Unknown Basis

Forum|Forum|5 years ago
December 27, 2020
3 replies
26 views

I have read posts about how to determine basis when there are no records that support the basis on stocks or mutual funds. However, I do taxes for someone who has some stock that there is no basis reported by the brokerage company. They have no idea of when they bought it. Maybe 10 years ago, maybe 15, maybe 20. My question is, how stringent would the IRS be in this case, if we said it was purchased 10 years ago without any supporting documentation.

Not A Product Question

Critter-3

Level 15

You only have to prove it if the return is audited ... so use the best guess you have and keep substantiation of how you make the calculation. If you don't enter something the basis is assumed to be zero ... anything is better than zero.

Any I hope as a paid tax pro you are using a professional tax program since using Turbotax to prepare returns for compensation is against the law.

NCperson

Level 15

an ideas:

the most conservative approach is to use a cost basis of zero - no one can argue with that.....if the stock price 10 years ago was very small, might as well use zero as the tax difference could be minor

where was the stock held? does that firm have any records? most financial institutions hold these records for years and years.

did you have the stock certificate? was there a date on it?

do you have old tax returns were the dividends were reported? if so, you know it was owned for that long.

Hal_Al

Level 15

You have to report the sale on your tax return. Lacking any cost basis, the IRS will consider the entire sale amount as taxable. So, you need to make your best effort to determine the original cost basis, even if (worst case) it's a guess. Historical prices of publicly traded stocks are readily available on the internet and should, at least, satisfy the IRS that your basis wasn't zero; just "google" “Historical Stock Prices". I use http://bigcharts.marketwatch.com/historical/. The stockholder relations dept. at the company may be able to help.

"Maybe 10 years ago, maybe 15, maybe 20". Then, the lowest price during that period would be the most conservative approach. You would not have to use zero.