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Cost Basis : Inherited Stocks Joint Tenancy

 
 
bpowder66
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      08-29-2003, 05:41 AM
Example:

Husband and wife own 5000 shares of stock at 10.00 per
share, Jointly with rights of survivorship. They live in a
NON Community property state.

Husband dies and wife get the stock. DOD Value is 30.00 per
share.

As I understand Joint tenancy the Wife's basis on the stock
would be equal to 1/2 the stepped up basis and 1/2 her
original basis.

The question I have pertains to the selling of this stock.
To calculate the basis when say 1000 shares are sold, Can
you say that the 1000 shares were owned by her ( even though
there is no proof of that)at a basis of 10.00 per share or
do you calculate the new basis on a PER SHARE BASIS. So the
new basis per share would be 20.00 ( 10 + 30 /2)

Similar questions have been posted on this before, but I
need to find the IRS Code or reg or PRL that says "the new
basis for stocks should be calculated on a per share basis.

Thanks for your help, in advance

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Phil Marti
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      08-30-2003, 05:59 AM
(E-Mail Removed) (bpowder66) writes:

> The question I have pertains to the selling of this stock.
> To calculate the basis when say 1000 shares are sold, Can
> you say that the 1000 shares were owned by her ( even though
> there is no proof of that)at a basis of 10.00 per share or
> do you calculate the new basis on a PER SHARE BASIS. So the
> new basis per share would be 20.00 ( 10 + 30 /2)
>
> Similar questions have been posted on this before, but I
> need to find the IRS Code or reg or PRL that says "the new
> basis for stocks should be calculated on a per share basis.


I'd be surprised if there is one. Although it can be
dangerous to apply logic to taxes, how in the world could a
block of 5,000 shares, all purchased at the same time, have
anything but an equal per share basis?

Phil Marti
Topeka, KS

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Arthur Kamlet
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      08-30-2003, 06:19 AM
bpowder66 <(E-Mail Removed)> wrote:

> Example:
>
> Husband and wife own 5000 shares of stock at 10.00 per
> share, Jointly with rights of survivorship. They live in a
> NON Community property state.
>
> Husband dies and wife get the stock. DOD Value is 30.00 per
> share.
>
> As I understand Joint tenancy the Wife's basis on the stock
> would be equal to 1/2 the stepped up basis and 1/2 her
> original basis.


Right. This applies to all jointly held shares.

> The question I have pertains to the selling of this stock.
> To calculate the basis when say 1000 shares are sold, Can
> you say that the 1000 shares were owned by her ( even though


Shares held JTWROS automatically transfer to the survivor on
death of the other joint tenant.

> there is no proof of that)at a basis of 10.00 per share or
> do you calculate the new basis on a PER SHARE BASIS. So the
> new basis per share would be 20.00 ( 10 + 30 /2)
>
> Similar questions have been posted on this before, but I
> need to find the IRS Code or reg or PRL that says "the new
> basis for stocks should be calculated on a per share basis.


See IRS Pub 550 and 551 if you still have questions.

Since all shares were jointly held they all received a
new basis on death.

__
Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH

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Dave Woods, EA
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      08-31-2003, 09:36 PM
"Arthur Kamlet" <(E-Mail Removed)> wrote:
> bpowder66 <(E-Mail Removed)> wrote:


>> Example:
>>
>> Husband and wife own 5000 shares of stock at 10.00 per
>> share, Jointly with rights of survivorship. They live in a
>> NON Community property state.
>>
>> Husband dies and wife get the stock. DOD Value is 30.00 per
>> share.
>>
>> As I understand Joint tenancy the Wife's basis on the stock
>> would be equal to 1/2 the stepped up basis and 1/2 her
>> original basis.


> Right. This applies to all jointly held shares.


>> The question I have pertains to the selling of this stock.
>> To calculate the basis when say 1000 shares are sold, Can
>> you say that the 1000 shares were owned by her ( even though


> Shares held JTWROS automatically transfer to the survivor on
> death of the other joint tenant.


>> there is no proof of that)at a basis of 10.00 per share or
>> do you calculate the new basis on a PER SHARE BASIS. So the
>> new basis per share would be 20.00 ( 10 + 30 /2)
>>
>> Similar questions have been posted on this before, but I
>> need to find the IRS Code or reg or PRL that says "the new
>> basis for stocks should be calculated on a per share basis.


> See IRS Pub 550 and 551 if you still have questions.
>
> Since all shares were jointly held they all received a
> new basis on death.


I would investigate differently. Quite possible depending
on who provided the funds to purchase the stock, that you
could get a 100% basis stepup.

--
David M. Woods, EA
Boston, MA 02109

Postings here are general information only and not to be
relied upon as advice.

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A.G. Kalman
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      08-31-2003, 09:55 PM
(E-Mail Removed) (bpowder66) wrote:

> Example:
>
> Husband and wife own 5000 shares of stock at 10.00 per
> share, Jointly with rights of survivorship. They live in a
> NON Community property state.
>
> Husband dies and wife get the stock. DOD Value is 30.00 per
> share.
>
> As I understand Joint tenancy the Wife's basis on the stock
> would be equal to 1/2 the stepped up basis and 1/2 her
> original basis.
>
> The question I have pertains to the selling of this stock.
> To calculate the basis when say 1000 shares are sold, Can
> you say that the 1000 shares were owned by her ( even though
> there is no proof of that)at a basis of 10.00 per share or
> do you calculate the new basis on a PER SHARE BASIS. So the
> new basis per share would be 20.00 ( 10 + 30 /2)
>
> Similar questions have been posted on this before, but I
> need to find the IRS Code or reg or PRL that says "the new
> basis for stocks should be calculated on a per share basis.
>
> Thanks for your help, in advance


I can't give you a citation but I can tell you how I have
seen it accomplished in a brokerage account. 1. Upon the
death of the joint tenant, the survivor created a separate
account for the assets that had a step up in value. 2. Upon
informing the investment company to rename the account, the
survivor also informed them to change the cost basis on the
assets that were stepped up in value.

Once that was accomplished the survivor could use the
specific identification method when selling any of the
assets.

Alan
http://taxtopics.net

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Martha Matthews, EA
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      09-04-2003, 08:54 AM
"A.G. Kalman" <(E-Mail Removed)> wrote in

SNIP

> I can't give you a citation but I can tell you how I have
> seen it accomplished in a brokerage account. 1. Upon the
> death of the joint tenant, the survivor created a separate
> account for the assets that had a step up in value. 2. Upon
> informing the investment company to rename the account, the
> survivor also informed them to change the cost basis on the
> assets that were stepped up in value.
>
> Once that was accomplished the survivor could use the
> specific identification method when selling any of the
> assets.


IMHO the method above would be the only way to be able to
identify the stock sold. If kept in one account the basis of
one share would be half the original basis plus half the new
basis: Original = $5 DOD = $10 New = $7.50.

Martha S. Matthews, EA

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A.G. Kalman
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      09-08-2003, 02:30 AM
mIchael T Wing CPA <(E-Mail Removed)> wrote:
> A.G. Kalman <(E-Mail Removed)> wrote:


>> I can't give you a citation but I can tell you how I have
>> seen it accomplished in a brokerage account.


> But I wonder if that is technically permissible. My
> understanding of "joint tenancy" is that each party owns an
> UNDIVIDED interest in the ENTIRE property. If that is
> correct, there would be no rationale for partitioning the
> property into two (or more) lots.
>
> On the other hand, if each party owns a FRACTIONAL interest,
> you probably have a "tenancy in common" (rather than a
> "joint tenancy") and, in that case, the "right of
> survivorship" goes out the window.
>
> Perhaps some of the attorneys around here will comment...
> <g>


I don't see any problem here. The husband and wife jointly
owned the shares of stock. Upon the death of one spouse, the
shares pass outside of probate to the survivor. The cost
basis of the shares that belonged to the deceased are
stepped up to FMV on the date of death. You now have half
the shares valued at FMV and half valued at the cost basis
prior to death. The issue on the table is how can the
survivor identify which shares are stepped up in order to
use the specific identification method upon disposition.
When the survivor goes to the investment company and asks
that the shares/account or whatever be placed in only one
name, the survivor has the flexibility to create a separate
account or to have the investment company identify the
shares with a stepped up value by creating a cost basis for
those shares.

I have no experience in dealing with the situation where
there is no investment company holding the shares. I.e., the
taxpayers have physical custody of the shares. I would
guess, that the survivor could request the transfer agent to
register one-half the shares in one name. Nothing says that
all the shares have to be reregistered upon the death of an
owner. One could still shares in joint name as long as one
can produce the death certificate. Lastly, I have to believe
that there is a ruling or PLR on this somewhere.

Alan
http://taxtopics.net

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Bruce E. Cobern
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      09-09-2003, 05:53 AM
"A.G. Kalman" <(E-Mail Removed)> wrote:

> I don't see any problem here. The husband and wife jointly
> owned the shares of stock. Upon the death of one spouse, the
> shares pass outside of probate to the survivor. The cost
> basis of the shares that belonged to the deceased are
> stepped up to FMV on the date of death. You now have half
> the shares valued at FMV and half valued at the cost basis
> prior to death.


I don't believe there ARE shares that were HIS and shares
that were HERS. I think they each owned all the shares,
jointly. Thus, upon the death of one, their basis in their
half of EACH share is stepped up. Thus, every share's basis
is the same, and is the sum of half a share's cost and half
a share's FMV date of death.

--
Bruce E. Cobern, CPA
(E-Mail Removed)

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A.G. Kalman
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      09-10-2003, 06:59 AM
Bruce E. Cobern" <(E-Mail Removed)> wrote:
> "A.G. Kalman" <(E-Mail Removed)> wrote:


>> I don't see any problem here. The husband and wife jointly
>> owned the shares of stock. Upon the death of one spouse, the
>> shares pass outside of probate to the survivor. The cost
>> basis of the shares that belonged to the deceased are
>> stepped up to FMV on the date of death. You now have half
>> the shares valued at FMV and half valued at the cost basis
>> prior to death.


> I don't believe there ARE shares that were HIS and shares
> that were HERS. I think they each owned all the shares,
> jointly. Thus, upon the death of one, their basis in their
> half of EACH share is stepped up. Thus, every share's basis
> is the same, and is the sum of half a share's cost and half
> a share's FMV date of death.


This obviously makes sense and is no doubt correct, so I'm trying
to figure out where I went wrong. I called a widow of a friend
of mine and asked why she had placed half of the stock in two
separate accounts if they were held in joint tenancy (as an aside
for those of you who know I live in a CP state, she lives in a
non-CP state). It turns out that my assumption was way off. She
created two accounts because they had promised half the stock to
their children but never got around to setting up the estate to
accomplish this. She created the two accounts so she could
easily manage the annual gifts that she is making to the
children.

Alan
http://taxtopics.net

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Gene E. Utterback, EA
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      09-10-2003, 07:18 AM
"Bruce E. Cobern" <(E-Mail Removed)> wrote:
> "A.G. Kalman" <(E-Mail Removed)> wrote:


>> I don't see any problem here. The husband and wife jointly
>> owned the shares of stock. Upon the death of one spouse, the
>> shares pass outside of probate to the survivor. The cost
>> basis of the shares that belonged to the deceased are
>> stepped up to FMV on the date of death. You now have half
>> the shares valued at FMV and half valued at the cost basis
>> prior to death.


> I don't believe there ARE shares that were HIS and shares
> that were HERS. I think they each owned all the shares,
> jointly. Thus, upon the death of one, their basis in their
> half of EACH share is stepped up. Thus, every share's basis
> is the same, and is the sum of half a share's cost and half
> a share's FMV date of death.


I agree with Bruce, absent evidence to the contrary on ownership.

Gene E. Utterback, EA

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