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RD
RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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I was the beneficiary of a trust set up by my grandmother.

Resolved Question:

I was the beneficiary of a trust set up by my grandmother. My father was trustee. He has now passed, and I've inherited the securities in the trust. Is the cost basis of the securities in trust / inheritance (a) ‘carried over' or (b) ‘stepped up/down'.
Submitted: 9 years ago.
Category: Tax
Expert:  RD replied 9 years ago.

If you were the beneficiary of the trust set up by your grandmother on her death than you inherited the interest on her death and the basis for the stock will be the fair market value of the stock as of the date of her death. Your father was only the trustee and you did not inherit the assets from him.

If the trust was formed when your grandmother was alive and it was an irrevocable trust than you would have a carryover basis from her.

 

Let me know if you have any question. Bonus and Feedback will be highly appreciated!!!

 

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases.

Customer: replied 9 years ago.
Reply to Renu V's Post: To be clear, I inherited the stock when my father passed a few months ago. My grandmother set this up whe she was alive, and died many years ago. So would it be the fair market value on the date of his death, or the carry over basis of when the stock was purchased in trust ?

Many Thanks for this help,
-AndyM
Expert:  RD replied 9 years ago.

What kind of trust was set up? Did she retain any interest in the trust?

Customer: replied 9 years ago.
Reply to Renu V's Post: She did not retain interest in the Trust. It was irrevocable. My Father and I recieved income off the trust (from dividends), and then when he died, I recieved the stock.
Customer: replied 9 years ago.
a bit more information...it was a testamentary trust. When she (my grandmother) died, her estate was put into equal trusts for each of her grandchildren.
Expert:  RD replied 9 years ago.

If it is a testamentary trust than it was created by a will after your grandmother's demise and hence was included in your grandmother's taxable estate. Hence your basis in the stock will be the step up basis as of the date of death of your grandmother.

 

 

Let me know if you have any question. Bonus and Feedback will be highly appreciated!!!

 

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases.

 

 

Customer: replied 9 years ago.
Reply to Renu V's Post: Yes, it was created by a will. I need just one more clarifying question so I'm clear. The tax implication / difference is huge. I do appreciate your help / patience.
So stock was purchased and put into trust for me upon her death (1960). The will was setup such that I didn't recieve ownership of the stock until my father died(happened last august). I now want to sell the stock. For the cost basis, do I use (a) the price of the shares when I took ownership in august(stepped up basis)or (b) the price of the shares from the 1960 purchase (carry over basis)?
Many Thanks,
-AndyM
Expert:  RD replied 9 years ago.

You will take the cost basis as the fair market value of the stocks on the date of your grandmother's death.

Let me know if you have any question. Bonus and Feedback will be highly appreciated!!!

 

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases.

Customer: replied 9 years ago.
Thanks...and if some additional shares were purchased along the way (ie. 1964, 1973, etc.) I use the cost basis from then?
Expert:  RD replied 9 years ago.

Yes, you will use the cost basis based on your purchase cost for additional purchases.

Let me know if you have any question. Bonus and Feedback will be highly appreciated!!!

 

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases.

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