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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121572  
Subject: Re: Cost basis of gifted stock Date: 2/2/2000 11:40 AM
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criser:

<<<<Last January my wife's grandpa gave her a chunk of stock. I don't know what his cost basis is, and the only information I have is the price at which it was gifted to my wife.

I read that my cost basis will be the lower of the transfer price or grandpa's cost basis. That doesn't make sense. I certainly don't want to ask him how much he paid for the stock, and since he's had it for years, buyouts and splits, I doubt he knows either. When we decide to sell, what will my cost basis be?>>>>

"The cost basis will not be the lower of the transfer price (I assume you mean the value on the date of the gift) or grandpa's cost basis. The cost basis will be grandpa's cost basis. If you can't prove what grandpa's cost basis is, the IRS will gladly give you a cost basis - zero."

To Chris Riser: Are you sure about the basis issue? I have always understood that the basis of gifts in hands of donee is lesser of donor's basis or FMV at time of gift. In addition, there was a recent thread about son giving depreciated stock to father, who was in higher tax bracket, for father to sell and take loss and TMFTaxes a/k/a Roy confirmed that in father's hands basis would be FMV at time of gift, and thus no loss would be recognized by father, unless stock fell even more (but that is hard to do when it is near zero).

I believe that this issue does not come up often because most donor are looking to avoid tax on gains, but you may wish to double check your sources.

Just my $0.02. Regards, JAFO


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