jtax
Level 10

Investors & landlords

Why do you say the basis wasn't stepped up?

 

If the trust were a living (intervivos) non-grantor trust and your mother gifted the shares to the trust during her lifetime, you would be right that there would be no step-up and you would not indicate to TT that they were inherited. Your basis would be your mother's basis and you'd have the same holding period. If you did indicated that they were inherited, but entered the correct basis and they were long-term I don't think it would matter.

 

On the other hand for a testamentary trust funded after you mother's death, from assets that she had full dominion and control over when she passed, you would get a step up. TT would care about that both for the basis stepup but also because inherited shares are consider long-term even if you sell then within a year of inheriting them I.R.C. 1223(9) https://www.law.cornell.edu/uscode/text/26/1223

 

How did you get the shares? I'm assuming the trust transferred the shares to you w/o selling them and without making an election to be taxed as if the trustee had sold them. If so then your basis is the trust's basis. It's the only thing that makes sense given that you got a 1099-B and not a K-1.

 

In any case the shares from dividend reinvestment from dividends received after your mother's death would not be "inherited" and would not get a stepup. The trust's basis in those would be the price paid for them. That would be your basis if you get the shares in-kind as described above.

 

 

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