Tax Question

[Boux 10]

Hi

I am at a loss on how to handle this situation. Hoping someone can point me in the right direction.

My parents transfered stock to me. Current price is significantly lower than purchase price and I am going to have to sell some of it...... is it income to me or a loss?

If income, what is my basis?

I'm assuming the transfer is counted as a gift...but how do I report it?

 

If there is a better forum for these questions I'll be happy to move along.

 

Thanks

[gosu 10]

What do you mean they "transferred" it to you?

 

You say you assume it's a gift? You mean you don't know?

 

Did you pay any money for it? (A sale)

 

Did you do any services for it? (Remuneration)

 

Did you give up other property for it? (An exchange).

 

If it was a bona fide gift, there's no tax consequence to you at the time of the transfer, but there may be tax consequences to them if the gift exceeded the annual exclusion for tax-free gifts to you.

 

If it was a gift, your basis is the LOWER OF their basis OR the FMV of the stock at the time of the gift. If it's a publicly traded stock, the FMV would be simple to determine. Your basis is used to calculate your gain or loss when you sell the stock. What this means is, if your parents had a realized (but unrecognized) loss in the stock at the time of the gift, that loss went unused.

[Boux 10]

What do you mean they "transferred" it to you?

 

The shares were transfered from a holding company to my broker....no shares were actually sold.

 

You say you assume it's a gift? You mean you don't know?

 

Yes, it was a gift but does the IRS see it that way?

 

Did you pay any money for it? (A sale)

 

No

 

Did you do any services for it? (Remuneration)

 

No

 

Did you give up other property for it? (An exchange).

 

No

 

If it was a bona fide gift, there's no tax consequence to you at the time of the transfer, but there may be tax consequences to them if the gift exceeded the annual exclusion for tax-free gifts to you.

 

FMV does exceed the annual exclusion

 

 

If it was a gift, your basis is the LOWER OF their basis OR the FMV of the stock at the time of the gift. If it's a publicly traded stock, the FMV would be simple to determine. Your basis is used to calculate your gain or loss when you sell the stock. What this means is, if your parents had a realized (but unrecognized) loss in the stock at the time of the gift, that loss went unused.

 

I can document the purchase prices and there was a sizable unrealized loss but is my cost basis calculated on the purchase price or price at the time of transfer?

 

I missed your response---its the lower of the two-----thanks