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Old January 3rd, 2013, 12:14 PM
jamesbishop911 jamesbishop911 is offline
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Question How is the tax handled on this transaction?

A relative recently died and left me some stock. How is the tax handled on this transaction? Do I pay the tax when I sell it? Her basis in the stock was very low.

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Old January 3rd, 2013, 12:22 PM
makaylagardner6 makaylagardner6 is offline
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When you inherited the stock, you received what is commonly referred to as a stepped-up cost basis. That means your relative's low basis in the stock is forgotten, and instead, your new basis is the stock's value on the date of death.

Technically, your cost basis is the average of the stock's high and low trading prices on the date of death, not the stock's closing price. If your relative died on a weekend or holiday, then a weighted average of the two nearest open market trading days is used to determine your cost basis. For instance, if your relative died on a Saturday, the average of the high and low trading price on Friday is multiplied by two-thirds, and the Monday high and low average is multiplied by one-third. The two resulting numbers are added together to arrive at the new cost basis.

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Old January 4th, 2013, 09:01 AM
jamesbishop911 jamesbishop911 is offline
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Ok, thanks you Makayla

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