Stock transfer form question re: basis - from joint tenant account to revocable living trust

[Island_Dreamer]

What is the name of your state? CALIFORNIA

My husband and I are creating a joint revocable living trust with both of us named as trustees, and we need to transfer assets to the trust. Current stock registration is as joint tenants. ("Community property" was not an option on the paperwork when the account was opened.)

On Computershare's transfer form, Line 10 is titled "Purpose for Transfer/Cost Basis Data." There are four choices: (1) Private Sale (must provide date of sale/cost per share), (2) Gift (must provide date of gift), (3) Inheritance (must provide date of death/value per share), or (4) No Change of Ownership (please specify).

The explanation for the "No Change of Ownership" option reads: "Change of name in cases of marriage or divorce, minor coming of age, addition of spouse to registration, etc. Existing cost basis of shares will be carried over to the new account."

Although "trust" is not mentioned in the instructions quoted above, "No Change of Ownership" seems like the most logical choice to me. Agree or disagree? But another stock holding company's paperwork does NOT include that option. It gives only three choices: (1) Private Sale (date of sale/cost per share), (2) Gift, or (3) Inheritance (date of death/FMV). What to do there?

We want all shares transferred from the existing joint tenants account to the new revocable living trust, and we want all existing cost basis to be carried over to the new account. We don't want this transfer to trigger a taxable event!

Which box do we check??? Also, would a 1099 be sent to us as a result of this transfer?

Any assistance would be most appreciated!

 

[TrustUser]

i think i would call the brokerage company. a transfer to a revocable grantor trust does not trigger a change in basis.

 

[Taxing Matters]

The transfers of property by the grantors of a revocable living trust to that trust are not a taxable event. For federal and California income tax purposes that trust is invisible and the assets are viewed as continued to be owned by the grantors directly. But outside of the world of tax, the transfer is real event — you are effectively making a gift of the property to the trust. So long as the shares are currently worth more than than the basis selecting gift on the form will not present any problems since the basis the donee gets in a gift is the lower of the donor's basis or the value of the gift at the time it is made. In other words, the tax law generally gives the donee the same basis in the gift that the donor had but does not allow a donee to get a built in loss on a gift. So if the investments are at a loss you need to be careful to ensure that the broker does not wipe out the loss in its records if you choose gift as the type of transaction.

You should discuss with each broker how they process the various options to ensure that you choose an option that ensures that (1) the basis remains unchanged and (2) that their records will show the trust as the owner of the assets.

 

[Island_Dreamer]

TrustUser and Taxing Matters, thanks for your replies!

I have contacted the three brokers via email. One told me that I don't need to fill out the section regarding basis and that cost basis for covered shares will transfer to the new account/registration. The other two brokers haven't responded yet.