Thursday, March 17, 2011

Family challenges!

Q.  Last year I sold my share of a RV Resort lot I owned with my brother. I wasn't using it and he wanted to buy my share. He was short on cash, so we agreed on some cash together with 1,500 shares of stock he owned, which he was able to transfer over to me. The difficulty I'm having is establishing the value of the stock, which was gifted to him through an UGMA account way back in the 80s from my parents. How should I proceed? RC, Vermont

A Without details and without researching court cases or IRS rulings, I would rely on the willing-buyer willing- seller concept. Since you actually sold a capital asset, it is a reportable taxable event. Whatever share of the lot you sold, your selling price would be the cash received together with the agreed FMV (Fair Market Value) of the stock received. I would ascertain the average trading price (assuming it is a publicly traded stock) as of the date of sale, and report that together with the cash, as your selling price. Hopefully you had the lot appraised at the time of the sale so you don't have below market issues to contend with. Since this was a personal asset, and if the lot was worth less than the purchase price, the transaction is reportable, but you won't be able to take any loss (assuming a loss is the result). If the result is a gain, your holding period will determine whether you have a short term or long term gain.

No comments:

Post a Comment