8207 Shares of Dell stock

[vd257]

What is the name of your state? My state is Texas, and my sister who is in bad health has turned over to my mother 8207 shares of Dell stock with a current share price of $40.09 each. She wants us to " Have Fun " and pay off my mom's house, pay off credit cards and just enjoy life. But.... one can not do that with the fear of the IRS looking over there shoulder. My question is what are our tax burdons going to be if we start selling some of these shares ?

 

[anteater]

What does "turned over" mean? Did sister actually make a gift of the shares to someone -- as in, actually transferring ownership? Whose names are the shares in now? If sister actually made a gift of the shares, she needs to file a gift tax return.

One way or the other, it depends on what sister's cost basis in the shares is, how long the shares have been held (more than a year or less than a year), and what tax bracket the actual owner is in when the shares are sold. Cap gains tax is owed on: Net Sales Proceeds minus Cost Basis. If the shares sold have been held for less than a year, the gain is short-term and taxed at ordinary income tax rates. If held for more than a year, the gain is long-term and taxed at either 5% or 15%.

For what it is worth, if sister is in danger of passing away, a better strategy may have been to dispose of the shares in her will or putting a designated beneficiary on the brokerage account or adding a co-owner as joint tenant with right of survivorship. When someone acquires assets as a beneficiary of a decedent, the cost basis is "stepped-up" to the value of the asset on the decedent's date of death.

 

[vd257]

Reply

The shares have been transfered into my mothers name in a Charles Schwab account as of 2/28/05. Sister worked for Dell the first 10 year of business and has not worked for years. Sister is on disability and just wanted my mother who is 70 to enjoy her life to the fullest. She has sold 600 shares to give me and my wife each $11,000 just cause. Will I need more then H & R Block next year at tax time ? This seems like more stress then my mother needs. Money does not bring happiness it seems.

 

[anteater]

Oh, I don't know. $320,000 of stock as a gift goes a long way to easing stress.

H&R Block ought to be plenty capable of handling it. But they are going to make the same request as any other tax preparer: we need to have some documents on how your sister obtained the shares and when in order to figure out the cost basis. If the gift and your Mother's sale of the shares was in 2005, at least you have a year to find the records.

 

[vd257]

Thanks

H. R. Block here I come, The better news is that there is still $385,000 in my sisters Van Guard accounts, That we are beneficiaries of. She is one of those " Dellyenaires"

 

[anteater]

Just remember, as in all things, H&R has people of varying knowledge and skill. Your situation is not all that tricky, but if the person you speak to at H&R doesn't talk in terms of.....

1) Mother having the same cost basis as sister since it was a gift
2) The need to discover sister's cost basis, which might be a bit complicated if sister acquired the shares through stock grants or options
3) Sister should be filing a gift tax return

..... then ask for someone more knowledgeable.