Question on inherited stocks cost basis

[kurchian]

My wife and I recently inherited some stocks. We are interested in selling some of them.

The date of death was 12/26/22. When the stocks were transferred to our broker the cost basis date became 12/26/22. The broker, therefore, currently shows this as short term.

It is my understanding that inherited stocks automatically are considered long term, regardless of how long we hold them.  So I am reluctant to sell them because I’m concerned that the 2023 1099 that my broker will issue will tell the IRS that the gains/losses are short term. And, of course, it is to my advantage to show these as long term, not short term

I would appreciate any advice that readers could share.

[Anonymous_ · Accepted solution]

Your scenario will not present an issue when you enter it in TurboTax, provided you check the box shown in the screenshot below.

[NCperson]

@kurchian I have seen brokerage account statements that are smart enough to reflect these inherited sales under the long term gain category automatically.  It is well known in the tax and brokerage circles that inherited shares get the cost basis of the date of death and are automatically categorized as long term gains, regardless of the holding period.  

[fanfare]

It is the Box Category you select that controls, not the Date Acquired.

Use Form 8949 Page 2.

You can put "(Inherited)" in descriptions

@kurchian