Personal Investments • Seeking Advice: Incorrect Cost Basis Reporting on Inherited Shares

Dear Bogleheads,

As the Power of Attorney for my 63-year-old mother, I’m seeking advice on a frustrating issue we’re facing with incorrect cost basis reporting for inherited shares.

Background:

• My mother inherited shares of a single company from her mother, who passed away in March, through a transfer on death (TOD) account with Computershare.
• These shares were transferred from Computershare to my mother’s Vanguard account in May, with assistance from a High Net Worth Client Case Representative at Vanguard.
• Acting on my mother’s behalf, I then sold all the shares, resulting in a capital gain of around $150,000 with the stepped-up cost basis.
• Some of these shares were covered, and some were non-covered. For the covered shares, Vanguard categorizes the proceeds as a short-term (realized) capital gain. However, my understanding of IRS Publication 559, "Survivors, Executors, and Administrators," is that a capital gain on inherited stocks is considered long-term regardless of the holding period.
• Vanguard claims that the cost basis information reported on their website corresponds to the information received from Computershare.

Steps Taken:

1. I contacted Computershare multiple times to send the correct cost basis information to Vanguard. Vaguely, they informed me that their internal policy prevents them from sending the updated cost basis information directly to Vanguard. Instead, they sent an Investment Plan Statement to my mother, which shows all the cost basis information of the original account holder and clearly indicates the account type as "TOD" (Transfer on Death), followed by my mother’s name and address.
2. I contacted Vanguard multiple times and provided them with the Investment Plan Statement and the death certificate of the original account holder, requesting that they reclassify the shares as long-term capital gains.
3. Vanguard responded by saying they cannot update the cost basis without direct information from Computershare.
4. Despite my efforts and hours on the phone, both institutions have been unhelpful.

Current Situation:

• Vanguard insists they need Computershare to send the cost basis information directly to them.
• Computershare refuses to send this information directly to Vanguard due to their vague internal policies.

Questions:

1. Has anyone faced a similar issue with inherited shares and incorrect cost basis reporting?
2. Are there any additional steps I should take to resolve this issue with Vanguard and Computershare?
3. If I cannot resolve this issue before tax time, how should I handle the reporting to the IRS to ensure it is correctly categorized as long-term capital gains?

Any advice or insights from those who have dealt with similar situations would be greatly appreciated.

Statistics: Posted by rschwartz — Tue Jun 25, 2024 8:28 pm — Replies 3 — Views 201

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