Message Font: Serif | Sans-Serif
No. of Recommendations: 0

<<<<Last January my wife's grandpa gave her a chunk of stock. I don't know what his cost basis is, and the only information I have is the price at which it was gifted to my wife.

I read that my cost basis will be the lower of the transfer price or grandpa's cost basis. That doesn't make sense. I certainly don't want to ask him how much he paid for the stock, and since he's had it for years, buyouts and splits, I doubt he knows either. When we decide to sell, what will my cost basis be?>>>>

"The cost basis will not be the lower of the transfer price (I assume you mean the value on the date of the gift) or grandpa's cost basis. The cost basis will be grandpa's cost basis. If you can't prove what grandpa's cost basis is, the IRS will gladly give you a cost basis - zero."

To Chris Riser: Are you sure about the basis issue? I have always understood that the basis of gifts in hands of donee is lesser of donor's basis or FMV at time of gift. In addition, there was a recent thread about son giving depreciated stock to father, who was in higher tax bracket, for father to sell and take loss and TMFTaxes a/k/a Roy confirmed that in father's hands basis would be FMV at time of gift, and thus no loss would be recognized by father, unless stock fell even more (but that is hard to do when it is near zero).

I believe that this issue does not come up often because most donor are looking to avoid tax on gains, but you may wish to double check your sources.

Just my $0.02. Regards, JAFO

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.