, but by the executor who has to value all assets by the alternate date. Again, that is not the OPs issue. As to the large estate exception for 2010, it has to do with the law of the time called carryover basis rather than stepped basis.

To the OP, do what I said. Give that basis to your tax preparer who will know what to do. (You will take a loss. There are limits to how much you can take on your return this year. If you have more, you then have a carryover for future years.)

OP Edit:
I take it back. Apparently, the post DID help.

 

[isis297]

Thank you both! I got from the article what I needed and was just about to ask if it would count as a loss then. Thank you.

 

[davew128]

If your tax preparer didn't know the fundamentals on how to find cost basis in this situation, you should find another preparer.