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amarkow
New Member

Will the IRS see a red flag when the FMV at death of inherited stock is not what is shown on the 1099B?

We inherited stock from my Wife's father.  We received a 1099B when we sold the stock that shows old Cost basis or none for most of it.  Turbotax states we use the FMV at the date of death which will show vastly different cost basis.  Will this be an issue for the IRS?  How do we best handle it?

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Accepted Solutions
rjs
Level 15
Level 15

Will the IRS see a red flag when the FMV at death of inherited stock is not what is shown on the 1099B?

There won't be any issues or red flags. When you enter the basic information from the 1099-B, there are two buttons to enter additional information about the sale. You can choose to enter the additional information all on one screen, or to go through step-by-step questions and answers. Either way, you indicate that the stock was inherited and you enter the correct date-of-death basis. If basis was not reported to the IRS, there's nothing to raise a red flag. Only the correct basis is shown on Form 8949. If basis was reported to the IRS, there will be a code B in column (f) of Form 8949. That code indicates that the basis on the 1099-B was incorrect. The basis from the 1099-B will be in column (e) and there will be an adjustment in column (g) to make the gain or loss correct. The entry for Date Acquired will be "Inherited" instead of a date, so the IRS sees that the stock was inherited, which explains why the basis is adjusted. This is all perfectly usual and common, so there are no red flags.

The sale of inherited stock is always considered long-term, no matter how long you or the decedent actually owned it.

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1 Reply
rjs
Level 15
Level 15

Will the IRS see a red flag when the FMV at death of inherited stock is not what is shown on the 1099B?

There won't be any issues or red flags. When you enter the basic information from the 1099-B, there are two buttons to enter additional information about the sale. You can choose to enter the additional information all on one screen, or to go through step-by-step questions and answers. Either way, you indicate that the stock was inherited and you enter the correct date-of-death basis. If basis was not reported to the IRS, there's nothing to raise a red flag. Only the correct basis is shown on Form 8949. If basis was reported to the IRS, there will be a code B in column (f) of Form 8949. That code indicates that the basis on the 1099-B was incorrect. The basis from the 1099-B will be in column (e) and there will be an adjustment in column (g) to make the gain or loss correct. The entry for Date Acquired will be "Inherited" instead of a date, so the IRS sees that the stock was inherited, which explains why the basis is adjusted. This is all perfectly usual and common, so there are no red flags.

The sale of inherited stock is always considered long-term, no matter how long you or the decedent actually owned it.

View solution in original post

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