I'm helping my mother do her taxes and using TurboTax for the first time (I usually do my own taxes just filling out the forms from the IRS myself). So my question is in part about the sale of some ETF shares last year and partly about understanding why TurboTax is asking a specific question. But there are a couple twists, on what would be a totally straightforward thing on my own taxes.
At the end of last year, my mother sold a small amount of shares of an ETF my parents held. A month prior my father had died. Because the ETF was held in a taxable trust account, a new account at the same brokerage had to be opened, with my mother as the sole surviving trustee, so that the tax payer ID number on the account could be changed to her (my father's taxpayer ID was used on the old account). Essentially, the shares never changed hands, the trust always remained in possession of them. But the account had to be changed, due to the issue with the taxpayer ID. At the time of opening the new trust account under my mother's taxpayer ID, the brokerage stepped up the cost basis on the shares (100%, because my mother lives in a community property state--this is correct we verified it with her accountant at the time, who subsequently retired, hence why I'm doing the taxes).
So, on the 1099-B for the shares sold, it shows the date acquired as my father's date of death. Simple enough.
But here's the twist, originally my father had inhertited these shares from his father. As far as I can tell, the cost basis was not stepped up at that time (old brokerage statements show the date acquired as long before my grandfather died).
It seems to me that when I go to report the sale of these shares on schedule D and form 8949, all the really matters is the date acquired as indicated on the 1099-B (my father's date of death). But Turbotax specifically asks if the shares were inherited or bought. I'm not sure that question really makes sense in this situation or why Turbotax is asking it. If Turbotax is just trying to help people who might fail to step up the cost basis themselves, then that's not really relevant. But is there some other reason it would have to be reported to the IRS that originally the shares were inherited? Or does the fact that the brokerage already stepped up the cost basis and is reporting it to the IRS that way. obviate why Turbotax is asking this question and mean that it really doesn't apply?
It all just seems weirdly complicated for something that should be simple. If I wasn't using Turbotax I wouldn't have even thought about it. I would have followed the date acquired on the 1099-B and never considered how my father acquired the shares, before they became community property with my mother and entered the original trust account.
At the end of last year, my mother sold a small amount of shares of an ETF my parents held. A month prior my father had died. Because the ETF was held in a taxable trust account, a new account at the same brokerage had to be opened, with my mother as the sole surviving trustee, so that the tax payer ID number on the account could be changed to her (my father's taxpayer ID was used on the old account). Essentially, the shares never changed hands, the trust always remained in possession of them. But the account had to be changed, due to the issue with the taxpayer ID. At the time of opening the new trust account under my mother's taxpayer ID, the brokerage stepped up the cost basis on the shares (100%, because my mother lives in a community property state--this is correct we verified it with her accountant at the time, who subsequently retired, hence why I'm doing the taxes).
So, on the 1099-B for the shares sold, it shows the date acquired as my father's date of death. Simple enough.
But here's the twist, originally my father had inhertited these shares from his father. As far as I can tell, the cost basis was not stepped up at that time (old brokerage statements show the date acquired as long before my grandfather died).
It seems to me that when I go to report the sale of these shares on schedule D and form 8949, all the really matters is the date acquired as indicated on the 1099-B (my father's date of death). But Turbotax specifically asks if the shares were inherited or bought. I'm not sure that question really makes sense in this situation or why Turbotax is asking it. If Turbotax is just trying to help people who might fail to step up the cost basis themselves, then that's not really relevant. But is there some other reason it would have to be reported to the IRS that originally the shares were inherited? Or does the fact that the brokerage already stepped up the cost basis and is reporting it to the IRS that way. obviate why Turbotax is asking this question and mean that it really doesn't apply?
It all just seems weirdly complicated for something that should be simple. If I wasn't using Turbotax I wouldn't have even thought about it. I would have followed the date acquired on the 1099-B and never considered how my father acquired the shares, before they became community property with my mother and entered the original trust account.
Statistics: Posted by cb474 — Tue Feb 27, 2024 3:11 am — Replies 1 — Views 59
