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Lev
Lev, Tax Advisor
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If a million dollars worth of stock X was put into a trust

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If a million dollars worth of stock X was put into a trust at the base of 0. In 2003..Would the individual broker dealer through (already obvious) false accounting...through the entirety of his holdings of these securities...Use my 0 base...buying the same stock..most likely the same number? With the outcoming being the trust pays his capital gains... SInce the trust is declaring a 0 base.
WOuldn't that be the logical conclusion, for maintaining the trust securities at the 0 base?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

LEV :

Hi and welcome to Just Answer!
When a million dollars worth of stock X is transferred to the trust - it generally would have the basis that the donor had at the time of the transfer. The basis will likely be more than zero. If the stock was purchase - the basis would be the purchase price.
If the same stock is purchased again on the trust's account - the basis of the old stock may not be used - but the basis of a new stock would be the purchase price.
There is NO capital gain for either transaction - but the gain will be only recognized when the stock is sold. In this case - you need to identify - which stock is sold - the new one or the old one - and depending on circumstances - the capital gain or loss would be determined. If the owner doesn't specify when stock is sold - the rule in effect would be First In First Out (FIFO) – a standing order to sell the oldest shares in the account first.
That is NOT a responsibility of the broker to calculate the gain - but rather the gain is determined when the tax return for the trust is prepared (assuming this is an irrevocable trust).
Let me know if you need any clarification or other help with tax related issues.

Customer:

The tax return for the trust was prepared by the finacial advisor. And the finacial advisor ignored any base price and entered the base as 0...Stocks were in Drip. When finacial statements were pepared by the advisor...(the ones you use for you tax prep) the stock base was at 0. This trust transfered to me with no issue with the stock base at 0.

Customer:

When the 2010 tax change came into effect...the drip stocks reflected a stock base...but not the 1 mil. Heres the thing..I have a lawyer/abritration going..Im 59, and in a situation getting my 2012 taxes filed. This is a very small area, and no one is talking. My accountant's not talking either. Has drasticly changed his plan for adjusting the base...and any refiling. There's another lawyer...who seems to be dragging his feet filing the final estate. ..(.the finacial planner was to file the final estate, ... close the trust) My finra case is regarding his 1% fee for this account...which had 1 stock, at 0 base..and no activity except sales for expenses.

Customer:

With that all in you mind. And the need for the accountant to adjust this e rate to my favor...and Im getting some super double talk now...oh...I do live in this most corrupt county in the state. Am I right to suspect...or consider, im not pinning you down...that my issues are stemming from his accounting practice. Not his illegal broker tacktics...which are near impossible to expose. But that amount of money being in 1 blue chip stock at a 0 base...for 13 years...and he is an independent broker dealer. Is that why I am having so much trouble getting my taxes done??? That's why no lawyer will talk to me? He could of sold like shares...using the trust 0 base to pay for all his business/family capital gains..?

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22962
Experience: Taxes, Immigration, Labor Relations
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Expert:  Lev replied 1 year ago.
Still - I have doubts that the tax basis is zero - that is very unusual. Still suggest to verify how the stock was acquired. If it was purchased - the tax basis is the purchase price.
There are different rules for the stock received as a gift or inherited - so it is very important to know how the stock was acquired.
If the stock had Dividend Reinvestment Plan (DRIP) - dividends are included into taxable income every year, but that amount is added to the basis - so you would have adjusted basis.
Again - the tax prepare may not decide which stock is sold - that is something you need to instruct your broker. If no instructions provided - the broker sells the oldest shares in the account first.
Broker's commissions are usually flat fees and not based on your gain - so I see no reason for the broker to choose any specific lot to sell from your account. The broker may only initiate the selling transaction based on your instructions and sell the lot which you indicate to sell.

Sorry fir your situation.
Please feel free if you need any help or clarification this matter.

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