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Old 10-24-2016, 02:40 AM
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Inherited stock advice

Hello all, I received a stock certificate for a company when my grandfather passed away, about 4 years ago, since then I have received a yearly dividend payment, and I've paid taxes on that dividend. Now, this year the company is offering a voluntarily buyback of up to 20% of our shares. The bottom line to make this short is my 20% is a rather large amount. It's roughly 200,000.000

Now I figure I can go two ways about this, the first way, is, I'm divorced, rent a house and have no deductions to write off, so I'm going to get eaten alive on my capital gains. I'm pretty sure it's considered long term capital gains, so I think thats 15% in taxes. I also believe that I should subtract the dollar amount the stock was valued at when I received it, and the difference of the selling price, then 15% would come off that amount for taxes. Does that sound about right?

Or the second way is I could get ahold of some cpa or financial guru to get advice on tax planning. Don't know that I need a lot of info in this case, but just want to make sure I have the tax right and also, what would one recommend to shelter some of that blow? Like a Roth maybe or something?

Thanks for the assistance,
Russ



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Old 12-01-2016, 11:37 PM
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Inherited stock advise

Hi Russ,

Below are some of the answers you were looking for:

1) The sale of inherited stock is a long term capital gain;

2) Being that I am single so I think thats 15% in taxes.

Agree, but I don't know if you have any other source of income that may potentially throw you into the 20% long-term capital tax gain bracket.

In addition, depending on your income, don't forget the NIIT (3.8% Obamacare tax).

3) I also believe that I should subtract the dollar amount the stock was valued at when I received it, and the difference of the selling price, then 15% would come off that amount for taxes.

Your capital gain is the difference between the selling price of the stock and the value of the stock at the date of death [or alternative valuation date]. The value of the stock when you actually receive it is not relevant when computing the amount of the gain. The capital gains tax is based on the amount of the gain.

4) Or the second way is I could get ahold of some cpa or financial guru to get advice on tax planning. Don't know that I need a lot of info in this case, but just want to make sure I have the tax right and also, what would one recommend to shelter some of that blow? Like a Roth maybe or something?

Roth IRA would require "earned" income. Gain on the sale of security is "un-earned income" and would not qualify for Roth IRA. Your best bet would be to see if you have other capital losses that could be used to offset capital gain on the sale.

Good luck!



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Old 12-02-2016, 12:47 AM
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Thanks for the reply!!!

Agree, but I don't know if you have any other source of income that may potentially throw you into the 20% long-term capital tax gain bracket.

I just have my employment income at 100k for the year. I pay into my employer for my medical benefits, so I am not on the obamacare plan.

So the date my grandfather died is the date used for valuation of stock not when I received it, did not know that.

As to other capital losses, you mean sell any other stocks that I'm upside down in, it sounds like?

Thanks for the reply again...
Russ



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Old 12-02-2016, 12:51 AM
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Thanks for the reply!!!

Agree, but I don't know if you have any other source of income that may potentially throw you into the 20% long-term capital tax gain bracket.

I just have my employment income at 100k for the year. I pay into my employer for my medical benefits, so I am not on the obamacare plan.

So the date my grandfather died is the date used for valuation of stock not when I received it, did not know that.

As to other capital losses, you mean sell any other stocks that I'm upside down in, it sounds like?

Thanks for the reply again...
Russ



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Old 12-02-2016, 02:06 AM
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Russ,

Sounds like you have not faced NIIT in the past. Here is the info for your reference. You may be subject to it

https://www.irs.gov/uac/newsroom/net...ncome-tax-faqs

It's often referred to as Obamacare tax. You don't have to take Obamacare (the 3.8% tax is what is used to finance Obamacare).

The last paragraph indeed advises you to sell other stocks/securities in your regular portfolio (not your retirement portfolio or anything like that) to offset the long-term gain on the sale of stock.Be sure to capture any portfolio losses you may have in the same year as the gain on the sale of inherited stock.

One other issue I did not ask is whether you live in a state that has income tax. If you do - the state will be looking to tax you on the gain as well.

Hope this helps.



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Old 12-02-2016, 06:02 PM
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Thanks for reply again,

I live in Texas
Russ



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