Gift Tax on Stocks

[joans]

Client received stocks from his aunt in 2007(have to amend 2007 return). Two questions: 1) What is the cost basis of the stock - when aunt purchased it or when client received it? and 2) would this be considered inheritance? Client is looking for the will to have supporting document. Thanks for the help.

Sara

[jasdlm]

Did the Aunt die? Why do you have to amend the 2007 return. Did the stocks pay dividends in your clients SSN that weren't included on the 2007 return?

If Aunt died and client received stocks as a result of her death, inheritance with basis of date of death value of stock (assuming it was in Aunt's name only; not joint tenancy with your client)

If Aunt was alive when stocks were transferred, it's a gift, and your client takes Aunt's basis in the stocks.

Need more information.

[Lion EA]

If he received the stocks as a gift from his aunt who was alive, his basis is her basis and his holding period includes hers. If he inherited stocks from his aunt upon her death, his basis is the FMV on her DOD or alternate valuation date and the stocks are long-term no matter how long held. Did he have income from the stocks during 2007? If not, why do you have to amend?

[Maribeth]

If he received the stocks as a gift from his aunt who was alive, his basis is her basis and his holding period includes hers. If he inherited stocks from his aunt upon her death, his basis is the FMV on her DOD or alternate valuation date and the stocks are long-term no matter how long held. Did he have income from the stocks during 2007? If not, why do you have to amend?

Especially in these times, you need to know two figures: the basis in the hands of the aunt AND the fair market value of the stock on the day it was gifted. For gain purposes, you would use the aunt's basis. For loss purposes, you use the lesser of the aunt's basis or the FMV at time of gift.

Maribeth

[joans]

Thanks for the help. Client received the stocks in 2007 and never showed it to us. Aunt did die. So I would use the FMV or stocks on the date of her death. This should make gain a lot less as stocks were originally purchased quite a while ago. Appreciate all the feedback:)

Sara

[kcjenkins]

Hint for the future. If someone 'inherited' something, please use that term, rather than 'received'. Received implies a gift, while an inheritance has very different rules than a gift has. So someone either 1) purchased, or 2) inherited, or 3) received a gift. If you ask the question vaguely, you may well get a wrong answer, as you force the readers to make assumptions that may not be correct.

PS

We are all still wondering why you need to amend 07?

[Lion EA]

If the aunt died after giving a gift, it's still a gift and follows those rules. If the reason your client has the stock is because he inherited it from his aunt who still owned the stock when she died, then it's an inheritance and follows those rules. And, why do you have to amend 2007. Did he sell the stock in 2007?

[joans]

My bad. Yes he did sell the stocks in 2007 and received a notice from the IRS because they weren't reported. Sorry for the confusion. Still trying to figure everything out. Haven't done too many of these.

[OldJack]

So we still do not know if the aunt died and the taxpayer inherited the stock or if it was a gift before the death. I guess some are just to busy to read the posts before they respond.

[joans]

Yes, client did inheritant from past away aunt and cashed stocks in in 2007. Yes, very busy. 1 week behind in returns and running like crazy with 2 other jobs. So sorry if sometimes clarification is sketchy. Please forgive.

[zeke]

Elrod - Please send Joans one of your cookies. J.B. - a banana sandwich. Jainen please lend her one of your roses to smell.

Now Joans, eat the cookie & the sandwich. Smell the roses. Now, we can all go back to work.

z ;)

[joans]

Thanks for cookie, sandwich & rose, but i would prefer Old Fashion and good movie to relax:) OH well, only 1 1/2 months left to that day. Thanks all for the help.

[Bart]

Thanks for cookie, sandwich & rose, but i would prefer Old Fashion and good movie to relax:) OH well, only 1 1/2 months left to that day. Thanks all for the help.

47 days 10 hours 34 mins. I have a countdown clock on my desktop