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Financial Planning / Tax Strategies


Subject:  Re: inheriting stock Date:  2/28/2014  4:37 PM
Author:  ptheland Number:  120294 of 129523

When your father passes, all of the stocks he owns will have their cost basis changed to the fair market value on the date of his passing. So on that date, the entire portfolio could be sold and there would be no gain or loss.

In the real world, there will be some time that elapses between his passing and dealing with the estate. So the portfolio will have some gain or loss by the time stocks are sold.

I understand that inheriting "stock" will preclude taxes on appreciated gains. If I sweep the stock into the various brokerage accounts, no tax.

Let me clarify this a bit. You are correct that there would be no current taxes because the stocks weren't sold. However, the stocks were all re-valued as of the date of death. So barring some major stock price moves, there is probably little gain or loss anyway.

What happens if I sell the fourth share and convert it "to money"? Will it then be taxed and will she receive less?

If the estate (or trust) sells the stock, then the estate will report any gain or loss on the sale of the stock. A gain could be passed through to your sibling and they could pay their own tax on the gain. However, a loss gets trapped inside the estate/trust. Eventually, that loss will get distributed to the beneficiaries (and could be assigned to the one sibling), but that can't be done until the estate is settled and a final return filed for the estate. And it's possible that other stock transactions in the estate could use up part of the loss before it is distributed on the final return.

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