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Author: gurdison 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 120825  
Subject: Re: no way to make a basis on gifted stock Date: 7/16/2001 6:35 PM
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<never listen to someone who advises you to pass up a legitimate claim because you lack "proof"..You can get an accurate history of stock prices and splits from the company and/or the library or from a web search. Then you can assume some rate of purchase over the years.>

<<As to the premise that the broker is not responsible, tell me please for what are we paying a commission?...If you transfer shares (or your great grandmother's cirtificates) into a brokerage account, it is also absolutely reasonable to ask the broker to establish a basis at the time of transfer and to then provide that info along with the 1099B.>>


First, the original poster said there were no records of any kind and that the history started at least 25 years ago (20+6). You have no dates of purchase, no record of dollar amounts or no indication of prior sales. Even if you had certificates, the date on them is only the date of issue, not the date of purchase. If you had new certificates made 6 years ago with the new owner designation, they are even more useless. Unless you have something more conrete to hang your hat on, I do not see how you can avoid taking the zero basis. If it was stated that 500 of 600 shares were bought or inherited on 1/2/75 you would have a fair starting point to claim a cost basis on at least those 500 shares (plus any adjustments since then). What you are suggesting is simply a WAG.

The problem when people do not keep decent records is that it becomes increasingly difficult to piece things together as time goes by. IE: if you were trying to backtrack holdings in Verizon look at what you would face. Verizon is a result of the merger between GTE and Bell Atlantic. Bell Atlantic also had a prior merger with NYNEX. Of course Bell Atlantic and Nynex were both spun off of AT&T. See how ugly this can get? The further back in time that you go, the less help you should expect from investor relations in ANY company.

As for the broker, you are paying a commission to perform a transaction, nothing more. Nowhere on any transaction are they required to list your cost basis. The 1099 that you receive will show either gross proceeds or gross proceeds less commission. That is the number that will be reported to the IRS. Figuring the cost basis is YOUR responsibility. If you are placing grandmas shares into a brokerage account, the broker is not responsible for calculating her original basis. You can ask them to help you, but again if you do not have specific dates and dollar amounts they are not responsible.

You may be able to get away with using an invented basis number, but it will not stand up to an audit. I do not think that any of the pros who regularly post here would suggest that as a good course of action to follow. If there are other legal choices in between, I am more than willing to hear them.

You should also bear in mind the law of diminishing returns. If the sale provides 10k of proceeds, you will owe 2.0k federal taxes using a zero basis. If you take 50 hours of time in your research to come up with an estimate of 2.0k as a cost basis, your tax liability only shrinks by $400 from 2.0k to 1.6k. Do you want to face a possible audit and/or penalties over this amount? Is $400 worth that much of your time? If there are more details that either one of us are not aware of but can be provided, maybe the answer can be modified.


BRG
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