Husband receiving funds from wife's account at her death

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Heidi
Posts: 27
Joined: Fri Nov 27, 2009 3:55 pm

Husband receiving funds from wife's account at her death

Post by Heidi »

Our son was named beneficiary on a mutual fund account owned by his wife (this was a regular account, not a tax sheltered account). His wife died and he is in the process of having to decide how to receive this fund. Two questions:

1). If he sells the fund immediately what will he use as the cost basis?
2). If he puts the fund into his name, and sells the fund later what will the cost basis be (what his wife paid for the fund or what the fund was worth when he put it in his name?)?
xerty24
Posts: 4827
Joined: Tue May 15, 2007 3:43 pm

Re: Husband receiving funds from wife's account at her death

Post by xerty24 »

Heidi wrote:Our son was named beneficiary on a mutual fund account owned by his wife (this was a regular account, not a tax sheltered account). His wife died and he is in the process of having to decide how to receive this fund. Two questions:

1). If he sells the fund immediately what will he use as the cost basis?
2). If he puts the fund into his name, and sells the fund later what will the cost basis be (what his wife paid for the fund or what the fund was worth when he put it in his name?)?
I believe the basis is the market value of the fund the day your son's wife died. This would be the same in either of the cases you list.
No excuses, no regrets.
TA_Lurker
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Re: Husband receiving funds from wife's account at her death

Post by TA_Lurker »

*edited because I failed reading comprehension this afternoon
Last edited by TA_Lurker on Wed Aug 08, 2012 1:07 pm, edited 1 time in total.
JDCPAEsq
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Location: Southwest Florida

Re: Husband receiving funds from wife's account at her death

Post by JDCPAEsq »

The basis is the fair market value on the date of her death regardless of when he sells it or transfers it.
John
Alan S.
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Re: Husband receiving funds from wife's account at her death

Post by Alan S. »

One exception to the above would apply if appreciated mutual funds were owned by your son previously and gifted to his wife within 1 year of her death. In that case the cost basis would be his wife's cost basis immediately prior to her death.

The purpose of this provision is fairly obvious. It is intended to prevent a person from transferring appreciated property to a terminal person (spouse or otherwise) in order to achieve a step up in basis when that spouse passes and the property is then reacquired.

See IRS Pub 551, p 9.
umfundi
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Re: Husband receiving funds from wife's account at her death

Post by umfundi »

And, assuming the funds are properly accounted for (and taxed, if need be) in her estate.

The estate administrator should inform him of the proper basis. It may be the value on her date of death, it may be the value on the date of distribution.

Keith
Déjà Vu is not a prediction
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