I have tried googling many different things and have not come up with any answers that are useful to me, so I have come to the all-knowing wolfweb.

OK, so a few years back a relative died and left me some stock in a trust fund, with my parents as the trustees. A few months ago I turned 22 and the stock was released from the trust into my sole possession.

Now, for a variety of reasons, I'd like to sell the stock. My question is this:

Would the capital gains tax be assessed from the time the stock entered the trust (several years ago, and thus long-term for purposes of the tax) or from the time that it was released to me (only a few months ago, and thus short term)?

I'm going to go through with the sale in either event, probably, because right now I have no income, which puts me in a lower tax bracket anyway.

Thanks for any advice you might have.

6/23/2007 9:58:39 PM

The assets would be valued at the current market value at the time you inherited. If the relative died three years ago, then the basis would be the CMV from three years ago.

6/23/2007 10:43:15 PM

OK, so, in short, the trust aspect is pretty much irrelevant for purposes of CG tax?

6/24/2007 2:13:33 AM

yeah, thats pretty much irrelevant...

capital gains are taxed at a maximum of 15% though so its not a huge deal... jsut remember not to spend it all so you dont get buried in April.

6/24/2007 9:15:09 AM

Quote :

"Determining your taxable gain on inherited stocks is more straight forward than with gifted stocks. To figure out your cost basis, set the Fair Market Value (FMV) of the stock on the date of your benefactor's death to your new cost basis. Use the average of the high and low prices of the stock on that date as the FMV. Your holding period is always considered long-term and qualifies for the 15% maximum tax rate. Remember, when filing your Schedule D, enter "inherited" in the space marked for the acquisition date for this stock. That way, the IRS won't confuse your holding period with the date you received the stock."

https://www.gainskeeper.com/WebHelp/Taxable_Gains_on_Inherited_or_Gifted_Stocks.htm

Make sure that you use the date of the inheritance for the cost basis...that could save you a lot in taxes if the stock appreciated significantly before you received it.

[Edited on June 24, 2007 at 9:21 AM. Reason : ]

6/24/2007 9:19:37 AM

Depending on the amount of gain you are going to realize you may want to avoid selling all the stock this year. There is a special capital gains tax for lower income which is only 5%. If you sell too many assets though your income will phase you out of this lower tax rate. I dont have the exact numbers in front of me but its something you may want to look into.

When you sell the stock you may want to consider making an estimated payment as well.

6/24/2007 12:16:10 PM

Quote :

"There is a special capital gains tax for lower income which is only 5%. If you sell too many assets though your income will phase you out of this lower tax rate."

I assure you that I don't have enough stock to launch me into the next highest tax bracket, don't worry.

Thanks for the information, people. I'm kind dissapointed -- even though the rate would be higher if the FMV started in February, there would have been a lot less gain in the value since then. But oh well.

6/24/2007 7:08:53 PM