Stock Basis?

[Treasur2]

Deceased received stock from demutualization of an insurance company in 2000 where he was EE. Lived in NY state at that time, was married to the same sp as below.

Moved to Washington state, cp state. TP death occurred in 2017. SP "inherited" stock, per will (I do not have copy) sold in 2018. I do not know registration at the time of grant or time of death.

Have only price at "transfer" to sp, per email from a child of sp.

Don't I need to know registration at the time of grant?

[Burke]

No. It got a stepped-up basis at DOD of original owner. Use that for basis, which looks like you have? If not, you can easily look it up on-line from many sources. The 1099-S should show the name/SSN of the spouse for gross proceeds. If it does not, explain.

[Treasur2]

Please educate me. Why would basis be stepped up if the stock was originally issued say JTWROS, other joint ownership? Again, I do not know the original registration.

[Maude Lebowski]

In community property states, the registration doesn't matter. If the property is community property, both halves get a step-up (or down) to DOD value. Sometimes, intent is difficult to decipher, as in did the TPs intend for this to be separate or community property. And of course, some clients want to have it both ways, or whichever way suits them in the current moment. In WA state, the default tends to community property. Separate property needs to be identified and maintained as such to keep its status as separate property.

See IRS Pub 555: https://www.irs.gov/forms-pubs/about-publication-555

[Treasur2]

But New York is not a community property state. That's where the property was acquired. What if it was only owned\issued in TP (his) name. Again I don't know registration i time of acquisition.

[Maude Lebowski]

It sounds like we can't help you until you do know the registration.

[Treasur2]

You just did. You confirmed that knowing the registration at the time of acquisition in a non-community property state IS important. Too bad no NY folks are viewing this. I'm sure this is a common scenario there. thank you. Unless one of you knows a NY blog or posting site. I'm sure there are many.

[Maude Lebowski]

This just dawned on me. It doesn't matter what the registration is if TP passed while a WA resident. If it was separate property, 100% step-up/down on DOD. If it was community property, there's still step-up/down of 100% (but we usually refer to each half being stepped-up/down.) Unless the TP passed in NY, that is. For joint property in a non-community property state, only the deceased's half gets a step-up/down.

FYI: It doesn't matter where the property was acquired. The applicability of community property rules is based on the TP's state of residence when he/she passed.

[Burke]

Please educate me. Why would basis be stepped up if the stock was originally issued say JTWROS, other joint ownership? Again, I do not know the original registration.

Stock from the demutualization of an insurance company would NOT have been issued in joint names. Shares were issued to the individual policyholder in question in their name alone, or in the name of the employee of the company (even if they did not own any policies), as per regulations for the demutualization process. If you have prior tax returns, review Forms 1099-DIV to determine in whose name they were reported. I know this because I worked for such a company for many years, and was the recipient of such stock, as was my spouse. All mutual insurance companies followed the same procedures.