- quote -

Neither - it's the grandfather's original cost basis. If
the grandfather is dead or is alive and doesn't know the
basis, then the basis is zero for the shares that were
gifted. Dividends reinvested after the gift into additional
shares have a basis of the dividend amount.

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"Reiner" <reiner[at]i-55.com> wrote in news:103sdnl9kh5sa54

- quote -

This question makes no sense to me. Cost basis of what?

Cash has a basis of its face value. If there was interest
or dividends over the years, it should have been included in
the minor's taxable income.

If it was a gift of other property, the basis is the same
basis the donor had.

Stu

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Reiner wrote:

- quote -

The key word is gift, the basis is generally the
grandfather's basis "cost".

--
Frederick E. Jorden http://Tax-Accounting-Payroll.com
7825 Midlothian Tpk - 207 Richmond, VA 23235-5247 EMAIL knowtax[at]bigfoot.com
(804) 320-6210 FAX (804) 320-6211

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- quote -

His basis is the original cost. He owned the account the
whole time. His grandfather was just managing it for him.
There was no change of ownership when he turned 18.

However, you have me wondering a bit because you did not say
what kind of account this was, and you did not use the word
"sold." Did the account contain assets such as stocks,
bonds, or mutual funds, or was it just money - a bank
account or certificate of deposit? Did he get a 1099-B when
he "cashed in" the account? If it was a bank account or CD,
then he didn't sell anything when he cashed it in. In that
case basis is meaningless and there is no transaction to
report on his tax return.

Bob Sandler
(not a tax professional)

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Reiner wrote:

- quote -

What happened in 1984? Was it a one-time purchase of a
stock? If so, that cost in 1984 is the basis. You can likely
find a range of values the IRS would be happy with.
Consider, 20 years at 10% takes $1000 to appr $8000. If you
claim $7000 or claim $7500 (gain), the tax difference may be
$50. Just do your best to track down the acctual numbers.

JOE

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Reiner wrote:

- quote -

The grandchild has been the owner of the account since 1984
and should have been reporting income on the investments if
the child was required to file tax returns. As the child
has always been the owner any asset that was purchased with
funds in the account has as its cost basis whatever was paid
for the asset. If someone gifted an asset into the account,
the cost basis in the hands of the donor transferred to the
donee. There is an exception to this last rule if at the
time of the gift the FMV was less than the cost basis. If
sold at a gain, you use the donor's cost basis. If sold at a
loss you use the FMV on the date of the gift as the cost
basis. All the rules for adjustments to cost basis are in
play. Finally, if the FMV was higher than the donor's basis
at the time of the gift and the donor paid any gift tax on
that gift, the amount of gift tax paid is added to the
donor's cost basis to arrive at the donee's cost basis.

--
Alan
http://taxtopics.net

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I'm trying to help a college student with his taxes.

In 1984 his grandfather set up an account under the "Unifom
Gift to Minors Act (UGMA)". In June 2001, he turned 18 &
took over the account. In January 2003, he cashed in the
account to use for college costs. I've been all over the web
& can't find anything that helps me figure out his cost
basis.

My question is: Do I figure his cost basis using the account
value when he turned 18 or is it figured from the account
origination date in March 1984?

Thank you for any help you can give.

Reiner Eggendorfer
reiner"at"i-55.com

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