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<< Okay. But what legal documentation do I have of what the purchase price/date was? It sounds like I could cheat the system if there wasn't any kind of document and procedure in place >>

I would HOPE that, at a minimum, you would have a copy of a cancelled check and a purchase agreement between you and your friend...showing exactly what you purchased.

As you note, you could make up any number that you would like. But if your return gets selected for exam, you'll be required to PROVE your basis...or you won't have one...and all of your gain will be subject to tax.

So I'd suggest that you gather your documents and make sure that you have some type of agreement.

TMF Taxes
Roy
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