So I have some shares that have a 1/2 stepped up cost basis that would result in long term gains.
They were purchased in 2012 from one brokerage.
But I consolidated everything to another brokerage, Vanguard.
To get this nagging thing of remembering those shares and to reduce my work on keeping the records - can I sell them and buy them back immediately or shortly after?
The gain would be small because of the cost basis step up and I believe the stock price is reasonable to buy back in.
This is the last stock in the batch to go through this half stepped up basis - Iâd just like to get it settled and move on without worrying about cost basis adjustments for IRS in the future.
Itâs a gain, so is there no wash sale or anything rule?
To get this nagging thing of remembering those shares and to reduce my work on keeping the records - can I sell them and buy them back immediately or shortly after?
Yes.
Itâs a gain, so is there no wash sale or anything rule?
Correct. Wash sales only occur when you sell a stock that has a loss. You are basically harvesting a gain, paying taxes on that gain, and resetting your cost basis to a higher level.
You are basically harvesting a gain, paying taxes on that gain, and resetting your cost basis to a higher level.
I meant to mention - you are also resetting your acquisition date. So you will need to hold for a year and a day after your new purchase to be taxed at LTCG rates.
Always great advice.
I have âbuysâ with div. reinvestments and other purchases after the step up stock purchases.
I just want to get the half cost basis stuff off the books and not have to remember (incase the broker messes up).
Yes, thanks for saying that new purchases reset the ST LT gain clock.
Just wanted to make sure I could just purchase it quickly after selling without issues.
AJâs answer is incomplete in this situation. While there is no wash sale if you sell for a profit, you need to look at the inherited shares separately from the original cost basis shares. You could be in a situation where the total of the share sale is a small capital gain, but what you have is a loss on the sale of the inherited shares and a gain on the original shares. In this case, you will have a wash sale on the inherited shares if you buy back within the wash sale window.
you need to look at the inherited shares separately from the original cost basis shares. You could be in a situation where the total of the share sale is a small capital gain, but what you have is a loss on the sale of the inherited shares and a gain on the original shares. In this case, you will have a wash sale on the inherited shares if you buy back within the wash sale window.
Do you have a citation to support this view?
My understanding is when you inherit from a spouse in a non-community property state that it gets a half-stepped up basis.
If for example:
You live in Oregon, have 100 shares of DIS in a joint account, which you bought for $50.
Your spouse dies when itâs trading for $130.
I thought the result is you have 100 shares with a basis of $90, not 50 shares with a basis of $50 and 50 shares with a basis of $130.
BUT I do not have a citation to support that. (and when I try to search, I just keep getting things about community property getting the full step up. Or things about items like homes where itâs one entity when bought/sold.)
I think everything getting a half-step up in basis makes more sense - especially if you have an odd number of shares. BUT I am not not familiar with the laws in these states (I live in a community property state) and I know the law does not always make sense, so I may be wrong (or this could even be a grey area thatâs not been settled in court yet)
My understanding is when you inherit from a spouse in a non-community property state that it gets a half-stepped up basis. If for example: You live in Oregon, have 100 shares of DIS in a joint account, which you bought for $50. Your spouse dies when itâs trading for $130. I thought the result is you have 100 shares with a basis of $90, not 50 shares with a basis of $50 and 50 shares with a basis of $130.
Your understanding is wrong. If the shares are owned âjointlyâ in a non-community property state, each spouse is deemed to own 50% of the shares. Only the shares owned by the decedent get their holding period and cost basis adjusted. For instance, if you (jointly) own 100 shares for 6 months when one spouse dies, the surviving spouse has 50 shares which are short term at the original cost basis and 50 shares at the date-of-death value for cost basis and âinheritedâ (long-term) holding period. The surviving spouse needs to wait another 6 months before all shares are long-term.
The logic is that there has been no event to require or justify a change in the cost basis/holding period of the shares attributed to the surviving spouse. Itâs only the shares attributed to the decedent that have had such an âeventâ.
While there is no wash sale if you sell for a profit, you need to look at the inherited shares separately from the original cost basis shares. You could be in a situation where the total of the share sale is a small capital gain, but what you have is a loss on the sale of the inherited shares and a gain on the original shares. In this case, you will have a wash sale on the inherited shares if you buy back within the wash sale window..
I donât think Iâd have a problem, from a personal standpoint, to waiting 30 days to buy back in.
However, there will be a remaining balance (shares only owned by me) of the stock that will generate dividends, which are reinvested. I believe the next date div is in June.
Itâs a small amount, but would that trigger a wash sale issue? I mean, itâs done automatically.
However, there will be a remaining balance (shares only owned by me) of the stock that will generate dividends, which are reinvested. I believe the next date div is in June. Itâs a small amount, but would that trigger a wash sale issue? I mean, itâs done automatically.
It will trigger a wash sale for the few or partial shares purchased if the sale is within the 61 days window. Cancelling the reinvestment would prevent the issue.
I wonder if I could specify lots and only sell the inheritated half of those?
Did the brokerage already split each of your lots into 2 lots for you?
One with your original basis, the other with your stepped up basis?
Iâm just trying to clear up having to remember this half step up cost basis on half of these shares.
I think you mean the full step up cost basis on half the shares.
And the half-step-up cost basis on shares that are not possible to evenly split (because theyâre a single share or it was an odd number of shares)
I think I get why you want to deal with this sooner, rather than later.
Of course you do have some other options - donate the shares (cost basis doesnât matter) or keep them until you die and then your heirs get a clean step up basis.
I wonder if I could specify lots and only sell the inheritated half of those? Did the brokerage already split each of your lots into 2 lots for you? One with your original basis, the other with your stepped up basis?
I believe this is one of the situations where the broker is not required to adjust the basis in their records - but the shareholder is.
And the half-step-up cost basis on shares that are not possible to evenly split (because theyâre a single share or it was an odd number of shares)
You can hold fractional shares and adjust the basis on them. It happens frequently when you use a dividend reinvestment program or purchase a mutual fund.
If the primary concern is getting rid of the paperwork hassle of half the shares getting a step-up in basis and half not getting the step up, and the wash sale outcome of selling the no-step-up batch along with the stepped up batch and then buying back the total number of shares is only a few bucks (OPâs definition of âfewâ), maybe a Gordian Knot solution: just sell them all, buy them back, and be done with it.
just sell them all, buy them back, and be done with it.
Only IF the shares with the stepped up basis are profitable, yes, youâd be done with it.
If the stock has gone down since the death, you would have a wash sale situation on those shares. (because you sold those shares for a loss, and bought replacement shares within 30 days.)
At least under what irasmilo has said is the treatment of inherited shares in a non-community property state. (And I assume theyâre correct because I donât find anything about it - neither supporting nor contradicting what they say is the way it is viewed by IRS)
I believe this is one of the situations where the broker is not required to adjust the basis in their records - but the shareholder is.
OK - but how do you sell only the shares that have an adjusted basis?
Only way I can see is if the brokerage has split each lot into two lots for you so that you can sell the specific lots.
Then if you had lots A,B,C, became A1, A2, B1, B2, C1, C2, you could sell lots A1, B1, C1 and be done.
If the lots havenât been split for you, you probably need to ask them to be split or something so that you could sell only the inherited shares.
You can hold fractional shares and adjust the basis on them. It happens frequently when you use a dividend reinvestment program or purchase a mutual fund.
If you sell a single share (say NVR) that was in a joint account at your spouseâs death (so half of it was inherited), and the half that was inherited is at a loss when you sell, but the half that was not is a gain, then you buy 1 share back the next day, are you saying you have a wash sale situation on that half-share?
Thatâd be even worse for keeping track of things IMO.
