Added to a stock account before mom died as joint owner. She passed, I sold part of it. My 1099B has cost basis on DOD. Should I be taxed at a higher rate like a spouse?

[greenportbeach]

My sister and I were added as joint owners before mom died.  When she died, the stock was split evenly between my sister and I.  I sold part of mine in 2018 to pay 2017 taxes.  My 1099B from my investment portfolio is showing the cost basis on the DOD for mom.

I see where a spouse is taxed at a higher rate if they are added to an account, but don't see that a child is taxed at a higher rate.

I just want to make sure using the DOD as a cost basis is correct!

[ScruffyCurmudgeon]

I am concerned about your words "were added as joint owners."  If ownership actually passed in part or in whole to you and your sister, then the cost basis changes from what was recorded as her cost basis.  I would seek information from the financial institution to understand their position on when ownership changed - as you say while your mother was alive -or as they seem to have decided, at her death.

[MarilynG]

When mom added two children, they owned 1/3 of stock at her cost basis. When mom died, they owned balance from 1/3 to 1/2 at DOD basis. Son sold some stock; could broker have sold last LIFO at DOD cost, which was likely higher than original cost basis, making less gain for him?

[ScruffyCurmudgeon]

That is my point!  There is no way he can reasonably use mother's cost basis!  Ownership of a portion of the stock was not inherited but instead gifted, so that using the step-up for cost is absolutely inappropriate for the shares that were already registered in the two siblings' names

[MarilynG · Accepted solution]

Your Cost Basis for the stock would be her Cost Basis on the Date that your mother added you to her account.  If there were three of you on the account at that time, then only two of you when your mother passed away, this gets complicated.

You would need to calculate the Cost Basis for the number of shares you had when your mother added you to her account, and another Cost Basis for the additional number of shares you received when she died (which would have a Cost Basis as of DOD). 

If the Broker issuing you the 1099-B can't help you with this, you could enter the 1099-B as you received it, especially if the time period between her adding you to her account and her date of death are not too far apart.

If they are, you may need professional help to calculate this. 

Click this link for an example using a home of Calculating Variable Cost Basis.

[Edited 3/10/2020 | 4:51 PM]

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