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I had blue chip stocks which were inherited. In 2002 I thought…

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I had blue chip stocks...
I had blue chip stocks which were inherited. In 2002 I "thought" my financial advisor was rolling them over into Franklin Mutual funds. To the IRS it shows I got a 1099 b (I think thats what it is when they are sold). Although, I never cashed them out! Now the IRS wants me to pay taxes on this. The financial advisor who directed me no longer works for the company. Can anyone give me info on this and if I really do owe taxes, even though they were simply rolled over and not cashed? Thanks.
Submitted: 8 years ago.Category: Tax
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Answered in 20 minutes by:
6/10/2010
Tax Professional: Lev, Tax Advisor replied 8 years ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,356
Experience: Taxes, Immigration, Labor Relations
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The "roll over" provision may only protect the gain from being taxed - if the money are rolled over from one tax deferred account to another - for instance - IRA, 401k plan, etc.

 

As the transaction occurred in your regular investment account - when assets are sold - you recognized a gain or loss regardless how the proceed were used.

It would be irrelevant if you cashed them out or transfer to a different investment account or used to purchase other assets.

 

When you sell assets - you need to determine the capital gain/loss as (selling price) - (basis)

The issue is - if you did not report the sale transaction - the IRS only receives the form 1099-B with the sale price, but doesn't know your basis. As a result - the IRS treats the total proceeds as your gain and added to your taxable income.

 

If you amend your tax return and report your sale transaction - your additional taxable income would be much less (if any)

To do so - you need to determine your basis. For inherited assets that is in most situations a fair market value of assets on the day the decedent died - your financial advisor will help you to determine historical prices.

In additional - you reinvested dividends - that amount should also be added to the basis.

 

So - you need (1) make a list of stocks you sold (2) determine the basis for each position (3) calculate your gain/loss (4) report sale transactions on the schedule D (5) amend your tax return and determine if you owe any additional taxes.

 

Let me know if you need any help.

 

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