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Cost basis of stock sold in an estate account?

 
 
Geo C
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      09-11-2006, 05:31 AM
My mother held around $200k in stocks and mutual funds in a
PNC Investment account. Some of the stocks were bought
decades ago. After her death in March, as the executor, I
set up an estate account with PNC and transferred in all of
the assets.

I would like to have PNC sell all the stocks and mutual
funds in the account and distribute the cash proceeds to
each of her heirs (my self included).

The broker tells me that the cost basis for the sale of the
stocks/funds would be the price which my mother originally
paid for the security. I think that the cost basis is the
FMV at the date of death.

Before I order the sale and to avoid large capital gains, I
need to make sure that I am correct. The estate is too
small to file Form 706.

The question is, what is the cost basis for the securities
which are sold while still in the estate account?

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Dick Adams
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      09-12-2006, 02:53 AM
Geo C wrote:

> My mother held around $200k in stocks and mutual funds in a
> PNC Investment account. Some of the stocks were bought
> decades ago. After her death in March, as the executor, I
> set up an estate account with PNC and transferred in all of
> the assets.
>
> I would like to have PNC sell all the stocks and mutual
> funds in the account and distribute the cash proceeds to
> each of her heirs (my self included).
>
> The broker tells me that the cost basis for the sale of the
> stocks/funds would be the price which my mother originally
> paid for the security. I think that the cost basis is the
> FMV at the date of death.
>
> Before I order the sale and to avoid large capital gains, I
> need to make sure that I am correct. The estate is too
> small to file Form 706.
>
> The question is, what is the cost basis for the securities
> which are sold while still in the estate account?


The broker has it half right. Your mother's cost basis was
the price originally paid. The estate's cost basis is the
FMV at the date of your mother's death.

Dick

<< ================================================== ===== >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
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<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
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Herb Smith
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      09-12-2006, 02:53 AM
Geo C wrote:

> My mother held around $200k in stocks and mutual funds in a
> PNC Investment account. Some of the stocks were bought
> decades ago. After her death in March, as the executor, I
> set up an estate account with PNC and transferred in all of
> the assets.
>
> I would like to have PNC sell all the stocks and mutual
> funds in the account and distribute the cash proceeds to
> each of her heirs (my self included).
>
> The broker tells me that the cost basis for the sale of the
> stocks/funds would be the price which my mother originally
> paid for the security. I think that the cost basis is the
> FMV at the date of death.


YOU are correct, your broker is not. All of the decedent's
assets receive a "stepup" (or stepdown) at death; the
original purchase price is no longer valid or relevant.

Besides, why worry what the broker thinks? - he doesn't file
your tax return - his responsibity is to sell the
stocks/bonds and provide you with documentation of the
sale(s).

> Before I order the sale and to avoid large capital gains, I
> need to make sure that I am correct. The estate is too
> small to file Form 706.
>
> The question is, what is the cost basis for the securities
> which are sold while still in the estate account?


FMV on date of death. Whether sold while in the estate
account or distributed to the beneficiaries and sold. All
sales are long term by definition.

<< ================================================== ===== >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
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<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
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Stuart A. Bronstein
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      09-12-2006, 02:53 AM
Geo C <(E-Mail Removed)> wrote:

> My mother held around $200k in stocks and mutual funds in a
> PNC Investment account. Some of the stocks were bought
> decades ago. After her death in March, as the executor, I
> set up an estate account with PNC and transferred in all of
> the assets.
>
> I would like to have PNC sell all the stocks and mutual
> funds in the account and distribute the cash proceeds to
> each of her heirs (my self included).
>
> The broker tells me that the cost basis for the sale of the
> stocks/funds would be the price which my mother originally
> paid for the security. I think that the cost basis is the
> FMV at the date of death.


You're right, your broker's wrong.

> Before I order the sale and to avoid large capital gains, I
> need to make sure that I am correct. The estate is too
> small to file Form 706.


But the estate probably has taxable income - and your mother
may have income in respect of a decedent. You'll do best to
go to a professional tax preparer who has experience with
estate returns. That person will have more credibility with
the stock broker, who shouldn't be giving tax advice anyway.

Stu

<< ================================================== ===== >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ================================================== ===== >>
 
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joetaxpayer
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      09-12-2006, 03:12 AM
Geo C wrote:

> My mother held around $200k in stocks and mutual funds in a
> PNC Investment account. Some of the stocks were bought
> decades ago. After her death in March, as the executor, I
> set up an estate account with PNC and transferred in all of
> the assets.
>
> I would like to have PNC sell all the stocks and mutual
> funds in the account and distribute the cash proceeds to
> each of her heirs (my self included).
>
> The broker tells me that the cost basis for the sale of the
> stocks/funds would be the price which my mother originally
> paid for the security. I think that the cost basis is the
> FMV at the date of death.
>
> Before I order the sale and to avoid large capital gains, I
> need to make sure that I am correct. The estate is too
> small to file Form 706.
>
> The question is, what is the cost basis for the securities
> which are sold while still in the estate account?


I'll refrain from sarcasm toward the broker. (But I'll say
"???")

You are quite correct. The only gains are from appreciation
since your mom passed. The estate tax return needs to
handle this before distribution to the heirs. If you have
any doubts on filling out the estate return, consider using
a pro familiar with the process.

JOE

<< ================================================== ===== >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ================================================== ===== >>
 
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Rich Carreiro
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      09-13-2006, 06:47 AM
Geo C <(E-Mail Removed)> writes:

> My mother held around $200k in stocks and mutual funds in a
> PNC Investment account. Some of the stocks were bought
> decades ago. After her death in March, as the executor, I
> set up an estate account with PNC and transferred in all of
> the assets.


[snip]

> The broker tells me that the cost basis for the sale of the
> stocks/funds would be the price which my mother originally
> paid for the security. I think that the cost basis is the
> FMV at the date of death.


That's why you don't get tax advice from a broker.

Assuming the securities were in your mother's name when
she died, their basis is their FMV on the day she died
(unless she's subject to estate tax and you choose the
alternate valuation date).

--
Rich Carreiro (E-Mail Removed)

<< ================================================== ===== >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
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ed
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      09-13-2006, 07:06 AM
joetaxpayer wrote:
> Geo C wrote:


>> My mother held around $200k in stocks and mutual funds in a
>> PNC Investment account. Some of the stocks were bought
>> decades ago. After her death in March, as the executor, I
>> set up an estate account with PNC and transferred in all of
>> the assets.
>>
>> I would like to have PNC sell all the stocks and mutual
>> funds in the account and distribute the cash proceeds to
>> each of her heirs (my self included).
>>
>> The broker tells me that the cost basis for the sale of the
>> stocks/funds would be the price which my mother originally
>> paid for the security. I think that the cost basis is the
>> FMV at the date of death.
>>
>> Before I order the sale and to avoid large capital gains, I
>> need to make sure that I am correct. The estate is too
>> small to file Form 706.
>>
>> The question is, what is the cost basis for the securities
>> which are sold while still in the estate account?


> I'll refrain from sarcasm toward the broker. (But I'll say
> "???")
>
> You are quite correct. The only gains are from appreciation
> since your mom passed. The estate tax return needs to
> handle this before distribution to the heirs. If you have
> any doubts on filling out the estate return, consider using
> a pro familiar with the process.


Your broker would be correct if the account held funds from the Bypass
portion of a A-B Trust created while your father was alive. In that
case the stocks would be valued at your father's DOD with no further
step-up available. The A portion of the trust would get a step-up in
basis when your mother died. The account should then have been titled
under the Trust's name, not your mother's personal name,

ed

<< ================================================== ===== >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
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MyVeryOwnSelf
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      09-13-2006, 07:06 AM
>> My mother held around $200k in stocks and mutual funds in a
>> PNC Investment account. Some of the stocks were bought
>> decades ago. After her death in March, as the executor, I
>> set up an estate account with PNC and transferred in all of
>> the assets.
>>
>> I would like to have PNC sell all the stocks and mutual
>> funds in the account and distribute the cash proceeds to
>> each of her heirs (my self included).
>>
>> The broker tells me that the cost basis for the sale of the
>> stocks/funds would be the price which my mother originally
>> paid for the security. I think that the cost basis is the
>> FMV at the date of death.


> You are quite correct. The only gains are from appreciation
> since your mom passed. The estate tax return needs to
> handle this before distribution to the heirs. If you have
> any doubts on filling out the estate return, consider using
> a pro familiar with the process.


Could it be that the account belonged to a trust with your
mother as beneficiary, rather than registered to your mother
directly as an individual?

In the case of a trust, I've been told that the broker may
be right, depending on the details of the trust.

I'm in the "trust" situation myself this year, and I'm
trying to figure out the cost basis by delving into years of
account history across two brokerages.

(Disclaimer: I'm not a tax pro.)

<< ================================================== ===== >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ================================================== ===== >>
 
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tobe
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      09-13-2006, 07:25 AM
"joetaxpayer" wrote

> You are quite correct. The only gains are from appreciation
> since your mom passed. The estate tax return needs to
> handle this before distribution to the heirs. If you have
> any doubts on filling out the estate return, consider using
> a pro familiar with the process.


From my estate/inheritance experience, using a tax
professional, the estate usually passes on (no pun intended)
any capital gains to the heirs via Schedule K1 of the estate
income tax return, and the heirs subsequently pay any
capital gains tax. In fact, this seems to be required in
the final tax year of the estate (which, from the OP's
description, will probably be this year).

Since some States have estate income tax forms which are
even worse than the Federal ones (e.g. Massachusetts), I
also recommend that the OP consult a tax professional in the
state of the deceased who has experienced with estate
returns. I consider myself very experienced in (my own) tax
returns (including, some years ago, an S-corporation
return), and the Federal and State estate income tax returns
were mostly incomprehensible to me.

<< ================================================== ===== >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
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Geo C
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      09-13-2006, 07:25 AM
Thanks for your replies. I will use a professional.

<< ================================================== ===== >>
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<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
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