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I'm certain that this is a problem many have faced.

My wife's 87-year old aunt with severe memory problems has a number stocks that have no paper trail leading back to their purchase. As the money is now required to meet expenses, we don't know how to figure a basis for calculating capital gains. How does one resolve this problem?
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I'm certain that this is a problem many have faced.

My wife's 87-year old aunt with severe memory problems has a number stocks that have no paper trail leading back to their purchase. As the money is now required to meet expenses, we don't know how to figure a basis for calculating capital gains. How does one resolve this problem?
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If you have the original certificates you may be able to contact investor relations at the company and see if they can assist you in determining a "trading range" based on the year in which the certificates were issued. You may want to use the mean average of that range.

pete
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<My wife's 87-year old aunt with severe memory problems has a number stocks that have no paper trail leading back to their purchase. As the money is now required to meet expenses, we don't know how to figure a basis for calculating capital gains. How does one resolve this problem?>


Calling investor relations may help as has been suggested. If the companies have gone through splits, multiple mergers, spinoffs, cash distributions, etc., you will need an enormous amount of time and luck. The new company is not responsible for tracking information on the old company.

If there ever is an audit, the burden of proof is on you to prove the cost basis (or very close to it). If the stocks have huge gains and were bought decades ago, the cost basis may be very low anyway. You need to estimate how much you can save compared to your investment of time. In the worst case, you will owe the 20% LTCG on the entire proceeds.

One way that you may limit the taxes is to be fully aware of the aunts medical expenses. If they are significant, you can use them to offset the gains. If possible, maybe you can bunch the expenses into this year to further reduce the impact of the gains. Does your wife have a durable POA? You should also get some professional tax advice. Good luck!


BRG
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<<<My wife's 87-year old aunt with severe memory problems has a number stocks that have no paper trail leading back to their purchase. As the money is now required to meet expenses, we don't know how to figure a basis for calculating capital gains. How does one resolve this problem?>

As pointed out, Investor Relations might be helpful. So might old copies of the Wall Stree Journal. But as was also pointed out, that might give you a price at a certain point in time, but it doesn't prove basis.

An cancelled check. An old brokerage statement. Anything that you might be able to find will certainly help you out. If you know the broker used to pruchase the shares, you might even want to contact them for some history on the account.

But it's your job to prove basis...with things such as cancelled checks and/or confirmation slips. Without those, the IRS could make a very good case that you have no basis, and can tax you on the entire amount of the sale. So ANYTHING that you can find will be better than nothing.

TMF Taxes
Roy
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hogback Date: 8/20/00 8:38 PM Number: 38919
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<<I'm certain that this is a problem many have faced.>>

Yes, and here is how some have logically, although not perfectly, resolved the situation if no documentation exists other than the stock certificate and no other information is otherwise available.

Make a copy of the stock certificate for record purposes. Look at the stock certificate and find the date of its issuance. Determine the approximate value of the stock on the date of issuance (multiply average price per share by the number of shares), add an appropriate amount to represent the commission which would have been paid, and you just might come up with a relatively appropriate basis. Use said extimated basis and said date of issuance when filling out the Schedule D. It should be close enough for government work and is at least logically justifiable.

No, it is not necessarily going to be exactly correct for a number of possible reasons, however it will be a reasonable estimate and much more realistically equitable than paying the full 20% tax on the gross proceeds.

Sincerely,

DHatch

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Don't overlook the possibility that your wife's aunt may have inherited these securities somewhere along the way. And the value of the stock may be much easier to establish at the time she inherited them than at the time they were first bought by her late husband or another relative. Also, even if the basis of the inherited stock turns out to be just as difficult to establish accurately, a more recent value may be higher/much higher than a value from many many years ago, and thereby save some tax dollars.

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LoTax
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<<Make a copy of the stock certificate for record purposes. Look at the stock certificate and find the date of its issuance. Determine the approximate value of the stock on the date of issuance (multiply average price per share by the number of shares), add an appropriate amount to represent the commission which would have been paid, and you just might come up with a relatively appropriate basis. Use said extimated basis and said date of issuance when filling out the Schedule D. It should be close enough for government work and is at least logically justifiable.>>

While logical, and somewhat justifiable, if the return is audited you are STILL at the mercy of the IRS. All this really proves is the stock price at the date of the issuance. There are any number of reasons that the original shares were purchased (or acquired in some other manner) at a time other than the date the share was issued. Renaming the owner. Inheritance. Stock splits or splitoffs. Could be anything.

I don't disagree with the methodology. Heck, I don't even disagree with using this technique if the shares WERE originally purchased at the time of the issuance of the certificate. I just want the reader to be aware that, even with a reasonable effort, if you are unlucky enough to have the return audited, the above analysis is not proof.

TMF Taxes
Roy
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<While logical, and somewhat justifiable, if the return is audited you are STILL at the mercy of the IRS. All this really proves is the stock price at the date of the issuance. There are any number of reasons that the original shares were purchased (or acquired in some other manner) at a time other than the date the share was issued. Renaming the owner. Inheritance. Stock splits or splitoffs. Could be anything.>


Roy:

Just to expand on your point, one of the most widely held stocks over the years has been AT&T. If the person has certificates of the regional bells from the original spinoffs in 1984, the basis would come from the original AT&T shares, not the share date on the Bell certificates.

Also, all of the spinoffs have had MAJOR activity since that date. Some of the activity requires further adjustments to the original basis. In some cases old certificates needed to be turned in before new ones would be issued. If she has any Nynex, Pac Tel or Ameritech certificates in her pile, there is a lot of other work to do.

Your main point that there are so many variables should keep the poster from trying to take a shoot from the hip approach. If the stocks have greatly appreciated and they have a basis date from 25 or more years ago, the basis can represent a tiny fraction of the current value. As I mentioned in a prior post, at some point you need to determine if the heavy investment of time is worth it.


BRG
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TMFTaxes Date: 8/22/00 6:58 PM Number: 38993
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<<<Make a copy of the stock certificate for record purposes. Look at the stock certificate and find the date of its issuance. Determine the approximate value of the stock on the date of issuance (multiply average price per share by the number of shares), add an appropriate amount to represent the commission which would have been paid, and you just might come up with a relatively appropriate basis. Use said extimated basis and said date of issuance when filling out the Schedule D. It should be close enough for government work and is at least logically justifiable.>>>

<<While logical, and somewhat justifiable, if the return is audited you are STILL at the mercy of the IRS.>>

Absolutely, however if the return is audited you are going to be at their mercy anyhow, so you might as well leave them some bear meat to find so that they can justify their existence and somewhat satisfy their hunger and perhaps go away to potentially greener pastures.

<<All this really proves is the stock price at the date of the issuance. There are any number of reasons that the original shares were purchased (or acquired in some other manner) at a time other than the date the share was issued. Renaming the owner. Inheritance. Stock splits or splitoffs. Could be anything.>>

Quite correct.

<<I just want the reader to be aware that, even with a reasonable effort, if you are unlucky enough to have the return audited, the above analysis is not proof.>>

Absolutely correct, however it beats just pulling a number out of a hat and it would be very difficult to effectively prosecute any criminal case when an honest good faith effort has been made in a situation where there was NO OTHER information available.

Sincerely,

DHatch

P.S. I had a small potful of the old AT&T before our government in its infinite wisdom decided to break up the greatest communication system the world has ever known and, as some of you know, the listing the dividends from the resultant clones and their offspring now take up most of a shedule B.

I have pretty much decided not to sell any, but rather let my heirs have the benefit of the date-of-death basis then hopefully still available. If I ever become so desperate that I have to sell any of it, I would be in such a low tax bracket that it might not cost overmuch to sell even if I could never figure out an exact basis.

One of the great disadvantages of a dividend reinvestment program is the need to keep incredible records. I suppose I could always give some away to charities and take a charitable deduction if I itemized deductions. It's sort of amazing what just a few hundred shares bought from time to time has apparently become worth since the late fifties and early sixties, so I guess I can't really complain too loudly, although Uncle Sam will probably turn out to be my largest beneficiary.

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