How do I change the cost basis of an investment due to my dad passing away? I know the unit price I want to change it to.
Also, I notice that in my mom's account, there is a money market fund that has an incorrect cost basis. The cost basis is OK for each lost but the summary is incorrect (as evidenced by market value not equal to cost.) How do I correct this?
Hi, Les.
The first question must be, "Who is the taxpayer?" No, that's not just semantics; there is a whole chapter in the tax literature on just that topic. The basis in your hands might not be the same as in your Mom's. The closely related question is, whose books are we dealing with? On whose books to you want to change the basis?
What kind of investment was it: listed securities, an apartment house, or the family farm? Who owned the investment at the date of your Dad's death? Was it in his name alone, or in joint tenancy, or as community property - or some other ownership? Generally, an investment acquired from a decedent is treated as having been purchased on that date for its fair market value on that date - but there are a LOT of exceptions.
If the investment was held in joint tenancy, it would have passed directly to the joint owner, and it might have retained its former basis. If it was community property, it might have received a new basis even without passing through your Dad's estate. If it was in Dad's name alone, it would pass through his estate, acquiring a new basis along the way.
If you tell us all the pertinent facts, we can probably give you a pretty good short answer. But if we don't know the facts, then we have to imagine dozens of possible contingencies (the ones I've mentioned are only the beginning) and provide theoretical "what if" answers for each of them. If you can't or choose not to disclose some details, then you probably should discuss it with the CPA and attorney for the estate.
Your Mom's money market fund almost certainly should have a basis equal to its cost, and that almost always is $1 per share, as you probably know. If the brokerage shows a different basis, then you need an explanation. Perhaps only a chronological retracing of the account will reveal where something went wrong. On the other hand, it might not matter, and a simple "sledgehammer" adjustment might be the best fix. There again, you are in a much better position than we are to find the answer.
The best advice I can give you is to discuss this with your own CPA and attorney. I've been retired for nearly 20 years and these rules change daily, so you need someone who is familiar with the laws as they are today, not the rules from 20 years ago.
RC
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