My husband inherited stocks from his mother, who died in 2018. He liquidated the stocks in 2018. Do we pay taxes on the entire liquidated amount, or only the interest?

Forum|Forum|7 years ago
June 3, 2019
2 replies
1 view

No text available

TurboTax Self Employed Online

Best answer by

No, you won't pay taxes on the entire liquidated amount. You will only pay tax on any capital gains between the market value on the date of death of the person you inherited it from and what you sold it for. It is a long term capital gain regardless of how long your actual holding period was.

Anonymous

Answer

alfa1600guilataAuthor

Level 2

Thanks. I'm still confused, though. Do we not file a 1099-B? The numbers on that are what I plugged into turbotax-- they are the liquidated amounts.

TomYoung

Alumni - Champ

"Thanks. I'm still confused, though. Do we not file a 1099-B? The numbers on that are what I plugged into turbotax-- they are the liquidated amounts."

If you got a 1099-B then you must report the 1099-B.

You seem to expect that all you have to do is to enter the 1099-B and that's it. But it's pretty clear to me that the 1099-B is not telling you the basis to use against the proceeds to come to a taxable gain or loss. I'm assuming that from the wording of your question which seems to suggest that all the proceeds are being reported as "gain."

Although brokers now have an obligation to report the basis associated with sales of securities in some situations, that doesn't apply to every possible situation. If the broker simply doesn't know the basis and/or the date of acquisition they can leave the basis and/or the date of acquisition blank. In this case it's your obligation to enter the correct basis.

For each security sale, enter the information you have. In the date acquired field enter the word "inherited". That will make the transaction a long term holding irrespective of how long your husband, (or his mother), actually owned the stock. For each security look up the security's closing price on the date of death. This, in most cases, will be the price you will use as the basis for the security. So you multiply the number of shares sold times that closing price and that's the number you enter in the cost basis field. If the price of the stock went up from the DoD you'll have a long term gain, if the price of the stock went down from the DoD you'll have a long term loss.

If some "corporate action" - a stock split, a spin off or any other action that adjusts your original basis - you'll have to adjust the basis appropriately. Hopefully nothing like that occurred and a simple exercise of multiplication will get you the correct basis to use.

Tom Young