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Posted by Rich Carreiro on April 17, 2006, 12:34 pm
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bbcrock@gmail.com writes:
> issue regarding this sale. I spoke to the IRS, but what
> they told me and what my father claimed are the tax rules
> regarding the gift are totally different. I will meet with
> an accountant tomorrow on this, but if anyone can give me
> some advice that would be much appreciated:
>
> Let's say it looks like this:
> Stock bought in 1980 for $100
> Stock gifted to me in 2005, value was $5000
> Stock sold immediately after gift for $5100
> In the Schedule D what is:
> Date Acquired
> Cost Basis
> short term or long term capital gains status
"Date Acquired" is 1980 (specifically, the date in 1980 when
your dad bought it).
Cost basis is $100.
Taxable gain to you is thus $5100-$100 = $5000.
Since holding period (which is measured from 1980) is
more than one year, it is a long-term gain.
> My father claims his accountant claims that neither he nor I
> pay capital gains on the amont from $100-5000 because it was
> gifted,
Wrong. You pay tax on the gain and it is a long-term gain.
> I only pay short term capital gains from $5000-$5100
> or $100.
Wrong. You pay tax on that gain too, but it is long-term,
not short-term.
> I understand from the IRS that I owe Short Term
> Capital Gains from $100-$5100
Also wrong. You pay tax on the entire $5000 gain, but
it is all a long-term gain, not a short-term one.
See IRS Publication 551, "Basis of Assets" and Publication
550, "Investment Income and Expenses".
--
Rich Carreiro rlcarr@animato.arlington.ma.us
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