No, you cannot claim the stock sale as a gift. Cash gifts are not taxable, but gifted property later sold (as is your stock) is subject to tax.
- Federal Taxes
- Wages & Income
- Investment Income
- Stocks, Mutual Funds, Bonds, Other - follow the prompts, you will be able to indicate that you received form 1099-B and enter information on your stock sale.
You will be asked additional information about the stock basis, which most likely is not listed on the form. You will have to find this on your own, using some old records if you have any, or you may use historical stock records. You would enter the date acquired as "various" since we know it is a long-term stock. If the cost basis is not reported to the IRS, you would select category F (long-term not reported).
Now... about stock basis: Cost basis for a gift is the same basis as that of the person who gave you the gift. If the item was sold at a loss, the basis is the fair market value on the date you received the gift. If the fair market value of the item is less than the donor's basis (his cost), and you sell it for more than fair market value, but less than the donor's basis, then you don't have a gain or a loss. In other words, you must know the grandfather's stock's cost and the Fair Market Value when it was given. If you do not have any records, try using Marketwatch or Nasdaq. It's generally acceptable to take the lowest and highest price from a given day and average them to arrive at a cost.
NOTE: Reporting gifted stock basis is confusing... if you cannot determine the basis, you will have to enter zero as your basis; you may actually enter it first (if you cannot figure out the basis) and see if you are subject to an extra tax... the reason I recommend this is because for 2016, the long-term capital gains tax rates are 0, 15, and 20 percent . If your ordinary tax rate is already less than 15 percent, you may pay zero percent long-term capital gains rate- which means you will not see a difference on your refund/ tax bill. You will not have any loss, but you won't pay tax on the gain either.
