Calculating gains on inherited stocks
BOSTON — Q. In 1973, i inherited a portfolio of blue-chip stocks, including 19 shares of General Motors worth, at the date of death, $1,594. Through the years, the stock doubled, and I now have 62 shares. (A split in 1989 resulted in 31 shares at $74.54 per share.) I'm now ready to liquidate some of the stocks if the capital gains aren't too prohibitive. How does one figure this out? S.L., Los Angeles
A. "Don't be distracted by the stock split, since it's not an issue here," says Ed Slott, a CPA based in Rockville Centre, N.Y.
You would use the estate-tax value at the date of death as your cost basis, adds the author of "Your Tax Questions Answered," Plymouth Press.
So if you decide to sell all your GM stock now, you would determine your gain by subtracting $1,594 from the current value, which is price times number of shares.
If you sell only part of the GM holdings, such as 20 percent, use 20 percent of the date of death value as your basis, Mr. Slott says.
Q. In May 1996 we invested in American Century 20th Century GiftTrust for our grandson. We bought in at $28.79 a share. Since our investment, the share price has gone downhill. In March the price was $19.26. We seem to be locked into a maturity date in the year 2016. Is there anything we can do to put our money into a better fund or to complain to the company or any government agency?
J. & B.B., Frazier Park, Calif.
A. "Unfortunately, there is not much that you can do," says Tim Shmidl, a financial planner with Prism Financial Group in Overland Park, Kan.
"If you want to complain, you'll probably have to stand in line," Mr. Shmidl says. The reason: The fund invests in small-cap stocks - a group that has been out of favor for several years now.
Since your investment was in effect an "irrevocable gift," you are locked in to the fund until the maturity date.
Shmidl's advice: Avoid making irrevocable gifts to a gift fund unless you have confidence it will perform adequately over time. And look for funds that carry large-cap, blue-chip stocks, which tend to be more stable.
But just because small-cap stocks have performed poorly since 1996 doesn't mean they won't bounce back by the time the fund matures.
Questions about finances? Write: Guy Halverson The Christian Science Monitor 500 Fifth Ave., Suite 1845 New York, NY 10110 E-mail: email@example.com