Discussion:Cost basis

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Discussion Forum Index --> Basic Tax Questions --> Cost basis


Discussion Forum Index --> Tax Questions --> Cost basis

Chicagocpa1 (talk|edits) said:

10 November 2009
Ok... I already know the answer but figured I would ask for any ideas...

I have a client who was disabled for many years. As she is recently better, I am now working on 10 years of tax returns for her. From 2000 - 2004 she sold some stocks she received from a trust. I presume the cost basis would be the cost basis to the trust... not the value on the date it was transferred to her. Correct?

Unfortunately, this information was never available. So, at this point, I am going with zero as the cost basis... unless someone can give me some creative ideas on where to find a cost basis.

Heritage120 (talk|edits) said:

10 November 2009
It depends on the type of trust. Some trusts treat the distribution of stocks with a step-up cost basis. It sounds like you may have a Revocable Living Trust. You really need to check on the type of trust. The Revocable Living Trust has no effect on cost basis when distributions are stocks. In other words the trusts basis becomes the grantor's basis. However; some trusts require a step-up basis on distribution. Do you have any K-1's from the trust? That would have the value of the distribution on it. IRS can provide a transcript for the years in question which should give you the amounts. If that fails, I would contact whoever was the trustee for that trust. They usually keep very good records and could also give you the K-1's. I think assigning a zero amount for cost basis isn't the best thing for the client. Here is a link that explains the different trusts and cost basis upon distribution. [1]

Blrgcpa (talk|edits) said:

10 November 2009
You may also contact the broker or the corp directly. They keep stock value records for every date going back many years.

Chicagocpa1 (talk|edits) said:

11 November 2009
Thanks all. The taxpayer doesn't have any K1s - the distribution was so long ago, that the IRS doesn't have records that far back that they can access. The trustee isn't alive. The broker who purchased the original stocks is defunct. The only thought would be to go the corps but we have no idea when the stocks were originally purchased or by whom (the trust or the grantor). I have come to the conclusion, it's a lost cause. Thanks.

RoyDaleOne (talk|edits) said:

11 November 2009
I would determine the earliest and latest possible date for the purchase of each stock.

Pick the lowest selling price between the two dates. This should represent the minimum price paid for the stock.

This should be acceptable under the Cohen rule.

Chicagocpa1 (talk|edits) said:

11 November 2009
Thanks! That's a great idea - better than zero.

"Shoebox" (talk|edits) said:

11 November 2009
Would a mean of the selling prices be acceptable under Cohan?

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