Stock from grandparent sold - help with tax issues?

Parent Cafe
1

My kids’ great grandmother, who died maybe 15 years ago, purchased stock for each of my kids.
In December of 2017 they each sold it to a distant relative or something like that. It was bank stock, and the bank was involved in the transaction somehow (maybe just to be nice - I’m not really sure). I think there grandmothers name may have been on the stock with theirs, but I’m not sure of that either.
I gathered they need to determine the basis to figure out what tax is due, and I don’t think the bank involved (same name as on stock) could help them determine the basis.
I can’t remeber exact amounts, but one kid’s amount was just under 2k total value and one was just over.
I am not aware of any mail related to the stock and taxes, which I would have expected, but I’m going to check on that.
Can anyone point me in the right direction?

Thanks in advance

2

There are historical stock price lookup sites.

Some things you may need to look into:

A. Whether the stock passed through an estate, which can change the basis date.

B. Whether there were stock splits, mergers, etc. that mean that you need to do some math to figure the correct basis.

3

It sounds like the stock was an UTMA gift (if the kids were under 18 at that time). That would explain why g-g-ma’s name was still on the account. So if that is the case, the cost basis would be what g-g-ma paid for it:

https://www.edwardjones.com/social/gifted-stock.html

4

Ah. The old grandmother shares. I am assuming they where actual stock certificates and not a broker account?

So a couple of things. Start with the estate documents. Hopefully that will give you some sense of how ownership was – joint ownership, or some type of trust ownership. Hopefully, it was some type of trust with ownership transferring to the kids on death. If so, their basis would be the value at death. If not, you may have to try to go back to the original purchase.

Every stock has a transfer agent. Given it was a bank, small local I’ll bet, it sounds like they acted as their own transfer agent. If so, they should have the original records of the sale.

It’s going to take some digging. Good luck.

5

Thanks everyone. I appreciate the advice.

6

OP here.
I called the bank and found out the following
July 30th, 2002 (she used that number, so I’m assuming that’s when they got the stock) kid received
23 shares, and each was worth 39.90
In late 2017 (transaction date is recorded as Jan 5th 2018, but money exchanged hands in 2017)
Kid had 43.385 shares, and each was worth $26. The accumulation was all from the original, with dividend reinvestment. No additional shares were ever given, if that matters).

Can anyone advise me what I need to help him do for tax purposes, or point me to resources?
If it matters, kid is in very low tax bracket.

Thanks

7

You need to find all of the records of dividend reinvestment (i.e. each dividend and the number of shares (often fractional) purchased with that money at that date), because each is a purchase for which cost basis must be used for capital gain or loss calculation.

Over 15 years, if the stock issued quarterly dividends which were reinvested, you may have 60 very small lots of (fractional) shares to account for. The instructions for IRS form 8949 do say that you can combine lots sold on the same date together with a purchase date of “various”: https://www.irs.gov/instructions/i8949#idm140253094255056

8

Unless the kids earned more than $37,000 (single) or $75,000 (married) in 2017 they will owe nothing on the capital gains. https://www.fool.com/retirement/2016/12/11/long-term-capital-gains-tax-rates-in-2017.aspx
Tax on dividends, even though reinvested, should have been paid in the years the dividends accrued. Given the amount each kid received was relatively small (in the eyes of the IRS) the dividend amount each year was probably negligible, under $30. The sale of the stock would have been reported to the IRS so if they are required to file a tax return they should list the sale date and proceeds, minus the price of the stock in 2002. I wouldn’t lose sleep over failure to report the dividends over the past 15 years.

9

I would just take the diff between the 2 number. It’s about $210. You’ll pay tax on that if required. It’s so small nobody will care.

10

Thanks everyone, especially @momsquad. I just dont them to get a bill from the IRS many years down the road or something.
They didn’t make over the amounts momsquad listed, so I’m not nearly as worried.

11

I concur with @momsquad . Many people don’t realize there is a zero tax bracket for long term capital gains, and those kids (very low income) are almost certainly in that zero bracket. You will probably have to fill out the paperwork (tax forms) correctly anyway which is still a pia, but looks like no tax will be owed so for convenience you might want to just assume a zero basis rather than going to a lot of trouble figuring out what the basis should be.