If you use a $0 cost basis, all the proceeds will be capital gain. You would pay the most tax if your cost basis is $0, so there would be no inquiries. If you claim anything else as the cost basis, you have the burden of proving if audited. Reporting $0 now will result in paying more tax but taking less risk than guessing an approximate basis and possibly receiving an inquiry.
The basis of securities you receive as a gift depends on whether your ultimate sale of the stock produces a profit or loss. If you sell for a profit, your basis is the same as the basis of the previous owner. In other words, the basis is transferred along with the property. If you sell for a loss, though, the basis is either the previous owner's basis or the value of the stock at the time of the gift, whichever is lower. In other words, you don't get to write off a loss that occurred while the donor owned the securities.
Tracking Stock Basis
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