San Antonio Business Daily

what's my cost basis for securities inherited from a trust?

I inherited securities from a trust that my parents had set up. If I sell the securities, do I pay taxes on gains since the original purchase date or from the date I inherited the securities? Is is different if they passed through a trust versus if they were not in trust?

Public Comments

1. The cost base is the price on the day you got them
2. 1. If you inherit a property, your cost basis is the valuation (Fair Market Value) of the property at the date of the decedent's death or the FMV (Fair Market Value) on the alternate valuation date if the personal representative for the estate elects to use alternate valuation. 2. If you sell the inherited property at a price up to your cost basis you don't have any taxes due. However, if you sell the property at price more than the cost basis to you, then you pay the taxes on the profit (sale price minus your cost basis). 3. Report the sale on schedule D of Form 1040.
3. The situation with trusts can be complicated. Consult a tax expert.
4. The answer depends on the devise by which you received the securities. If your parents set up a trust for you to get at a certain time, the basis would be what your parents paid for the securities. If your parents had the securities in their grantor trust in which, at their death, you were the beneficiary, the securities would get a stepped-up basis. The tax treatment could be different depending on the type of trust and the provisions of that trust. If the securities were sold while in the trust and you received the proceeds, it could be that the trust should pay the taxes. In this case you should have received a K-1 from the trust. I would suggest going to a CPA whose specialty is trust taxation.
5. I assume you are the beneficiary of a grantor trust. The basis of the securities when they are distributed to you is the trust's basis. That basis would be the value of the securities on the date of death (or subsequent valuation date set by the estate), plus any reinvested income such as dividends. The trustee will be able to tell you what the trust's basis is. Use that number.