My wife and her grandmother had a joint account since 23 and purchased a mutual fund for $10,0 and reinvested dividends since. Grandma died in Feb 2011 and wife transferred the mutual fund to our Fidelity Joint account. I sold half the fund recently ($85 worth). So we get to use that $10,0 plus the reinvested dividends as cost basis to help lower our tax burden? None of our money was used to purchase the fund originally.
Update:
Thanks to all that responded. To clarify, Grandma put up the initial $10,0 all on her own, my wife was just listed on account. In other words, we never put any money into this. The value on her death was $17,589 and that’s what my wife transferred to our joint account and we continued to reinvest dividends. So I know that most of 2011 is cost basis we can claim since we reinvested dividends. But can we claim half the initial investment plus hlaf all the reinvested dividend since purchased in 23?
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The cost basis is still what was paid for it.
” claim half the initial investment plus hlaf all the reinvested dividend since purchased in 23″
I believe your last statement is correct. But the bottom line is that it doesn’t really matter. The IRS doesn’t really care how you figure things as long as you pay the correct amount of taxes. In your case the taxes won’t amount to much no matter how you figure it. So pick the easiest way. Treat it as if it were your and your wife’s joint account from the very beginning. You will need to give Fidelity the basis that you pick.
Who provided the money in the account? Just because it was a joint account doesn’t mean your wife put up half.
Grandma died in 2011, the portion that grandma purchased gets a “stepup” to the value of the shares grandma owned on her date of death. The portion your wife owned (and paid taxes on) is what she paid plus the reinvested dividends.
once you bought the gadgets, the mutual fund company would desire to have sent you a checklist of it. If not, touch them to deliver you that checklist, which will incorporate the cost at which you purchased the mutual money and it will element in case you have a capital income or loss from the sale, then your accountant or tax agent would have the potential that might assist you with the desirable tax workplace standards for the sale.
I’ll assume that their investments in the account were equal. Your wife’s basis is 1/2 of her original investment and 1/2 of the fair market value of the fund on the date of her grandmother’s death.
Example:
Initial investment: $10,0 ($5,0 each)
DRIPS: $5,0
Combined investment: $15,0 ($7,5 each)
Value on date of death: $20,0
1/2 of initial investment ($7,5) + 1/2 of value on date of death ($10,0) = basis of $17,5
The basis gets adjusted at death so what ever it was worth when Grandma died or the date chosen by the executor is the basis. Based on dates likely no gain or loss
your wife inherited the stock when g’ma died, and the value of it at that time would be the amount your wife inherited(establishing the value)
the amount at the sale of any of it that exceeds the value will be cap gains
You had better visit with a licensed & registered tax preparer to make sure you are totally clear on this one.