Since the stock account assets have been transferred into your name, your E-trade account, your mother has in practice made a gift of these assets to you. Therefore in the eye's of the IRS the stock account assets are yours, are reported as being owned and sold by you, and you are responsible for reporting any related transactions on your tax return, (interest, dividends, sales).
Your basis in the assets is your mothers basis (basis = cost = purchase price). If the stock in question is sold for a capital loss you should report that loss on your tax return. Schedule D and Form 8949.
The actual transfer of assets is considered a gift, a person who receives a gift is not responsible for any taxes on the gift, however the person giving the gift may be responsible to file a Gift Tax return, Form 709. In general a person may gift up to $13,000 per year, per person away and not have to file a gift tax return. There are overall limits for lifetime gifts and the limits are different for Non US citizens.
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Hi Winktax, thank you, XXXXX XXXXX quite a relief for me. So, let's say the stock transfer was $40K, and there was a $15K capital loss on this stock. I would be able to claim the capital loss of $15K and wouldn't get taxed for the $40K, correct? If later on I buy shares of another stock, then the price goes up, then decide to sell, I will be taxed on the capital gain of that stock, correct?
I forgot to ask, do you know what the gift limit for non-US citizens to US citizens? The transfer was more than $13K. What are the chances the IRS asking for more information for this gift/transfer?
Thank you very much Winktax! You made my day :)
Do you own a tax practice or know someone you can refer to me in SF, CA? I am self-employed, started last year. My fiance and I created an LLC. We will definitely have some tax questions. Again, thank you very much!
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