How to Change Cost Basis

Posted by les on May 4, 2009, 12:07 pm

Please log in for more thread options

How do I change the cost basis of an investment due to my dad passing
away? I know the unit price I want to change it to.

Also, I notice that in my mom's account, there is a money market fund
that has an incorrect cost basis. The cost basis is OK for each lost
but the summary is incorrect (as evidenced by market value not equal
to cost.) How do I correct this?

Posted by R. C. White on May 4, 2009, 5:36 pm

Please log in for more thread options

Hi, Les.

The first question must be, "Who is the taxpayer?" No, that's not just
semantics; there is a whole chapter in the tax literature on just that
topic. The basis in your hands might not be the same as in your Mom's. The
closely related question is, whose books are we dealing with? On whose
books to you want to change the basis?

What kind of investment was it: listed securities, an apartment house, or
the family farm? Who owned the investment at the date of your Dad's death?
Was it in his name alone, or in joint tenancy, or as community property - or
some other ownership? Generally, an investment acquired from a decedent is
treated as having been purchased on that date for its fair market value on
that date - but there are a LOT of exceptions.

If the investment was held in joint tenancy, it would have passed directly
to the joint owner, and it might have retained its former basis. If it was
community property, it might have received a new basis even without passing
through your Dad's estate. If it was in Dad's name alone, it would pass
through his estate, acquiring a new basis along the way.

If you tell us all the pertinent facts, we can probably give you a pretty
good short answer. But if we don't know the facts, then we have to imagine
dozens of possible contingencies (the ones I've mentioned are only the
beginning) and provide theoretical "what if" answers for each of them. If
you can't or choose not to disclose some details, then you probably should
discuss it with the CPA and attorney for the estate.

Your Mom's money market fund almost certainly should have a basis equal to
its cost, and that almost always is $1 per share, as you probably know. If
the brokerage shows a different basis, then you need an explanation.
Perhaps only a chronological retracing of the account will reveal where
something went wrong. On the other hand, it might not matter, and a simple
"sledgehammer" adjustment might be the best fix. There again, you are in a
much better position than we are to find the answer.

The best advice I can give you is to discuss this with your own CPA and
attorney. I've been retired for nearly 20 years and these rules change
daily, so you need someone who is familiar with the laws as they are today,
not the rules from 20 years ago.

RC
--
R. C. White, CPA
San Marcos, TX
(Retired. No longer licensed to practice public accounting.)
rc@grandecom.net
Microsoft Windows MVP
(Using Quicken Deluxe 2009 and Windows Live Mail in Win7 x64)

> How do I change the cost basis of an investment due to my dad passing

> away? I know the unit price I want to change it to.

> Also, I notice that in my mom's account, there is a money market fund

> that has an incorrect cost basis. The cost basis is OK for each lost

> but the summary is incorrect (as evidenced by market value not equal

> to cost.) How do I correct this?

Posted by TomYoung on May 5, 2009, 9:30 am

Please log in for more thread options

> How do I change the cost basis of an investment due to my dad passing

> away? =A0I know the unit price I want to change it to.

> Also, I notice that in my mom's account, there is a money market fund

> that has an incorrect cost basis. =A0The cost basis is OK for each lost

> but the summary is incorrect (as evidenced by market value not equal

> to cost.) =A0How do I correct this?

I'll assume you want to change the cost basis of an investment upward
in an existing file without changing lot dates.

You know the total cost of the investment that you're shooting for:
(# shares of StockA) x (Unit cost of StockA) =3D Total New Basis.

Subtract the existing basis from the Total New Basis to come up with
the additional total cost you want to allocate to the stock: Total
New Basis - Existing Basis =3D Additional Basis.

Do a RtrnCapX transaction (i.e., transfer account is the same account
in which you're making the entry) entering the Additional Basis AS A
NEGATIVE NUMBER.

The result is: 1) no change in cash in the account and 2) Quicken will
spread the basis back to existing lots of StockA.

Tom Young