Fixing My Cost Basis [on inherited stocks]

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Steve1636
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Fixing My Cost Basis [on inherited stocks]

Post by Steve1636 » Sat Jun 23, 2018 8:26 am

I inherited stocks from my father, who passed away in 2016. These stocks have been transferred to my Fidelity account from the Fidelity account the executor of my father’s estate opened to consolidate the estate. Unfortunately, several of these stocks have incorrect costs basis. I think the costs basis for these shares should be based on the share price as of my father’s date of death. Instead, Fidelity is reporting cost basis that are much lower (possibly based on when my father purchased them).

I have reached out to Fidelity and several times and have not been able to get them to look into the problem and correct it. Any advice on how I should proceed would be appreciated.

JW-Retired
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Re: Fixing My Cost Basis [on inherited stocks]

Post by JW-Retired » Sat Jun 23, 2018 9:00 am

You supply the cost basis when you sell the stock.
https://www.investopedia.com/ask/answer ... tbasis.asp

Look up the closing price of the stock on the date of your father's passing here for example.
https://www.marketwatch.com/tools/quotes/historical.asp
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livesoft
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Re: Fixing My Cost Basis [on inherited stocks]

Post by livesoft » Sat Jun 23, 2018 9:05 am

https://ttlc.intuit.com/questions/42679 ... tems-blank

has good answers

Note that "Date Acquired" is "INHERITED" if you read and follow the IRS instructions which are available online for free. In other words, you don't even put the date of death on your tax return.
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Steve1636
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Re: Fixing My Cost Basis [on inherited stocks]

Post by Steve1636 » Sat Jun 23, 2018 10:30 am

My Fidelity statement is reporting the incorrect cost basis currently. If I sell these stocks, won’t Fidelity send me and the IRS 1099s with the wrong cost basis? I am concerned that if I just override the cost basis with correct lower amounts in my tax return, that I will have a problem with the IRS saying my reported taxes are too low. Won’t this be a problem?

Sidney
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Re: Fixing My Cost Basis [on inherited stocks]

Post by Sidney » Sat Jun 23, 2018 10:35 am

Steve1636 wrote:
Sat Jun 23, 2018 10:30 am
My Fidelity statement is reporting the incorrect cost basis currently. If I sell these stocks, won’t Fidelity send me and the IRS 1099s with the wrong cost basis? I am concerned that if I just override the cost basis with correct lower amounts in my tax return, that I will have a problem with the IRS saying my reported taxes are too low. Won’t this be a problem?
If they report these as non-covered shares it doesn't matter what they report on the 1099-B as the cost basis. When you file your taxes when you sell them, you will provide the basis that you know is correct.
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Re: Fixing My Cost Basis [on inherited stocks]

Post by JW-Retired » Sat Jun 23, 2018 12:37 pm

Has the estate settled? Has a federal or state tax return been filed? If there was I think there must have been an appraisal of the stock holdings. That would show either the value at death or, used to be the executor had another option of some number like 6 or 12 months after that. Not sure exactly what the time span was and if that's still available?

Anyway, what does the executor say was or will be done?
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donall
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Re: Fixing My Cost Basis [on inherited stocks]

Post by donall » Sat Jun 23, 2018 1:50 pm

I think I had to fill out a form to get the stocks and bonds reset at the date of death level.

delamer
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Re: Fixing My Cost Basis [on inherited stocks]

Post by delamer » Sat Jun 23, 2018 1:54 pm

If any of the assets were is a certain type of trust, it could be that they did not receive a step-up in cost basis when your father died.

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grabiner
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Re: Fixing My Cost Basis [on inherited stocks]

Post by grabiner » Sat Jun 23, 2018 2:22 pm

Sidney wrote:
Sat Jun 23, 2018 10:35 am
Steve1636 wrote:
Sat Jun 23, 2018 10:30 am
My Fidelity statement is reporting the incorrect cost basis currently. If I sell these stocks, won’t Fidelity send me and the IRS 1099s with the wrong cost basis? I am concerned that if I just override the cost basis with correct lower amounts in my tax return, that I will have a problem with the IRS saying my reported taxes are too low. Won’t this be a problem?
If they report these as non-covered shares it doesn't matter what they report on the 1099-B as the cost basis. When you file your taxes when you sell them, you will provide the basis that you know is correct.
In particular, the 1099-B will report the cost basis only to you, not to the IRS, for non-covered shares, so the IRS won't have any reason to question the numbers you report. (You should still have your own records in case of audit; these would show that the shares were inherited on date X and that the price on that date was $Y.)
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Earl Lemongrab
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Re: Fixing My Cost Basis [on inherited stocks]

Post by Earl Lemongrab » Sun Jun 24, 2018 2:24 pm

Usually for non-covered shares, the custodian provides a way to update. I have in the past sent them the information or been able to change it online. While you don't have to have it, it can be nice for planning purposes to have the gains tracker on the web site have accurate information.
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asset_chaos
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Re: Fixing My Cost Basis [on inherited stocks]

Post by asset_chaos » Sun Jun 24, 2018 7:33 pm

It's now been 15 years or so since I dealt with inherited stock basis, but back then I recall having a choice of date to use to set the inherited basis. You could have chosen the date of death or a date some months later, the exact number of which (6 perhaps?) I no longer recall; you were free to choose whichever date was more advantageous to you. I don't know if this provision still exists, but, if still available, it might provide you a small benefit.
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sometimesinvestor
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Re: Fixing My Cost Basis [on inherited stocks]

Post by sometimesinvestor » Sun Jun 24, 2018 8:25 pm

When I was the executor of my Mom's estate I provided a letter to my siblings the cost basis for each of the securities they inherited. I would ask the executor for such a letter

increment
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Re: Fixing My Cost Basis [on inherited stocks]

Post by increment » Sun Jun 24, 2018 8:40 pm

Last year I asked an enrolled agent about the use of the "alternate valuation date" (which is 6 months after the date of death). She said that it applies only when estate tax is owed.

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celia
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Re: Fixing My Cost Basis [on inherited stocks]

Post by celia » Sun Jun 24, 2018 9:26 pm

When I was a trustee settling an estate, since stocks change price all day long, my lawyer said to use the average of the lowest and highest selling price on the date of death. If the markets were not open that day, you can use the previous closing price.

As far as reporting a different basis than what the custodian reports to the IRS, the IRS makes a provision for this. You would enter the custodian's data that was sent to the IRS. Then look for a question or checkbox in your tax software that says something like "The basis was reported to the IRS" [if using H&R Block, like I am]. Then there should be another box labeled "If Box xx is incorrect, enter the correct basis amount here." This way the IRS gets both the custodian-reported basis and yours.

I have done this several times, especially in the first year there were covered shares and many of my tax forms were wrong. Instead of getting the custodian to fix things (especially if they weren't the original custodian when the purchase was made), the IRS allows you to override the numbers. They have never objected to my overrides. (But if you are audited, be prepared to send them a copy of the original statements or how you came up with your numbers. If they don't contact you within 2 years, they have likely moved on to more recent returns.)

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