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Discussion:What's the basis?

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Discussion Forum Index --> Basic Tax Questions --> What's the basis?


Discussion Forum Index --> Tax Questions --> What's the basis?

Harry Boscoe (talk|edits) said:

14 March 2014
I'm gonna see this friend this weekend, so's I'm gonna ask for a quick answer here to a question that I probably could figure out myself.

There seems to have been a mistake on the inventory of the late mother's estate, as the executrix/administratrix/whoever missed a three-for-one stock split that happened just about - shortly before - the time Mom died. So a block of stock went into the estate at a value of $30,000 when it was really $90,000. I'm 99.99% certain - I'm convinced - that the number of shares of the stock was misstated in the inventory as 300 shares rather than 900, but the value per share was the *post-split* market value. The resulting value was understated by $60,000 in the estate inventory, got that?

My friend is now selling the stock and wants to know what the real, actual, tax basis of the stock is. Gain/loss will go on this year's Schedule D.

Obviously, I would like to say that the tax basis of the inherited stock is $90,000, based on the (accurate) number of shares inherited and the actual per share market value on the date of death.

My friend is worried that the "inventory" - which may have been used in the decedent's estate and/or inheritance tax returns - and the mistaken number of shares it showed may have some weight in determining the stock's tax basis. I'm trying to assure her that's not the case.

Mom died almost twenty years ago and nobody knows where copies of her estate/inheritance tax returns might be.

Ckenefick (talk|edits) said:

14 March 2014
Was friend involved in administration of mom's estate?

If not, then case law holds that basis = DOD value, although that case law is based more on valuation disputes as opposed to mistakes.

Harry Boscoe (talk|edits) said:

14 March 2014
"Was friend involved in administration of mom's estate?" I think not; there's a bunch of sisters of whom my friend is *not* the one that should have been involved with anything that involves numbers and dollars... Sorry, dear.

Ckenefick (talk|edits) said:

14 March 2014
Here's a few cases, there's a few more, including differing values/basis owing to blockage discounts:

Bryant, Harriet, Trust, (1948) 11 TC 374; Devereux, Virginia Evans Est, (1948) PH TCM ¶48208, 7 CCH TCM 748; Rogers, May, (1935) 31 BTA 994, affd (1939, CA2) 23 AFTR 895, 107 F2d 394, 39-2 USTC ¶9742.

Beltzer, William v. U.S., (1974, CA8) 33 AFTR 2d 74-1173, 495 F2d 211, 74-1 USTC ¶9373.

Shook, Robert v. U.S., (1983, CA11) 52 AFTR 2d 83-5868, 713 F2d 662, 83-2 USTC ¶9564.

Harry Boscoe (talk|edits) said:

14 March 2014
It's stuff like this (from a text book I found somewhere): "...the Commissioner's interpretation of the applicable statutory provision, as set forth in the Treasury Regulations: "The value of property as of the date of the death of decedent as appraised for the purpose of the Federal estate tax shall be deemed to be its fair market value at the time of acquisition." The court followed the generally accepted interpretation of this Regulation, by affording the estate tax valuation prima facie weight as evidence of fair market value" that gives me a headache.

Who wants to deal with "Commissioner's interpretation" and "appraised value" and "shall be deemed" and "generally accepted interpretation" and "prima facie weight" as **evidence** of FMV. Either it is or it isn't. Somebody needs to study this area and publish a list of things we can look at for determining value, and tell us which of them trumps the others...!

I know the number of shares and I know the market value on the date of death. Do I have to worry that there might be a federal estate tax return out there somewhere with a different number on it? Maybe I missed that day in class when the prof explained what's a "good indicator" of fair market value, and what is - **really is** - fair market value.

Just whining, I guess. It's Friday afternoon and there's refrigpbrerator.

Dennis (talk|edits) said:

15 March 2014
Case Law? Don't waste your time reading any. This is strictly a matter of fact. If you are talking publicly traded stock, you can look up exactly what happened and when. If the facts support your position...end of story. BigCharts

Ckenefick (talk|edits) said:

15 March 2014
As noted, those cases deal with valuation "disputes," if I could use that word...bene later sells asset and says, "My basis is different (higher) than what was reported on the 706." Absent misrepresentation (maybe), I'm with Dennis.

Ckenefick (talk|edits) said:

15 March 2014
And, quite frankly, I don't see how one could make this mistake, unless someone just asked for the numbers without any verification.

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