How would I report capital gains in 2018 resulting from an inheritance as a benficiary of a prior year?

[GB2010]

An investment that I inherited in 2015 declared a distribution of common shares of beneficial interest in May of 2018, resulting in Capital Gains (CG) and tax in 2018.  How do I record the inherited part of the CG v. the taxable portion to me as the beneficiary?

[GB2010]

If the taxable basis at the time of inheritance increased from the original basis, why wouldn't I be able to take advantage of that? Example:  If the original basis was $1K and the inherited basis was $10K and I sold it at $15K, I should only pay CG taxes on $5K, right?

[robtm]

If the person passed away in 2015 and you inherited the stock, any capital gain you received in 2018 belongs to you, there is no distinction between  inherited capital gains and your capital gains - they are all yours.

[GB2010]

If the taxable basis at the time of inheritance increased from the original basis, why wouldn't I be able to take advantage of that? Example:  If the original basis was $1K and the inherited basis was $10K and I sold it at $15K, I should only pay CG taxes on $5K, right?

[robtm]

That's right. The cost basis for inherited stock is usually based on its value on the date of the original owner’s death -- whether it has increased or lost value over time. If the stock is worth more than the purchase price, the value is stepped up to the value at death. If, for example, your uncle purchased the stock for $100 and it was worth $250 when he died, your basis would be $250 and you would not be taxed on the gain that occurred while he was alive. When you sell the stock, your tax bill would be based on the gain or loss on that $250.

Likewise, you can’t claim a loss for losses incurred while the original owner was alive. If your uncle purchased the stock for $250, for instance, and the value had dipped to $100 by the date he died, then your basis would be $100.