Inheritance Stocks stepped-up basis

Technical topics regarding tax preparation.
#1
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Client's dad passed away on 8-2-2017. Client inherited some stocks from him. The stocks were sold in 2019. Now we need to come up with client's tax basis on the stocks. I understand the stocks are inheritance and therefore client should be able to get the stepped-up basis on the stock which is the value of the stocks on the day that his dad passed away. I researched on Yahoo Finance and I found different prices for the stocks on that day (8-2-2017), such as Open, High, Low, Close and Adj Close. For the purpose of the stepped-up basis, which one should we use?
 

#2
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I found an article on the web that addresses this question. The author says we should use the average of the High and Low price as of the day that the deceased person passed away. Is it reasonable?
 

#3
Doug M  
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that is the correct way to value DOD basis, unless death was Saturday/Sunday
 

#4
HowardS  
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Careful...if the stocks were held at a financial institution the institution usually does the acquisition date and step-up and this will show on the 1099-B.
Retired, no salvage value.
 

#5
Jake  
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1099-B reports often have an incorrect basis number. Just use the correct basis. I forget what you use if the death was on a non-trading day. Maybe add the average of the high-low on the trading day preceding death, and the average of the high-low on the trading day following death and divide by 2?
 

#6
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BestQuestion wrote:I found an article on the web that addresses this question. The author says we should use the average of the High and Low price as of the day that the deceased person passed away. Is it reasonable?


Yes and that's the same method used for gift purposes, when donating stock to a charity. Average of the high and low. Or, the average of the high/low averages of the prior and subsequent trading days, if the DOD isn't a trading day. You would weight those two averages based on the number of days between the DOD and the trading days, if they were different. Reg 20.2031-2.

The same rule applies to bonds. Most bonds aren't traded every day, and trade data isn't as accessible as it is for stocks, which can make the broker valuations helpful.
 


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