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johkar1
Level 1

Where to enter the sale of stock received with a zero dollar cost basis in TurboTax

I'm trying to figure out what the tax consequences would be (for 2021 tax year) if my mother sold 300 shares of stock.  I'd like to make a copy of her 2020 tax file in TurboTax and see the tax impact but am unsure where to enter this hypothetical sale.  The circumstances are...

  1. My father owned an old life insurance policy in a mutual insurance company. When the company went public in 2001 he was issued 300 shares for owning that policy. 
  2. My father died in 2013 and the stock was put in my mom's name.
  3. I'm gathering her cost basis is $0 because of the circumstances of how it was obtained.  The stock's most recent closing price was $58.68 so it is now worth $17,604.   
  4. If she sold this stock what tax form would she be issued by the company and what figures would be on the form and in what boxes? 

She's elderly and just has 2 small pensions and SS and usually has to pay in about $700 each year on federal.  The stock yields about $600 in dividends/yr so just trying to figure things out.  She could use the money to pay for care.

1 Best answer

Accepted Solutions
ErnieS0
Expert Alumni

Where to enter the sale of stock received with a zero dollar cost basis in TurboTax

I’m assuming you are referring to the Prudential demutualization in 2001 (or similar circumstance). The cost basis to your father is zero.

 

The cost basis to your mother would be share price on your father’s date of death since this was your father's policy. The value of inherited property is the fair market value (FMV) of the property on the date of the decedent's death or FMV of the property on the alternate valuation date, but only if the executor of the estate files an estate tax return (Form 706) and elects to use the alternate valuation on that return.

 

Related Resources:
Gifts and inheritances

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3 Replies
ErnieS0
Expert Alumni

Where to enter the sale of stock received with a zero dollar cost basis in TurboTax

I’m assuming you are referring to the Prudential demutualization in 2001 (or similar circumstance). The cost basis to your father is zero.

 

The cost basis to your mother would be share price on your father’s date of death since this was your father's policy. The value of inherited property is the fair market value (FMV) of the property on the date of the decedent's death or FMV of the property on the alternate valuation date, but only if the executor of the estate files an estate tax return (Form 706) and elects to use the alternate valuation on that return.

 

Related Resources:
Gifts and inheritances

View solution in original post

johkar1
Level 1

Where to enter the sale of stock received with a zero dollar cost basis in TurboTax

Thanks for the reply.  There was no estate tax return filed so you are saying it is the value of the stock on my father's death date even though it might have been transferred a couple months later?  My mother did have a lawyer assist with getting the stock transferred to her because there wasn't a transfer on death. Why would the government give up the total tax potential from the zero cost basis?

Cynthiad66
Expert Alumni

Where to enter the sale of stock received with a zero dollar cost basis in TurboTax

That is correct.  The value of the stock at the date of death.  You can still choose $0 cost basis if you don't mind donating to the government.  However, the government would most likely prefer to have your taxes be correct so that if the stocks are  moved around some more the basis will be accurate.

 

The cost basis of inherited stock is generally the market price of the stock on the date that the benefactor died.

 

In rare cases, the executor of the estate will make a special election to treat the stock differently. Check with the executor to be sure.

 

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