Tax question regarding stocks?

Question

I sold stocks last year that was given to me as a gift in the previous years, how do I calculate the cost basis?

Answer 1

I will assume there is no gift tax involved in this.

If the donor could have sold the stock at a gain (in other words, the fair market value of the stock was greater than the donor's basis), then your basis is the donor's basis. This rule exists so that tax on the gain cannot be avoided by making a gift of the stock while the donor is alive.

When the donor would have sold the stock at a loss at the time of the gift, (in other words, the fair market value of the stock was less than the donor's basis), there are three cases:

1. If you sell the stock at a price higher than the donor's basis, then you use the donor's basis to compute your gain.

2. If you sell the stock at a price less than the fair market value at the time of the gift, then you use the fair market value as your basis to compute your loss.

3. If you sell the stock at a price between the donor's basis and the fair market value at the time of the gift, you have no gain or loss. Your basis and sales price are equal.

Answer 2

Here is an article that will explain your situation. If you inherited the stocks it is different than if they were given to you as a gift:


"If someone gives you an asset, you ‘inherit’ the giver’s cost basis in that asset. So if mom gives you $10,000 of stock that she’s owned for years, you inherit her cost basis and are responsible for paying the capital gains tax on it when you sell it. If she only paid $1,000 for that stock and you sell it for $10,000 then you will owe taxes on the $9,000 gain.

On the other hand, let’s say you inherited that stock from mom after her death (through her estate). Then your cost-basis would be the stock’s market value at that time. This is called ‘stepped-up basis’. So, even if mom only paid $1,000 for the stock, if it is valued at $10,000 when you inherit it you can sell it and not owe any capital gains tax. You just legally avoided the Tax Man!"

Hope that helps!

Answer 3

pricey poster, the threshhold of $5700 merely applies to a depending if all of your earnings became coming from a W-2. upon getting earnings, your generic deduction floats from a minimum of $950 to $5700 per a formula. on your case it really is $1500 plus $three hundred, or $1800 complete. therefore on the point your UNEARNED earnings (some thing it is not any longer from a W-2) is--or appears to be like--more advantageous than $three hundred, you'll owe some tax. the following is the issue with those inventory sales. in case you get issued a 1099-B displaying sale proceeds of more advantageous than $three hundred, the IRS workstation will merely comprehend that you had a loss (and do not owe money) in case you document a 1040 with a agenda D displaying your value foundation. in case you do not document in any respect (or pass the agenda D), you receives a CP2000 nastygram in December 2011 declaring you forgot to record the sales proceeds as earnings. The IRS does no longer get the price foundation, so it treats it as all earnings and the letter will recommend a tax invoice depending on the misguided suggestion. Taxaway has curiously forgotten a thanks to calculate the classic deduction for a depending. it is why he suggested if the full is lower than $5700, no mission. The $950 rule is likewise off because there became some earned earnings.

Answer 4

If a gift, meaning the person giving you the stock was alive at the time, your basis is the lower of their basis or FMV at the time of gift. If the FMV of the stock was higher than the giftor's cost or basis, their basis carries over to you and the stock's FMV does NOT factor in.

If inherited, meaning the person has died and the stock was a bequest through an estate, then your basis would be the stock's FMV at the date of death.

Nina below has nailed it if a gift and not a bequest!!!

Answer 5

The cost basis would be the value of the stock on the day when they were given to you

Answer 6

ninasga is ABSOLUTELY CORRECT. this depends on whether sold for a gain or loss. great question.

Answer 7

In the bought date you put "Inherited" and you just use the year that you got them. to get an estimate of the value in that year ......go into yahoo finance...put the code for the stock (i.e. GE for general electric) in the quote field. then go down on the left hand side and select "historical prices". On that page, on the top of the page, you can put in the year that you got them and select monthly quotes, and it will tell you what they were trading at, at that time.
good luck