Tuesday, March 15, 2011

Inherited Securities

Q.  My father passed away in February last year and I am his sole beneficiary. I sold several of his stocks in October, and now I need to report them on my return. How do I find out when he purchased them and how much in paid for them so I can report them on Schedule D? He's owned some of these stocks for decades! AA, Maine

A.  There are two possibilities: (1) if you were required to file an estate tax return for your dad, all the assets were re-valued as to either the date of death or 6 months thereafter, known as the alternate valuation date. This will be clearly reported on the estate tax return, if indeed, one needs to be filed, and if it has been filed. In this scenario, if the estate tax return has yet to be filed, you may have to file an extension for your return until the information is available to you.

If no estate tax return is required, then you simply get the average trading price for each security on the date of your dad's death, or the nearest trading day to your dad's death, in case he passed away on a weekend or holiday.

The good news is that there is no need to find out when he actually acquired each security and how much he paid for them. You simply report them as inherited and you will automatically receive long term capital gain treatment.

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