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Author: lhommedieu Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121313  
Subject: Gift of Stocks Date: 7/11/1999 3:58 PM
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I was gifted stocks valued at $10,000 in 1992. I sold them in 1999. For purposes of figuring capital gains, do I use the donor's basis when he bought the stock back in 1941, or is the basis different because of the market value of the stock just before it was gifted in 1992.

Thanks for your help.
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Author: UUinMN Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17181 of 121313
Subject: Re: Gift of Stocks Date: 7/12/1999 10:45 AM
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Hi, lhommedieu, and welcome to the Fool. (Do you hail from Alex and vicinity?)

Unfortunately, you have to use the donor's original basis. Had they been thoughtful enough to die and leave you the stock in their will, you would have been able to use the "stepped up" basis of 1992. Groan. No offense, I hope.

You might need to pay quarterly taxes on your profit--see the Taxes FAQ for some Safe Harbor rules, that allow you to wait until you file your 1999 return next year.

Michael



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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17274 of 121313
Subject: Re: Gift of Stocks Date: 7/13/1999 8:04 PM
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[[I was gifted stocks valued at $10,000 in 1992. I sold them in 1999. For
purposes of figuring capital gains, do I use the donor's basis when he bought the
stock back in 1941, or is the basis different because of the market value of the
stock just before it was gifted in 1992.]]

As UU pointed out, you are stuck with the donor's basis (the basis of the person who gave you the shares). So MAKE SURE that person provided you with the PROOF of the basis (such as purchase confirmations back from 1941).

You can read more about this and other gift/basis issue in the Taxes FAQ area. You might want to check it out.

TMF Taxes
Roy

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Author: gmc123 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17303 of 121313
Subject: Re: Gift of Stocks Date: 7/14/1999 12:55 PM
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As UU pointed out, you are stuck with the donor's basis (the basis of the person who gave you the shares). So MAKE SURE that person provided you with the PROOF of the basis (such as purchase confirmations back from 1941).

Actually, having confirmations going back to 1941 might not even be much good. Suppose this company spun off a division back in the 50's. You'd still have your original shares plus whatever shares you'd gotten of the new company. The basis in the original company would be less than $10,000 now. Further suppose you were only given the original stocks and not the ones that were spun off. How do you (or a broker for that matter) research what spinoffs and splits happened decades ago that would affect your basis in this gift?


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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17318 of 121313
Subject: Re: Gift of Stocks Date: 7/14/1999 9:14 PM
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[[Actually, having confirmations going back to 1941 might not even be much
good. Suppose this company spun off a division back in the 50's. You'd still
have your original shares plus whatever shares you'd gotten of the new
company. The basis in the original company would be less than $10,000 now.]]

Right...but at least you could track that, and arrive at the correct basis...

[[ Further suppose you were only given the original stocks and not the ones that
were spun off. How do you (or a broker for that matter) research what spinoffs
and splits happened decades ago that would affect your basis in this gift?]]

The first thing that you would do is to try and check the tax returns of the person who sold the shares and find out what THEY used as the basis of the spun-off shares. Hopefully they prepared the basis statement correctly, and you would pick up the basis on the remaining shares. Even if they didn't make the basis computations correctly, you will be stuck with the computations that they actually made.

As far as the research, that is generally the easy part. Just call the investor relations people at the company and they can give you the information...all the way back to the 1940s.

TMF Taxes
Roy

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