unknown cost basis of stock

[davidrosenbaum]

I have a client whose father invested in IRA's. The father died, and
the son received the IRA's as the residual beneficiary of the account,
and this money didn't go through probate (that's what he says).

For some reason, there was a transaction performed and part of the IRA
was redeemed and immediately reinvested in the same shares. He claims
it was a mess-up on the part of the broker. But the strange this is
that he received a 1099-B for the "sale"of those shares.

Of course, he has no idea of the cost basis of those shares or whether
his father had any nondeductibe contributions to the IRA.

Can anyone make heads or tails of this?

Thanks.

David Rosenbaum

 

[Arthur Kamlet]

I have a client whose father invested in IRA's. The father died, and
the son received the IRA's as the residual beneficiary of the account,
and this money didn't go through probate (that's what he says).

For some reason, there was a transaction performed and part of the IRA
was redeemed and immediately reinvested in the same shares. He claims
it was a mess-up on the part of the broker. But the strange this is
that he received a 1099-B for the "sale"of those shares.

Of course, he has no idea of the cost basis of those shares or whether
his father had any nondeductibe contributions to the IRA.

Can anyone make heads or tails of this?

If he was the named beneficiary of the IRA, then the IRA does
not become part of his probate estate.


Unless he asks for the IRA to be distributed to him as new owner
of the IRA, the proceeds should not have been distributed.


Ordinarily, he would ask the IRA custodian to re-register the IRA
as John Doe as Beneficiary of James Doe IRA or very similar.


If he never asked for a distribution, and the IRA custodian will
not own up to its responsibility to make this whole, then this
now becomes a legal matter, and he needs legal advice.

 

[Rich Carreiro]

For some reason, there was a transaction performed and part of the IRA
was redeemed and immediately reinvested in the same shares. He claims
it was a mess-up on the part of the broker. But the strange this is
that he received a 1099-B for the "sale"of those shares.

Of course, he has no idea of the cost basis of those shares or whether
his father had any nondeductibe contributions to the IRA.

The cost basis will be whatever the amount of the reinvested
IRA "redemption" was. Whether or not his father had made
non-ded contributions to the IRA is irrelevant.

 

[Phil Marti]

I have a client whose father invested in IRA's. The father died, and
the son received the IRA's as the residual beneficiary of the account,
and this money didn't go through probate (that's what he says).

As previously noted, if he's the named beneficiary of the IRA it doesn't go
through probate.

For some reason, there was a transaction performed and part of the IRA
was redeemed and immediately reinvested in the same shares. He claims
it was a mess-up on the part of the broker. But the strange this is
that he received a 1099-B for the "sale"of those shares.

Of course, he has no idea of the cost basis of those shares or whether
his father had any nondeductibe contributions to the IRA.

Something is missing.

If the IRA sold shares there would be no 1099-B, and basis in the shares is
irrelevant. If there was a distribution of shares which were subsequently
sold by the beneficiary from a taxable account there would be a 1099-R
showing the market value of the shares distributed, and that amount is the
basis in the shares distributed. If the shares were sold from an inherited
IRA we're back to no 1099-B and irrelevant basis.

You need to dig deeper. Question 1: What name is on the 1099-B? Question
2: What do the pertinent IRA statements show?

Irrelevant to this specific transaction but important for the beneficiary to
know is whether the deceased had after-tax money in any of the IRAs which
were inherited. That information comes from the decedent's returns.

 

[D. Stussy]

If he was the named beneficiary of the IRA, then the IRA does
not become part of his probate estate.


Unless he asks for the IRA to be distributed to him as new owner
of the IRA, the proceeds should not have been distributed.


Ordinarily, he would ask the IRA custodian to re-register the IRA
as John Doe as Beneficiary of James Doe IRA or very similar.


If he never asked for a distribution, and the IRA custodian will
not own up to its responsibility to make this whole, then this
now becomes a legal matter, and he needs legal advice.

A form 1099-B for an IRA (inherited or not) is an error. What is important
is the 1099-R.

If the broker issued a 1099-B for the sale from the IRA account, the broker
really screwed up - unless the account wasn't an IRA after all.

 

[davidrosenbaum]

A form 1099-B for an IRA (inherited or not) is an error.  What is important
is the 1099-R.

If the broker issued a 1099-B for the sale from the IRA account, the broker
really screwed up - unless the account wasn't an IRA after all.

--

Thanks everyone.

I also thought that there shouldn't be a 1099-B, as you say.

And Phil, I agree with your analysis. I told him pretty much the same
thing. He gave me no info re the IRA - said there was none. But he's
now checking it. The 1099-B was issued on his name.

Hopefully he'll get me some IRA info and then we can see.

David