Question

Tom's mother died on 1/10/2019. She had owned stock for 20 years with a basis of $35,000, that was transferred to Tom on 12/25/2018, three weeks before she died. This stock was worth $235,000 at the date of the mothers death, and it was worth $200,000 on 12/25/2018. Tom sold the stock for $325,000, net of commissions, on 12/25/2019.

What is the amount of Tom's gain or loss from disposition of this in 2019?

What is the nature (long or short term) of Tom's gain or loss?

Answer 1

Answer:

Typically when you sell a stock or fund you pay capital gains tax on any gain that has occurred since you bought it. The amount you originally bought it for is called your cost basis. When you inherit these types of assets, for tax purposes, the cost basis is based on the fair market value of the fund or stock at the time of the decedent’s passing.

So here the cost is $235000 .i.e value on the date of death of tom's mother

Sale consideration is $325000

So Gain is Sales consideration less cost

=325000-235000=$90000

Capital gain on disposition of shares is $90000

Under the current law, an asset has a long-term holding period if it has been held, or is deemed to have been held, for more than one year.But in case of inherited asset(including stock) the holding period counts holding period of deceased person.So here Holding period is more than 1 Year.

Tom's gain is Long term capital gain