DDad's 20+ years of DRIP...

Pilot2013

Pilot2013

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My DDad (turning 80 on 9/11) started talking to me about "some Duke Energy" stock that he inherited from his father in the early 80's. Through the discussion, i learned that he has been set up in a DRIP the entire time, the stock has split, there have been a couple of "spinoff events" (Spectra Energy, and then a move Enbridge).

This has been through Duke Energy and associated Transfer Agent the entire time. He just said "I was thinking about selling some of this, and doing something else with it, but I'm not sure what I will get, tax impact, etc".

Long story short, I started asking him about the cost basis, etc and he said "whut?".

Further discussion, and I am thinking we have to somehow back track 20+ years of DRIP for share cost basis. He now has 1249 shares of Duke, and 860 shares of Enbridge. I can only imagine how many transactions since it was ALL DRIP.

Holy Cow. :facepalm:
 
Pilot2013 said:
Holy Cow.
Click to expand...

Are there copies of tax returns during the period? They should show the value of the Duke dividends for each tax year. Sum the dividends to the cost of the original investment and there's your total cost basis. You won't know the cost of each lot but at least you'll know the average cost per share.
 
Ask the transfer agent... they might be able to get that info for you...
 
Does he need to sell? If not, let it ride. This is why the step up on death was created.

Ha
 
haha said:
Does he need to sell? If not, let it ride. This is why the step up on death was created.

Ha
Click to expand...

+1
Used this many times for inherited stock and real estate. A real game changer.
 
GrayHare said:
Are there copies of tax returns during the period? They should show the value of the Duke dividends for each tax year. Sum the dividends to the cost of the original investment and there's your total cost basis. You won't know the cost of each lot but at least you'll know the average cost per share.
Click to expand...

Pretty sure he hasn't kept 20+ years of tax returns... He for sure didn't keep the statements.

I'm wondering if I can go back through the PRICE HISTORY, determine DIV % and dates, and try to recreate. That's all I can think of.
 
haha said:
Does he need to sell? If not, let it ride. This is why the step up on death was created.

Ha
Click to expand...

True, and he is putting TOD's on these. but he was wondering if he DID need to sell some....
 
Pilot2013 said:
Agents/Brokers were not "required" to keep this information for you until 2012. I have a call in to see if by chance they do.
Click to expand...


True, but most have the info anyhow... sometimes it takes them a bit of time to get the info.... I asked for that info on a fund my mom had with Fidelity and they did provide it after a week or two...
 
Pilot2013 said:
True, and he is putting TOD's on these. but he was wondering if he DID need to sell some....
Click to expand...

Depending on the value of 'some', you could either:

1) Sell FIFO, and assume the first shares have 0 basis - which is probably a close estimate, and one the IRS won't quibble about
2) Sell LIFO, and you should be able to find the basis for the most recent shares from the transfer agent etc. Wait for the step-up to reset the basis on the older shares.
 
Contact the Investor Relations group at each company. They should have the required information.
 
Another option is to give the shares to a charitable organization. If you have held them more than a year, you can donate and deduct the FMV on the date of donation, which becomes the charity's basis. Basically works like the step-up that happens at death.
 
SecondCor521 said:
Another option is to give the shares to a charitable organization. If you have held them more than a year, you can donate and deduct the FMV on the date of donation, which becomes the charity's basis. Basically works like the step-up that happens at death.
Click to expand...

Uhhh. Not sure where this one came from. He's not wealthy, so he doesn't need deductions, and I don't see him giving away ~$135k worth of stock to avoid the work of determining cost basis. The only "step-up charity" will be my sister and I if it goes that route and he does not need the money for LTC or something else.
 
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Pilot2013 said:
Uhhh. Not sure where this one came from. He's not wealthy, so he doesn't need deductions, and I don't see him giving away ~$135k worth of stock to avoid the work of determining cost basis. The only "step-up charity" will be my sister and I if it goes that route and he does not need the money for LTC or something else.
Click to expand...

I was merely trying to provide another option for dealing with the basis issues you were describing in your original post. If it doesn't fit your situation, that's OK by me. It may be applicable to someone else who comes across this thread later and might help them out.
 
Amazing what steady savings does, my dad retired in dividend stocks as his income, all with saving by way of 2 companies. He ended up with $800k in Hawaiian electric and $300k in Verizon which was GTE when he was buying

It's the problem with most people, the inability to save
 
I'd just make an educated guess for basis and let the IRS tell you that it's wrong. If you sell a small amount every year they probably won't care. I am NOT a tax expert so take this free advice for what it cost you. Good luck.
 
CaliKid said:
I'd just make an educated guess for basis and let the IRS tell you that it's wrong. If you sell a small amount every year they probably won't care. I am NOT a tax expert so take this free advice for what it cost you. Good luck.
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the IRS will say the basis is zero.... you have to show them that it is not....
 
Does he have his tax returns, I would assume the dividends were declared as income and add up all the dividends from the tax returns, at a minimum that provides additional stock basis for the years you can find, you could sell that amount of stock for the portion you can prove and continue to work on the earlier years.
 
And if he just stops the DRIP he would have $5,644 a year in dividends to spend
 
Texas Proud said:
the IRS will say the basis is zero.... you have to show them that it is not....
Click to expand...
You'd tell the IRS what the bottom line of your calculations were on schedule D. The default is they accept it. If they audit you, you show them your calculations. Maybe THEN they'd say your proof was insufficient and they'd say "zero".

If it were me, I'd get what I could from the agent, get price history from Yahoo Finance, then whip up a spreadsheet with a best-guess estimate. I'd use that every year I sold some to keep track of the basis. Unless you're talking really big money, I doubt the IRS would bother you. And if they do, you show them your best effort spreadsheet, which they'd probably accept.
 
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My parents did this and wanted to let it ride to death and step up basis. Guess what? The utility went private and forced the sale!

Dad's tax accountant did the hard work and got 20 years of past values (from company history) and calculated basis on 80 transactions. I was impressed.
 
sengsational said:
You'd tell the IRS what the bottom line of your calculations were on schedule D. The default is they accept it. If they audit you, you show them your calculations. Maybe THEN they'd say your proof was insufficient and they'd say "zero".

If it were me, I'd get what I could from the agent, get price history from Yahoo Finance, then whip up a spreadsheet with a best-guess estimate. I'd use that every year I sold some to keep track of the basis. Unless you're talking really big money, I doubt the IRS would bother you. And if they do, you show them your best effort spreadsheet, which they'd probably accept.
Click to expand...


I agree... but I was responding to someone who had said let the IRS say it is wrong... and if they say it is wrong and there is not a good number to show then it will be zero... I have done a number of audits when I was young and they made the taxpayer prove everything... without proof they did not allow anything...

The 'best guess' is good if there is something to back it up.... IOW, you can do the math and back into all the divis over 20 years.... and how many shares etc. is there... time consuming, but doable... the original might be a problem and I would not go with a best guess...

So, unless OP plans to sell it all, then sell what is provable and leave the rest for the estate and get a step up...


Now, the other poster did have a good suggestion.... sell a little at a time and an audit will probably never happen.... done deal...
 
As for erasure of the problem via cost basis step up upon the owner's death, keep in mind that step up will go away if Estate "Death" Tax goes away, as is currently under consideration as part of tax reform.
 
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