Basis on Gift

[S T]

I believe I know the answer just want confirmation

Gift tax return filed in 2012 showing the basis of the gift of stocks to a daughter. The brokerage house apparently does not have this information, parent to child gift.

So for stocks sold relating to that Gift, I use the value of the stocks as reported on the 709

I am thinking this is correct as we when prepared the 709 the Parent had already paid taxes on stock through W-2 wages and she transferred to daugther.

On gift tax return the value for 3387 sh of stock is listed value as 320,546 to daughter - daughter's Schwab stmt shows a sell of same 3387 shares at 478,098 but no cost basis - so then I use non covered as reported by Schwab, but then do an adjustment code which I have optons on through the software?

Thanks

Sandy

[kathyc2]

The gift tax return should have been based on FMV, and since it's a gift the daughters basis at that time would be same as parents. Basis may have increased since then if dividends were reinvested.

[Burke]

That is correct. Basis is same as donor's, so you cannot use FMV on the 709. It is what the parent paid for it originally. Did the donor pay gift tax at the time the 709 was filed?

[S T]

Thanks

Sandy

[Roland Slugg]

Hello Sandy. Yes, you use the parent's basis (but see note at end), which may/should be reported on F-709, Schedule A, column D. It might be a good idea to see if you can verify that basis, if you or the daughter can easily do so. The shares' FMV when gifted is sometimes relevant, but in your case it is not, since the shares were sold at a gain.

Report the sale on F-8949. It's a non-covered transaction, type E. You do not need to use any of the adjustment codes. Those are really only necessary for "covered" transactions, types A and B (maybe C).

It's fortunate that you have all the information you need and that the number of shares given to your client agrees with the number she sold. Many times this information is missing, and it can be a real headache to collect. The donor's basis didn't used to be reported on F-709. That was added several years ago ... not sure exactly when ... and it's very helpful.

Note: If there was gift tax paid in 2012 when the shares were given to D, some, but not all, of that tax can be added to the parent's basis, thus increasing D's basis. See Code §1050(d)(6). See correction below.

The correct reference s/b to Code §1015(d)(6). Thanks to NYEA for catching this, but no thanks to this new keyboard I just bought and on which I can't tryp five jeys in a roq withput makimg a ,isyake.

[S T]

Thanks for the great explanation. Yes I have the 709 Gift Tax Return as I prepared the 2012 form 709. Client took advantage of the special $5M Lifetime Gifting allowance, so there was no gift tax. And all of the donor's basis, # shares, description etc was listed on the 709 Form, so that has been easy for me to track, when the daughters sell stock and the Brokerage house has not entered any cost basis.

Thank goodness I still have a good memory to some degree, as that is what made me think about these 3387 shares of stock sold and the fact that the Brokerage did not list Cost basis.

Sandy

[Burke]

The donor's basis didn't used to be reported on F-709. That was added several years ago ... not sure exactly when ... and it's very helpful.

I have not done a 709 since this change, so I did not know it was being provided. Great idea.

[New York Enrolled Agent]

Hello Sandy. Yes, you use the parent's basis (but see note at end), which may/should be reported on F-709, Schedule A, column D. It might be a good idea to see if you can verify that basis, if you or the daughter can easily do so. The shares' FMV when gifted is sometimes relevant, but in your case it is not, since the shares were sold at a gain.

Report the sale on F-8949. It's a non-covered transaction, type E. You do not use any of the adjustment codes. Those are only used for "covered" transactions, types A and B (maybe C).

It's fortunate that you have all the information you need and that the number of shares given to your client agrees with the number she sold. Many times this information is missing, and it can be a real headache to collect. The donor's basis didn't used to be reported on F-709. That was added several years ago ... not sure exactly when ... and it's very helpful.

Note: If there was gift tax paid in 2012 when the shares were given to D, some, but not all, of that tax can be added to the parent's basis, thus increasing D's basis. See Code §1050(d)(6).

Roland - I think there is a typo - I think it's §1015(d)(6)