Inherited stock cost basis

[ILLMAS]

TP received a check from the sale of stock of a relative, I have an understanding that cost basis starts the date the person died, but happens when they simply cash out and don't hold on

to it?

[JohnH]

Capital gain is calculated by subtracting the market value on date of death from the selling price. Transaction fees can also be added to market value in calculating basis. Even if sold on the date of death, next day, or whenever, you still use this formula. Capital gain on inherited stock is considered long term, even if the stock is held for less than one year by both the decedent and the heir.

[jasdlm]

Did it come from the estate? If so, the sale (including the tax basis information) will be reported on the 1041, and your client should receive a K1 for his share of the income (depending on the estate expenses, etc.). I assume you're saying that the estate cashed out the position?