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Author: chickbull Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121095  
Subject: Stepped up Cost Basis on Death Date: 1/8/2002 1:57 PM
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When death occurs on a sunday, what is the date used for the cost basis of stock? would you use the previous Friday close, Monday open, or otherwise?
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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56924 of 121095
Subject: Re: Stepped up Cost Basis on Death Date: 1/8/2002 2:32 PM
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When death occurs on a sunday, what is the date used for the cost basis of stock? would you use the previous Friday close, Monday open, or otherwise?

I'm pretty sure it's the average of the high and low on the last trading day before death. Unless the stock is very thinly traded ("thinly traded" as in you measure the time between individual trades in days) in which case you would use a weighted average of the trades before and after death.

Hopefully, someone will correct me if I've made an error here.

--Peter

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Author: Charlie48K Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56925 of 121095
Subject: Re: Stepped up Cost Basis on Death Date: 1/8/2002 4:08 PM
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When death occurs on a sunday, what is the date used for the cost basis of stock? would you use the previous Friday close, Monday open, or otherwise?

It's the mean of the average of Friday's high and low with Monday's high and low.

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Author: DivPlanner Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56926 of 121095
Subject: Re: Stepped up Cost Basis on Death Date: 1/8/2002 4:29 PM
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The average needs to be weighted to sjow that you are one day from Monday but two from Saturday.


Tax Facts:

"If there were no sales on the valuation date but there were sales on dates within a reasonable period both before and after the valuation date, the fair market value is determined by taking a weighted average of the means between the highest and lowest sales on the nearest date before and the nearest date after the valuation date. The average is to be weighted inversely by the respective numbers of trading days between the selling dates and the valuation date. If the stocks or bonds are listed on more than one exchange, the records of the exchange where the stocks or bonds are principally dealt in should be employed if such records are available in a generally available listing or publication of general circulation. In the event that such records are not so available and such stocks or bonds are listed on a composite listing of combined exchanges in a generally available listing or publication of general circulation, the records of such combined exchanges should be employed. Regs. §§20.2031-2(a), 20.2031-2(b)(1), 25.2512-2(a), 25.2512-2(b)(1"

Hope this helps!

Stephanie

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Author: chickbull Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56932 of 121095
Subject: Re: Stepped up Cost Basis on Death Date: 1/8/2002 8:28 PM
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WOW! I got the mean for the Friday before the Sunday date of death. It is $85.3437. Where I get lost is where you say "The average is to be weighted inversely by the respective numbers of trading days between the selling dates and the valuation date"
Seems the valuation date, Friday, is the same as the selling date, correct? Is the selling date the same as the date used for the valuation. Any further help is sure appreciated.

Ron

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Author: lorenzo2 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56938 of 121095
Subject: Re: Stepped up Cost Basis on Death Date: 1/8/2002 10:51 PM
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The average needs to be weighted to show that you are one day from Monday but two from Saturday.

Well, no. The regulation says to weight the average depending on how many trading days there are between the two selling dates. This was a weekend, so there were no trading days. The correct answer is: take the mean of the high and low selling prices on Friday, and again on Monday. Then take the average of those two numbers. The weighting business doesn't apply. Indeed, this very situation is covered in the quoted Reg 20.2031:

Example (3). Assume the decedent died on Sunday, October 7, and that Saturday and Sunday were not trading days. If sales of X Company common stock occurred on Friday, October 5, at mean sale prices per share of $20 and on Monday, October 8, at mean sale prices per share of $23, the price of $21.50 is taken as representing the fair market value of a share of X Company common stock as of the valuation date

(The stuff about weighting is intended to be used when evaluating a thinly traded issue. If the decedent died on a Sunday and the nearest trades were on the previous Thursday and the following Friday, then you would weight the average accordingly - that is, give more value to the nearer trade date.)

I also learned something interesting in looking at Reg 20.2031. If the decedent dies when the stock is ex dividend, the amount of the dividend should be added to the valuation arrived at by averaging prices as above.

Lorenzo

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Author: japper Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56992 of 121095
Subject: Re: Stepped up Cost Basis on Death Date: 1/9/2002 10:38 PM
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Ron,
You also have the option of choosing the basis amount as of market pricing 6 months from date of death. Sometimes it can be beneficial to use this amount if the market is climbing.

good luck,
Jenn

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