2001 - 1099-B Basis for Gift???

[Sherill]

Clients had not filed in 2001... Annual Gift Tax Exclusion was $10K(basis).
Father gave $50K to only daughter in Stocks/Bonds who is filing mfj with husband.
May I reduce her 1099-B by $10K (gift tax excl) to $40K ???
(Feds have the full $50K as income on transcript).
Thanx/luv your site and professional info!!

[Bees Knees]

No. The issue of whether or not the father filed a gift tax return is irrelevant to the daughter who received the gift. The basis of the stock in the hands of the daughter is the father’s basis in stock at the time he gave the stock to the daughter.

[snowbird]

If you have The TaxBook, I suggest you go to section 21-33. There are good examples on page 33 & 34 of Basis for Gifts. Also IRS Pub 551 page 8. There can be exceptions, especially if the FMV is less than donors basis.

[FEDUKE404]

1099-B for a gift?

Must have been a long day, but I'm somewhat confused:

1) I thought, in general, gift taxes paid by the donor were added to the (donor's adjusted) cost basis of the gift in the recipient's hands? (Yes, sold for gain/loss can be a factor requiring additional calculations.)

2) What "transcript" are you talking about for the $50k?

3) Barring any sale, since the gift in 2001, what is the origin of the Form 1099-B? A mere "gift" will not generate such.

FE

[Sherill]

1099-B for 2001 Gift of Stocks/Bonds

1-Dad, the donor, put $50K in daughter/his name. JTWROS (now I found out dad paid $50K for Stks/Bds).
2-IRS Wage & Income Transcript.
3-Stocks are not sold as of todate. This was a gift.

[FEDUKE404]

Gift?

1-Dad, the donor, put $50K in daughter/his name. JTWROS (now I found out dad paid $50K for Stks/Bds).
2-IRS Wage & Income Transcript.
3-Stocks are not sold as of todate. This was a gift.

Then the dad still "owns" the stock, albeit jointly, and is subject to taxation on the dividends and/or sale of shares. From your description, it is probable that any income from the stock is mostly "his." If the facts support it, he can always do a nominee distribution on his own Sch B.

I'll let the lawyers provide details, but I'm unsure if there even IS a gift yet!

Of course, some of this could now be mostly null and void if the infamous kiddie tax (Form 8615) can possibly come into play for the daughter. That "child" can now include a college age person - so much for astute financial planning!

And I still cannot figure out where a Form 1099-B is coming from without any sale occurring....perhaps a reorganization and/or stock swap?

FE

[Jesse]

And I still cannot figure out where a Form 1099-B is coming from without any sale occurring....perhaps a reorganization and/or stock swap?

FE

This is what confuses me, either something occurred to make this a reportable transaction or there was an error in reporting by the issuer of the 1099B.

If Dad indeed paid $50K and the 1099B reports proceeds of $50K there is no gain or loss, but needed to be reported.

I'm not sure if the JTWROS is a completed gift or not - my mind is telling me yes for 1/2 but I don't have time to research. If yes, a gift tax should have been prepared, but most likely no tax due. Perhaps someone else will answer/correct me.

[FEDUKE404]

Details on Form 1099-B ?

This is what confuses me, either something occurred to make this a reportable transaction or there was an error in reporting by the issuer of the 1099B.

If Dad indeed paid $50K and the 1099B reports proceeds of $50K there is no gain or loss, but needed to be reported.

I'm not sure if the JTWROS is a completed gift or not - my mind is telling me yes for 1/2 but I don't have time to research. If yes, a gift tax should have been prepared, but most likely no tax due. Perhaps someone else will answer/correct me.

What is the description on the Form 1099-B (avoiding any privacy disclosures)?

One possibility is the 2001 purchase of a CD/bond that has since matured, and then most likely replaced with a similar. Unfortunately, such an event will generate a "sale" to be reported on Form 1099-B. The fact that you are, apparently, talking about "round numbers" would support that scenario.

Were that to be the case, you should not have (other than paperwork) any Schedule D issues. I would, however, look very carefully from 2001 onward to see if the Schedule B amounts have been reported properly for both dad and daughter.

FE

[New York Enrolled Agent]

Must have been a long day, but I'm somewhat confused:

1) I thought, in general, gift taxes paid by the donor were added to the (donor's adjusted) cost basis of the gift in the recipient's hands? (Yes, sold for gain/loss can be a factor requiring additional calculations.)

Gift tax will be added to basis BUT only to the extent appreciation in the value of the gift bears to the amount of the gift. See §1015(d)(6). (for gifts made after 12/31/76)

Example: gift had basis of $80K, FMV on transfer = $100K. Gift tax paid = $10K.

The appreciation in this asset = $20K. Thus, 1/5 of the gift tax is due to appreciation on the gifted asset. New Basis = $80K plus $2K from gift tax = $82K.

I'm ignoring any possible annual exclusion that a taxpayer may claim. Thus, for simplicity, I assume the $100K is the taxable gift.

[FEDUKE404]

Still need info!

Gift tax will be added to basis BUT only to the extent appreciation in the value of the gift bears to the amount of the gift. See §1015(d)(6). (for gifts made after 12/31/76)

And that's why I originally said "in general" and therefore stayed away from any calculations related to this question.

We still have not received pertinent information as to what is on the Form 1099-B (2008???), which might clear things up immensely.

This question by Sherill in particular: "May I reduce her 1099-B by $10K (gift tax excl) to $40K ???" is confusing. Also, "Stocks are not sold as of todate. This was a gift." adds to the confusion.

FE