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I'm trying to get a stock transfer agent to understand that a half step up cost basis should be applied to shares of stock.
They did transfer the stock into the wife's name after her husbands passing.
The transfer agent replied that a step up basis of any kind does not apply.

Again, I will try to request this -

I'm including Page 14 of Publication 559 which lists in the Basis of Inherited Property section:
"Qualified joint interest. One-half of the value of property owned by a decedent and spouse as tenants by the entirety, or as joint tenants with right of survivorship if the decedent and spouse are the only joint tenants, is included in the decedent's gross estate. This is true regardless of how much each contributed to-ward the purchase price.
Figure the basis for a surviving spouse by adding one-half of the property's cost basis to the value included in the gross estate. Subtract from this sum any deductions for wear and tear, such as depreciation or depletion, allowed on that property to the surviving spouse."


And also Page 9 and 10 of Publication 551 which lists
"Qualified Joint Interest
Include one­half of the value of a qualified joint interest in the decedent's gross estate. It does
not matter how much each spouse contributed to the purchase price. Also, it does not matter
which spouse dies first.
A qualified joint interest is any interest in property held by married individuals as either of
the following.
Tenants by the entirety, or
Joint tenants with right of survivorship if the married couple are the only joint tenants.

Basis. As the surviving spouse, your basis in property you owned with your spouse as a
qualified joint interest is the cost of your half of the property with certain adjustments. Decrease
the cost by any deductions allowed to you for depreciation and depletion. Increase the reduced
cost by your basis in the half you inherited."


Can anyone suggest what else should be included to help them understand to correctly adjust the basis?


thanks in advance,
nag
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Can't this be handled when sold by using form 8949? There is a code for inherited property.
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This is an ages old JTWROS DRIP account - I was hoping that the transfer agent would get the correct cost basis applied - at least for the half of the shares that require adjusting.
Then the plan was to transfer in kind to another broker to consolidate assets - to make it fairly painless it would be nice to have at least that half basis set in stone when transferred.

thanks
nag
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This is an ages old JTWROS DRIP account - I was hoping that the transfer agent would get the correct cost basis applied - at least for the half of the shares that require adjusting.
Then the plan was to transfer in kind to another broker to consolidate assets - to make it fairly painless it would be nice to have at least that half basis set in stone when transferred.


How old is 'ages' old? Please keep in mind that for DRIP investments, the basis is required to be reported to the IRS only for purchases dated in 2012 and later. At least in my experience (although I haven't ever had a DRIP account), if the broker isn't required to report the basis, they usually don't. And even if they do, as already pointed out, you can adjust the basis that the broker reports using form 8949 https://www.irs.gov/pub/irs-pdf/f8949.pdf if the reported basis isn't correct.

AJ
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Started the DRIP 20 years ago.
Was concerned about setting off flags if adjusting the basis is required when it's sold. Especially since it would be adjusting shares purchased after 2012 - covered shares.

Another DRIP brokerage was requested to adjust the basis and it was correctly reported when it transferred to the consolidated brokerage house - granted it lists the shares as non-covered, but does give the adjusted cost and gain which is helpful.

I guess it's more for convenience - this request - even though it's non-covered - at the new brokerage house (VG), they will list on your account the cost basis for non-covered shares. They don't report it, but at least you aren't having to figure it all out.

So I'm hoping to put in the request for the adjustment one more time - and cross my fingers that I explain in a clear way that the cost basis should be adjusted. They certainly have been given paperwork to prove the loss of spouse.

nag
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Your life will be much easier if you put all of this info into your personal records and don't worry about the broker.

The IRS doesn't really care if you adjust the basis on the 8949 when the shares are sold. There's a code specifically for this situation, and it get used frequently. They actually expect you to adjust the basis when a spouse passes.

My understanding is that the broker is not supposed to adjust the basis reported to the IRS. They continue to report the original purchase basis, and it is up to the taxpayer (i.e. YOU) to make the appropriate adjustments.

--Peter
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My understanding is that the broker is not supposed to adjust the basis reported to the IRS. They continue to report the original purchase basis, and it is up to the taxpayer (i.e. YOU) to make the appropriate adjustments.

My understanding is the same as Peter's. Brokers only adjust cost basis due to corporate actions and only those that impact shares which are already "covered" securities. I see this problem all the time with investment clubs that transfer shares as part of a member withdrawal. The sending broker provides the club's cost basis in the shares, not the receiving member's adjusted basis in the shares. The receiving broker will not, and does not have to, adjust the cost basis in their records. I know I've seen the actual regs that cover this, but I don't have the reference at my fingertips.

Ira
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I tell my clients (or their children, since many of my clients are quite elderly and as lacking in computer skills as I am) to put together and Excel or similar sheet for each stock. Original purchase date, price, and shares, any dividend reinvestments and/or additional purchases, splits, stock dividends, spin-offs, etc. In many cases, whoever was in charge of the family finances (usually the husband, but not always) had some manual version of this, thank God.

The requirement that brokerages track this stuff, and the increased willingness of people to leave their stocks and such in their brokerage accounts, has been a blessing for tax accountants everywhere. There's nothing as dicey as having to ask a widow whose husband passed away five, ten, twenty years earlier, "OK, we have to start somewhere. Who was the President when Max bought this stock the first time? How old were your kids, what grade were they in? Who won the World Series that year?" (You'd be amazed how many non-sports-fan widows know the answer to that last one)

If they keep a computerized record, when a spouse dies, the survivor has an up-to-date record, and making the step-up calculation becomes very easy. The spreadsheet for the stock does NOT go with the tax return, but a copy should be with the taxpayer's copy of the return for the year of sale.

Count on the broker for the routine transactions that effect the number of shares and cost, but for the other things, such as the partial step-up or a change of brokers, you need your own records.
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