Untangling long stock history? ? ?

Look at

Year Ratio Certificate Date/Pay Date 2000 3-for-1 5-May-00 1997 2-for-1 9-May-97 1994 2-for-1 13-May-94 1987 2-for-1 22-May-87 1983 2-for-1 1-Jun-83 1971 2-for-1 7-Jun-71 1954 3-for-1 11-Jun-54

-- Don EA in Upstate NY

The date of inheritance is what you use.

will let you look up the split-adjusted price. 4/1/70 = .7031 for example.The pricing is adjusted for the splits so the split dates are really not an issue.

I have a separate question of my own on this - suppose you bought stock in a company a long time ago, then the company was acquired by another in a pure stock transaction, and you received shares of stock in the new company in return, say 1 share of the new company in return for every 5 shares of the old company. Then a few years go by, and you decide to sell the shares in the new company. Because you originally bought shares in a company that no longer exists, you can't go to that company's investor relations website like you did for GE and find historical pricing data. I'm also assuming the IRS won't accept the cost basis of the new company's shares from the day they acquired the old company. Does anyone have insight on what to do in this situation?

Thanks,

Chris Johnson, Esq., EA

There may be websites with historical info on defunct stocks.

But why not go to the new company's investor relations folks and ask them? Chances are good they have that data.

There is a history somewhere of the ratio and detail of a stock acquisition or spinoff. That said, if the shares are old enough and the information were truly unavailable I'd use $0 and not lose sleep. In this thread, the OP has "small number of shares." Ok, 500? The current value is $8500 and her basis is $350. She owes cap gain tax on $8150. An additional 15% paid on $350 is $52.50. There's rarely a cause to actually do this, but it's absurd to either pay a third party or spend hours on this. Before computers, OP could look at microfilmed newspapers, now a quick Yahoo visit. Your details may be available just as easily. Hypothetical, right? You mention no company.

Disclaimer - Claiming zero basis is not the "legit" way to do this, but it's a matter of time (perhaps) vs money. A note on the return may be in order so it's not flagged as a typo.

Joe

Thanks so much Don -- that's a great help.

Look at

Year Ratio Certificate Date/Pay Date 2000 3-for-1 5-May-00 1997 2-for-1 9-May-97 1994 2-for-1 13-May-94 1987 2-for-1 22-May-87 1983 2-for-1 1-Jun-83 1971 2-for-1 7-Jun-71 1954 3-for-1 11-Jun-54

-- Don EA in Upstate NY

Unless she bought more stock, you may not need the dates of the splits.

Her basis in the current investment is her basis in the original investment. So if she inherited 100 shares of XYZ with a fair market value of $10 a share she has $1,000 in basis in XYZ. If XYZ later split, multiple times perhaps, and she now owns 10,000 shares of stock, her basis is STILL $1,000 - divide that into the $10,000 shares and you get a per share basis of $0.10 cents.

You do have to account for any dividends paid that were reinvested. If she got a dividend check and spent it, you can ignore them.

So if she owned the stock for 40 years go back over those tax returns and see how much dividend income she claimed on those returns for which she did NOT actually get a check - add those numbers up and add them to what her original basis was and you'll have her current basis. Assume she paid tax on $100 per year for 40 years - add $4,000 to the original basis of $1,000 and you get total basis of $5,000 - now divide that into the number of shares and you'll get the per share basis.

This is assuming either she's selling ALL of it or she wants to use the average cost basis. If she wants to specifically identify some parcel and assign the actual price to those shares there is a LOT more work involved.

Today its rather common for stock to be held in "Street Name" - this is where the brokerage house holds the stock and records your name on their books - GE may not even know your sister exists. If the stock is with a brokerage house THEY should be able to give you the cost basis. They may whine and cry about doing the math, but they can do it.

Back in 1970 I don't know how common holding securities in the street name was. If your sister is holding paper certificates her situation just got a bit more convoluted. She'll need to deliver the securities to a broker who will need to verify their legitimacy. Then they'll be some math hoops to jump through. I'd be surprised if you got this math work done for free - though the broker may waive some of the fee if he gets a commission or fee for the sale of the securities.

Good luck, Gene E. Utterback, EA, RFC, ABA

I thought that average cost basis was only allowed for certain investments, and that individual common stocks weren't one of them. Was I mistaken?

Bill.

Dividend-paying stocks (with reinvestment) are an upcoming exception.

I remember that the carryover basis rule was repealed when it was attached as a rider to Jimmy Carter's Crude Oil and Windfall Profit Tax Act of 1980. Without research, I am not certain what the law was in 1970, but it might have that the stock would have a carryover basis.

I am not certain if the FMV on the date of death would be the basis. It might be the decedent's original cost.

For decedents dying in 1970, IRC Section 1014(a) read exactly the same as it did in the 1954 code. I.e., the FMV on the date of death or if elected by the executor of the estate, the FMV on the alternative date of death (the 6 month rule).