The decedents brokerage account was set up to receive dividends as shares of stock. I changed this to receiving cash but prior to this some stock was received. Normally, the basis is set to the value on date of death for inherited stock and you can put "inherited" for basis.
1) When I distributed this brokerage account only full shares were transferred and 0.955 shares remained. This was cashed out resulting in a gain that was distributed to the beneficiaries. The 1099B used the date a dividend was purchased as stock for the basis for the 0.955 shares - which is 3 months after death. I assume I use the actual basis on the purchase date instead of date of death as well?
2) - When transmitting stock to heirs I have told them the basis on the date of death is the basis to use. For any shares acquired after date of death do I need to first determine who received those exact shares and then tell them the actual basis and date of purchase?
@SaratogaSam1 wrote:
.....I assume I use the actual basis on the purchase date instead of date of death as well?
Yes, you use the price paid on the purchase date instead of the date of death valuation as the basis.
@SaratogaSam1 wrote:
.....do I need to first determine who received those exact shares and then tell them the actual basis and date of purchase?
Did you liquidate the shares and distribute cash or did you distribute the actual shares? I have to assume it was the former and, if so, the proceeds would typically be shared equally or in accordance with the will or per the laws of intestate succession.
I distributed the actual shares. I did not intend to cash anything out but since they did not transfer partial shares it just happened. The 0.955 shares was part of the dividend so there are more shares with the same purchase date.
The stock price was rising at the time so whoever got this stock would have a higher (better) basis. There was a large number of shares transferred. I only specified number of shares to each, not which exact shares.
The beneficiaries just need to know the basis of the shares they received.
You should inform the beneficiaries of the acquired dates (mostly being date of death), cost/basis and number of shares of stock whose gains are unrealized , whether resulting from reinvested dividends , or not.
Realized gains, such as partial shares liquidated, would go on the beneficiary's K-1
I agree with tagteam. inherited shares FMV on DOD. reinvested shares acquired after DOD use their purchase price. unless you can find something in the will or state tax law, the heirs' tax basis would be in proportion to shares distributed. you wouldn't be able to distribute DOD shares to one heir and reinvested shares to another.