Long term Capital Gains taxes. Update and resolved.

[JB]

In 1999 I inherited some investments.<br /><br />Sold a bunch of bonds. . .no capital gain.<br /><br />A couple of years later I sold some equities to buy a mortgage. I used the original prices of the equities as basis and paid taxes on the gain. Most were purchased in the 50s and 60s.<br /><br />Last year I sold all of the remaining equities and purchased CMOs. Again I used the original purchase price as basis and paid a ton in Capital Gains tax.<br /><br />Now I have one CPA telling me that I shouldn't have used the original purchase prices as basis, but the value at the time I inherited. That would make a big difference.<br /><br />Another CPA is telling me that I should have used a Form 1031 to defer the capital gains on the transfer of funds from one investment to another.<br /><br />There is about 20G at stake here.<br /><br />Anybody out there know enough tax law to tell me what to do, if anything?

 

[rottenray6402]

Re: Long term Capital Gains taxes. Update and resolved.

Did the person you inherited them from die? If so then the cost basis would be what they were worth at time of death. If they were given to you but the original purchaser is or was still alive then you would use the original purchase price. If it is the first case it can make a tremendous amount of difference in the tax.

 

[JB]

Re: Long term Capital Gains taxes. Update and resolved.

Thanks, Ray. <br /><br />The account was originally owned by my grandmother who left it to my father who left it in trust to my stepmother. My siblings and I inherited it when she passed on.<br /><br />At least GE, JP Morgan and Exxon Mobil were worth a lot more when I inherited than when purchased in the 60s.

 

[rottenray6402]

Re: Long term Capital Gains taxes. Update and resolved.

Good luck, JB. I would think you can file an amended tax return to recoup the extra tax you paid. I am not a tax professional but I am a licensed stock broker so unless the rules have changed dramatically in the past 2 years you shouldn't have to pay the extra.

 

[BassMan283]

Re: Long term Capital Gains taxes. Update and resolved.

You can go back 3 years to amend. Since we're past April 15, you may only be able to go back to the 2003 tax year, but check with somebody who's current on tax law. And yes, the basis is the value on the day you inherited, known as the adjusted basis. Same thing applies to real estate which is why it is always better to inherit real estate than have it gifted to you while the original owner is still alive.

 

[KRS]

Re: Long term Capital Gains taxes. Update and resolved.

I'm not that familiar with tax law... but I will write that we are at a 15 year LOW for capital gain tax rates. If there were ever a time to "take the hit", now is it.<br /><br />I would not defer it to the future (the future is unknown) when today's tax rate is so low.<br /><br />And you can always amend, as discussed above.

 

[KM2]

Re: Long term Capital Gains taxes. Update and resolved.

JB,<br /><br />With stocks your basis is the price at the time of death of the person you inherited it from. It's called a stepped up basis in the biz. You over paid your taxes and need to file an amended return. <br /><br />1031's are used when selling and buying real estate. <br /><br />Kevin

 

[jtexas]

Re: Long term Capital Gains taxes. Update and resolved.

Fill out a new Schedule D - write "INHERITED" in the "Date acquired" column and use FMV on the date of your stepmother's passing as the cost.<br /><br />Then fill out a new Form 1040 and transfer the revised figures to Form 1040X. In Part II "Explanation" write "Schedule D - Original return reflects incorrect basis of inherited securites."<br /><br />The change in your AGI might have an effect on other items such as itemized deductions, if so you'll need a revised Schedule A.<br /><br />Make copies of both pages of your original 1040, schedule D, and any other form that changed. At the top write "AS ORIGINALLY FILED". At the top of your revised forms write "AS AMENDED".<br /><br />Your deadline is three years from the date you filed your original return, or three years from the due date if you filed early. I'm afraid the tax you overpaid in 2001 is long gone.<br /><br />Have fun, let us know how it turns out.

 

[JB]

Re: Long term Capital Gains taxes. Update and resolved.

Thnx, JTex.<br /><br />I am not going to let TurboTax do this one. I am going to a Tax Attorney this Fri.

 

[JB]

Re: Long term Capital Gains taxes. Update and resolved.

Well, had to postpone appt with the tax guy. My FA hasn't come up with corrected bases for the stocks I sold.<br /><br />How can I find out the closing prices for NYSE and NASDAQ listings for 23 May, 1999?

 

[KRS]

Re: Long term Capital Gains taxes. Update and resolved.

Ohhhhh, I don't know. I've always heard "check 'em when you sell 'em because you're outta luck otherwise".<br /><br />There must be a way though.

 

[jtexas]

Re: Long term Capital Gains taxes. Update and resolved.

try www.bigcharts.com - click on "Historical Quotes"

 

[JB]

Re: Long term Capital Gains taxes. Update and resolved.

JTex saves the day (again)!!<br /><br />Took a couple hours to track em all down, but. . .<br /><br />From when they were purchased to the date I inherited them total Capital Gains were about 133K.<br /><br />From that date to when I sold them last year they LOST 12K.<br /><br />So my amended return will replace a 121K gain with a 12K loss. <br /><br />Gonna get my money back so I can pay back the loan.

 

[ndemge]

Re: Long term Capital Gains taxes. Update and resolved.

VERY nice outcome. Congrats!<br /><br />I hate it when I loose $ on my tax return

 

[jtexas]

Re: Long term Capital Gains taxes. Update and resolved.

Holy guacomole that's a lotta escondido avocado!<br /><br />Hope you didn't take any "aggressive" positions on any other issues for that year. <br /><br />It's like found money - enjoy!

 

[JB]

Re: Long term Capital Gains taxes. Update and resolved.

It would be found money except I had to borrow it in the first place so all I can do with it is pay back the loan.<br /><br />Aggressive? How about 50% real estate (undeveloped land) and 50% CMOs.<br /><br />I have been feeling really smart lately.