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What is cost basis of inheritance from a Trust?

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    What is cost basis of inheritance from a Trust?

    Here's the question:
    Client gets inheritance from a lady who was the beneficiary of over 30 years of the uncle who left the proceeds to relatives upon the death of this bene.
    Shouldn't the cost basis be the date of death of the beneficiary who has been using the trust proceeds these past 30+ years?

    #2
    No. There is no stepped-up basis at the death of the beneficiary. He assumes the basis of the assets in the trust as of the uncle's DOD.

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      #3
      what about the 1099- B reported?

      i.e., the 1099 Brokers.... is showing a cost basis of -0- .
      Shouldn't there be some cost basis especially since it dates back about 30 years?

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        #4
        If you can determine the basis by a reasonable method (value of stock on DOD), use it. IRS says if you don't know the basis, the basis is zero.

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          #5
          Originally posted by taxforce View Post
          i.e., the 1099 Brokers.... is showing a cost basis of -0- .
          Shouldn't there be some cost basis especially since it dates back about 30 years?
          It is very unlikely that after 30 years, the same stocks are still in the account (although it is possible.) Wouldn't the trust have been trading these stocks all this time, and buying new ones? You don't specify what kind of trust this is, or whether the uncle set this trust up while he was living -- revocable or irrevocable -- or whether it was a testamentary trust which became established at his death, etc. -- all factors which need to be considered. The brokerage does not have to report basis for stocks it did not purchase. So you are going to have to do some digging. Start with a copy of the trust document. Whoever did the trust returns all these years may be able to help.

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            #6
            Type of trust etc

            I beleive it to be an irrevocable trust set up by uncle while alive.
            The 3 main stocks were allstate, morgan stanley, discover
            I'll probably file extension for this return.
            Since the cost basis on 1099 B is reporting -0- should I see what cost basis was on the date showing in the "Acquired" column which was in Oct of 2007?
            As it's looking now, this family will owe over $300,000 in taxes bc there is no cost basis on the statement.
            Any ideas?

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              #7
              Have your client work with the broker to get the appropriate cost basis. Explain his tax due if he doesn't do that to motivate him!

              Comment


                #8
                Did your client receive stocks and then sell them? What document reported the date acquired of 2007? Extension with payment!!!

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                  #9
                  Originally posted by taxforce View Post
                  I beleive it to be an irrevocable trust set up by uncle while alive.
                  The 3 main stocks were allstate, morgan stanley, discover
                  I'll probably file extension for this return.
                  Since the cost basis on 1099 B is reporting -0- should I see what cost basis was on the date showing in the "Acquired" column which was in Oct of 2007?
                  As it's looking now, this family will owe over $300,000 in taxes bc there is no cost basis on the statement.
                  Any ideas?
                  The "Acquired" column date may be the date the brokerage "acquired" the account, not when the stocks were bought. That means it was somewhere else before that date. They are required to furnish basis from purchases after 1/1/2012, so probably nothing was bought after that date. Try to find out where the stocks were being held prior to the "acquisition" date. As I said, the trust has been required to file tax returns since the grantor set it up (if it was an irrevocable trust) or at least since his death if it wasn't. So WHO was doing the trust return? Hopefully, a great deal of information can be gleaned from those documents and files. AND GET A COPY OF THE TRUST DOCUMENT SO YOU KNOW FOR SURE WHAT KIND IT WAS. Morgan Stanley merged with Smith Barney a while back, and I am not sure how long Discover has been around. But if all have been in the trust since it was set up, then the basis was grantor's basis if it was an irrevocable trust, and his DOD if it wasn't. Anything bought during the trust's existence would have basis on the date it was purchased. I once had to dig through old records of the TP that went back to 1988, and many stocks had merged, been bought out more than once by other companies, but we were able to do it since she had kept everything. It took me days, and I charged by the hour.

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