Have a Tax Question? Ask a Tax Expert
Thank you for giving me the opportunity to assist you. I will give the best answer that I can with the information provided.
Although it seems as if a tax expert could help you to figure gain and loss, the tax expert cannot do that without basis information, and that is what you are missing. The tax expert cannot find your basis information because your brokerage records are confidential. I am assuming that you have already tried to track down that information and have not found it?
You have two choices without basis information. You can either use $0 as the basis amount and pay tax on the full sale price (not as bad as it sounds as capital gain rates vary from 0-15% based on your other income) OR take the information you have and give your best estimate as to the basis.
The second choice is what I sometimes assist customers in doing. For example, if you know that the 250 shares were purchased approx. 13 years ago, you can use historical pricing. You could look at the range of prices over the approximate year or two years that you think the shares were purchased, and use the highest price of the stock to calculate your basis. Such as---The stock's highest price between 1996 and 1997 was $8.00. That would make your basis in the stock $1700 (250 X $8 minus 15% discount).
This is a conservative approach.
You could gift the stocks to either your church (in which case you would generally get a deduction) or to a family member (no deduction for gift to family member).
However, if you gift the stock to your son, when he sells it--he will need to know your basis in the stock to figure his gain or loss....so you are back to square one.
I think that the easiest approach would be to contact the holder of the stock (brokerage or employer) and tell them you need basis info (even if you have to pay a small fee) and if not---reconstruct it with your best estimate, and report the gain yourself.
Please let me know if you need additional information.
First off, to hopefully simplify things, we have NEVER redeemed any of the SLE common stock purchased & there was NEVER a break in or lowered amount of contributions toward the employee discount program once starting the plan. Our incomplete records indicate contributions toward the purchase of SLE stock as $25 weekly on 12/25/94, $30 weekly on 12/26/96, & $30 weekly on 08/03/97 according to old SLE pay stubs... missing 2005 & making some sense with my 08/01/97 employment departure. The one & only SLE Employee Stock Purchase Plan Quarterly Statement available indicates an 08/05/06 closing balance of $14.45 with 91 book shares. It also concludes that 12 shares were purchased on 02/05/96 with a $25.1812 Purchase Price per Share ($32.8750 Market Value per Share), 12 shares were purchased on 05/06/96 with a $26.1375 Purchase Price per Share ($30.75 Market Value per Share), & 8 shares were purchased on 08/05/96 with a $26.1375 Purchase Price per Share ($32.3125 Market Value per Share). Understanding the last SLE 2 for 1 stock split was in Dec 1998 (after I resigned) indicates that we had accumulated 125 shares by 08/03/07 to own 250 shares now. Considering this scarce information, wouldn't it be extremely safe to declare a very conservative cost of $25 for 1994 (1 check @ $25), $1,300 for 1995 (52 checks @ $25), $1,305 for 1996 (51 checks @ $25 + 1 check @ $30) & $930 for 1997 (31 checks @ $30) totaling $3560 as an estimated cost basis when redeeming the 250 SLE shares? That is the “very minimum” that could have possibly been paid & would be our best conservative estimate as to the cost basis according to the information we still have AND MUCH BETTER than claiming $0 as the basis amount. Would these flimsy calculations satisfy the IRS during an audit? Are we underestimating the cost too much? SLE closed @ $14.26 today giving a $3565 value on 250 shares (currently reflecting a mere $5 gain). Thanks for your continued expertise on this issue!
I think you have a great understanding of how this works and a good amount of information, even if it is not complete. You also understand the concept of a stock split and how that led to the amount of shares that you have now.
There is legislation to require brokers to report cost basis, but there are loopholes when stocks changed brokers and brokers claim not to have all cost basis info.
Since you have actual written records of much of the stock purchases, and you are willing to report the minimum that could possibly have been paid, I don't consider this flimsy at all, and I doubt that it would trigger an audit (although one can never be 100% sure of not being audited). In this financial climate, most folks have losses or pitiful gains on their stocks and mutual funds, so your calculations do not seem unreasonable.
I have done this same type of patchwork and conservative estimates with my own tax clients. Sometimes you can only do your best and that has to be good enough.
Let me know if you have any additional concerns.