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Here's the deal, my wife's parents had set up mutual funds for each child. For my wife, the funds are in her name and she has to claim the dividends each year on her income taxes. However, the money actually belongs to her parents and they are currently cashing in some of the funds to pay for the building of their brand new retirement home.

We have never contributed a dime to these funds so I was wondering what the tax consequences would be. Do we have a cost basis of zero dollars or is our basis equal to what her parents paid for those shares?

Mike C.

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