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Level 3
posted Mar 19, 2022 12:07:30 PM

I gifted stock with stepped up basis how to list on tax form

I had an ETF that I owned for many years.  The cost basis was $29,949.  My wife passed away in August of 2014.  On the date of death the ETF was worth $40,310.
 
I then gifted the ETF to my daughter on 12/8/2021.  On the date of the gift the ETF was worth $65,534.  She then sold the ETF on 12/18/2021 and it was worth $67,747.
 
I'm doing the taxes for this transaction and I am not sure what to use for the gain.  The cost basis was never updated by the brokerage company (was I supposed to inform them?) and on the 1099 it lists the full gain of  $67,747.
 
Am I able to use a stepped up basis?
My original investment was $14,975 and my wife's $14,975.
On the date of death my cost basis is still $14,975, my wife's is now $20,155 
So should the gain I need to list on daughter's tax form be $67,747 - $14,975 =  $52,772 - $20,155 = $32,617 or the $37,798 listed on the 1099 ($67,747 - $29,949).
 
What is the correct method to list on tax form?
If $32,617 is correct do I need to concern myself over the amount reported by the brokerage house?
 
Thank you

0 2 423
1 Best answer
Level 15
Mar 19, 2022 1:26:49 PM

You can make an adjustment for the incorrect basis shown on the tax reporting statement from the brokerage firm.

 

See https://www.irs.gov/instructions/i8949#en_US_2021_publink1000285717

 

You can use the stepped-up basis for the one-half you received from your wife as a result of her passing. Note that the proper method for valuation of the ETF is to use the high plus the low for the date of death divided by two (i.e., the average of the high and low the ETF traded at that day).

 

Note further that you also have to file a gift tax return (Form 709).

 

See https://www.irs.gov/instructions/i709#en_US_2021_publink16784xd0e314

 

2 Replies
Level 15
Mar 19, 2022 1:26:49 PM

You can make an adjustment for the incorrect basis shown on the tax reporting statement from the brokerage firm.

 

See https://www.irs.gov/instructions/i8949#en_US_2021_publink1000285717

 

You can use the stepped-up basis for the one-half you received from your wife as a result of her passing. Note that the proper method for valuation of the ETF is to use the high plus the low for the date of death divided by two (i.e., the average of the high and low the ETF traded at that day).

 

Note further that you also have to file a gift tax return (Form 709).

 

See https://www.irs.gov/instructions/i709#en_US_2021_publink16784xd0e314

 

Level 3
Mar 20, 2022 2:56:43 PM

Thank you!