Mother's estate payout -- reporting on my taxes

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Statch
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Mother's estate payout -- reporting on my taxes

Post by Statch »

My mother passed away in 2017, and I was executor of her estate. I thought everything had been dealt with but then discovered last year that she and my father had had a small (total $400) Fidelity brokerage account that was in my father's name. He had predeceased her, and she never reported his death and got it switched to her. Fidelity was very helpful in getting it sorted out, and it ended up with them having me create a Fidelity account, and then once I provided all the documents to get the ownership changed to me, they deposited the total in my account and (at my request) mailed me a check, which I disbursed to the heirs. (I was only the conduit - didn't keep any of the money myself.)

There was probably a better way to handle it, but I didn't know it and it was a small amount. But now it's time to do taxes. There were three accounts totalling $400. Two of them are showing the the "date acquired" as "various" and they report a cost basis. That's fine. The third one shows the "Date acquired" as unknown and the "cost or other basis" as unknown. TaxAct will not allow "unknown" as the cost basis. I don't have any records from my parents that might show what the cost basis was or transactions on the account.

The amount for that third account is small ($180), and I don't mind paying the taxes for my siblings, but really don't want to have to consult a tax advisor when our taxes are otherwise very simple. Thanks in advance for any assistance anyone can offer.
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samsoes
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Re: Mother's estate payout -- reporting on my taxes

Post by samsoes »

Since the shares in question have obviously been held > 1 year, they are long term. So, show the date acquired as "Various" and column "E" on form 8949 (Long-term transactions reported on Form(s) 1099-B showing basis wasn’t reported to the IRS).

You'll have to calculate a cost basis yourself, and retain the "evidence" you used to show this calculation in the unlikely event you are audited for $180! Use the date the account was opened, and take the closing price at that date for the baseline. If you only know the year it was opened, take the low price of the year.

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BogleTaxPro
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Re: Mother's estate payout -- reporting on my taxes

Post by BogleTaxPro »

samsoes wrote: Thu Jan 27, 2022 11:21 am Since the shares in question have obviously been held > 1 year, they are long term. So, show the date acquired as "Various" and column "E" on form 8949 (Long-term transactions reported on Form(s) 1099-B showing basis wasn’t reported to the IRS).

You'll have to calculate a cost basis yourself, and retain the "evidence" you used to show this calculation in the unlikely event you are audited for $180!
This. And for the basis, you can just put 0. This is perfectly acceptable to the IRS. For $180 in gains, it's probably not worth spending more time on the phone with Fidelity...who probably will not even have the records back that far anyway.
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Re: Mother's estate payout -- reporting on my taxes

Post by Big Dog »

Isn't the cost basis the closing price on mom's date of death, i.e., stepped-up basis? Can't OP just look up closing stock prices on a website like yahoo.finance on or about that date, or if a mutual fund account, look up online the closing price of the mutual fund accounts on (or about) that date?

Sure, a basis of zero will work fine, but why pay taxes on the whole amount if one can get the basis pretty easily?
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Statch
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Re: Mother's estate payout -- reporting on my taxes

Post by Statch »

Samsoes and BogleTaxPro, thanks so much for your help! I may be back later with questions but I wanted to say that I saw this and thank you.
The 19th hole
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Re: Mother's estate payout -- reporting on my taxes

Post by The 19th hole »

Statch wrote: Thu Jan 27, 2022 11:03 am My mother passed away in 2017, and I was executor of her estate. I thought everything had been dealt with but then discovered last year that she and my father had had a small (total $400) Fidelity brokerage account that was in my father's name. He had predeceased her, and she never reported his death and got it switched to her. Fidelity was very helpful in getting it sorted out, and it ended up with them having me create a Fidelity account, and then once I provided all the documents to get the ownership changed to me, they deposited the total in my account and (at my request) mailed me a check, which I disbursed to the heirs. (I was only the conduit - didn't keep any of the money myself.)

There was probably a better way to handle it, but I didn't know it and it was a small amount. But now it's time to do taxes. There were three accounts totalling $400. Two of them are showing the the "date acquired" as "various" and they report a cost basis. That's fine. The third one shows the "Date acquired" as unknown and the "cost or other basis" as unknown. TaxAct will not allow "unknown" as the cost basis. I don't have any records from my parents that might show what the cost basis was or transactions on the account.

The amount for that third account is small ($180), and I don't mind paying the taxes for my siblings, but really don't want to have to consult a tax advisor when our taxes are otherwise very simple. Thanks in advance for any assistance anyone can offer.
Actually the basis "steps up" to FMV (fair market value) at the date of your father's death. If your mother's estate inherited it before it was passed on to your siblings, it got another step up on the date of your mother's death. Either way, it's long term and the gain would be from the date of your mother's death until the actual sale date.
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Re: Mother's estate payout -- reporting on my taxes

Post by JDave »

"in the unlikely event you are audited for $180!"

- a while back, I had an IRS agent bang on my door, waking me up, threatening to freeze my accounts over - $180! The IRS had lost one of my monthly tax payments for my corporation and were saying I never sent it in.

- after some jaw-boning I managed to convince the agent it was a mistake on the part of the IRS, but never over-estimate the reasonableness of the Internal Revenue Service. After all, if you were 29,000,000,000,000.00 in debt, you too might be eager to collect every penny!
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Re: Mother's estate payout -- reporting on my taxes

Post by JazzTime »

I'm wondering what Fidelity did here. They should have changed the cost basis to the date of death. Having said that, I'm not exactly sure what Fidelity does when a child reports the death of a parent. I'm sure they must have a standard practice. It may be small potatoes in this case, but what if the deceased had an account valued at $1MM? It should be possible to get Fidelity to look up the value of each account on the date of death.

Edit: By the way, this is why I encourage people to insist on getting paper statements. The OP had no idea that these accounts existed. However, if the owner received monthly statements, the OP would have learned very quickly that her parents had accounts at Fidelity. It is important that people keep an updated list of ACTIVE accounts so the poor Executor knows where to look for things.
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Mysterious
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Re: Mother's estate payout -- reporting on my taxes

Post by Mysterious »

Going through this now. Yes, Fidelity can tell you the value of the account on the date of your last parent's demise. That is your cost basis.

My condolences!
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Statch
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Re: Mother's estate payout -- reporting on my taxes

Post by Statch »

JazzTime, Mysterious, The 19th hole, Big Dog, JDave, thanks to you also for taking the time to respond. It sounds like I should probably give Fidelity a call tomorrow and see if it isn't too much trouble to get them tell me why the one 1099 says "unknown" for cost basis when they were able to calculate the other two. Thanks again!
TropikThunder
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Re: Mother's estate payout -- reporting on my taxes

Post by TropikThunder »

samsoes wrote: Thu Jan 27, 2022 11:21 am Since the shares in question have obviously been held > 1 year, they are long term.
Inherited assets are automatically considered long-term.
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dodecahedron
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Re: Mother's estate payout -- reporting on my taxes

Post by dodecahedron »

Mysterious wrote: Thu Jan 27, 2022 12:37 pm Going through this now. Yes, Fidelity can tell you the value of the account on the date of your last parent's demise. That is your cost basis.
In theory, yes, Fidelity can and should be able to tell you this value.

In practice, I discovered there are no guarantees.

For reasons unknown to me, when my late husband died unexpectedly eight years ago, he had a small taxable brokerage account at Fidelity and Fidelity gave me a terrible runaround when I tried to get the FMV of the assets in the account on the date of death.

I was the executor and sole beneficiary of the estate as well as the surviving spouse. Once I had the letters of appointment from the probate court officially appointing me executor, I had no trouble at all getting Fidelity to move control of the assets to me but I spent a lot of time on the phone and even made a trip in person to try to get the date of death FMV info.

Ultimately, I gave up and decided just to use the assets for a charitable donation I was planning to make in his memory anyway, making the exact cost basis info moot. The paralegal doing the paperwork for the estate (which required a state estate tax return, even though no actual estate tax was due because of spousal exemption, but return still needed to be filed) kept wanting me to provide an official Fidelity statement of date of death value for that return. (Even a statement of the value at some point in the month of death would have been okay for her purposes, but I could not even get that.) All I got was the statement of the assets in the account as of the date they were turned over to me several months after the death (and I believe there had been some automatic reinvested dividends in the intervening time between date of death and when I obtained control.)

Eventually I convinced the lawyer she was working under that an informal estimate reconstructed based on public information was sufficient for our purposes.

Interactive Brokers was another place where my late husband had an account that was very uncooperative about turning over information I needed. The funds were no problem. But the info was another matter. Fortunately a very nice "concierge" at Vanguard did a three way call with me and Interactive Brokers that effectively "bullied" Interactive Brokers into providing the info I needed. (I had previously called multiple times and was always told that the person at IB that I needed to talk to was "out of the office" and he never returned my calls.)
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Re: Mother's estate payout -- reporting on my taxes

Post by Big Dog »

dodecahedron wrote: Thu Jan 27, 2022 6:46 pm
Mysterious wrote: Thu Jan 27, 2022 12:37 pm Going through this now. Yes, Fidelity can tell you the value of the account on the date of your last parent's demise. That is your cost basis.
In theory, yes, Fidelity can and should be able to tell you this value.

In practice, I discovered there are no guarantees.

True, but if you know the individual stock holdings, you could look them up one-by-one online at any number of financial sites. Just print off whatever closing price you find on date of death for record-keeping and you should be good to go. Most mutual fund historical prices are also available online.
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Re: Mother's estate payout -- reporting on my taxes

Post by Gill »

Big Dog wrote: Thu Jan 27, 2022 7:09 pm
dodecahedron wrote: Thu Jan 27, 2022 6:46 pm
Mysterious wrote: Thu Jan 27, 2022 12:37 pm Going through this now. Yes, Fidelity can tell you the value of the account on the date of your last parent's demise. That is your cost basis.
In theory, yes, Fidelity can and should be able to tell you this value.

In practice, I discovered there are no guarantees.

True, but if you know the individual stock holdings, you could look them up one-by-one online at any number of financial sites. Just print off whatever closing price you find on date of death for record-keeping and you should be good to go. Most mutual fund historical prices are also available online.
Just to pick a nit, it’s not the closing price but rather the mean market price on date of death.
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dodecahedron
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Re: Mother's estate payout -- reporting on my taxes

Post by dodecahedron »

Big Dog wrote: Thu Jan 27, 2022 7:09 pm
dodecahedron wrote: Thu Jan 27, 2022 6:46 pm
Mysterious wrote: Thu Jan 27, 2022 12:37 pm Going through this now. Yes, Fidelity can tell you the value of the account on the date of your last parent's demise. That is your cost basis.
In theory, yes, Fidelity can and should be able to tell you this value.

In practice, I discovered there are no guarantees.

True, but if you know the individual stock holdings, you could look them up one-by-one online at any number of financial sites. Just print off whatever closing price you find on date of death for record-keeping and you should be good to go. Most mutual fund historical prices are also available online.
I agree this is possible--and would satisfy the IRS and state tax authorities. Would not satisfy the picky paralegal doing the estate paperwork (who wanted something official looking from Fidelity, not something informally reconstructed and calculated by me) until I finally convinced her boss (the lawyer) to tell her this was okay. I was annoyed at being billed for the repeated back-and-forth on this thanks to Fidelity's intransigence. It would have been easier and cheaper if Fidelity had simply been willing to provide even a month of death statement which would have satisfied the paralegal with no muss or fuss.
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Statch
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Re: Mother's estate payout -- reporting on my taxes

Post by Statch »

dodecahedron, that must have been a really frustrating experience. Thanks for sharing it. I'm sorry for your loss as well.

I'm going to call Fidelity tomorrow and will report back in case it helps anyone.
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Re: Mother's estate payout -- reporting on my taxes

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dodecahedron wrote: Thu Jan 27, 2022 7:25 pm It would have been easier and cheaper if Fidelity had simply been willing to provide even a month of death statement which would have satisfied the paralegal with no muss or fuss.
Exactly. I am puzzled why Fidelity would not provide a copy of the monthly account statement for the month corresponding to the date of death.

I can go into my account and get copies of back statements any time I want. Since Fidelity has the statement in its system, it would not have been difficult to provide it.
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dodecahedron
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Re: Mother's estate payout -- reporting on my taxes

Post by dodecahedron »

JazzTime wrote: Fri Jan 28, 2022 8:34 am
dodecahedron wrote: Thu Jan 27, 2022 7:25 pm It would have been easier and cheaper if Fidelity had simply been willing to provide even a month of death statement which would have satisfied the paralegal with no muss or fuss.
Exactly. I am puzzled why Fidelity would not provide a copy of the monthly account statement for the month corresponding to the date of death.

I can go into my account and get copies of back statements any time I want. Since Fidelity has the statement in its system, it would not have been difficult to provide it.
Still scratching my head over this.

It *was* a relatively small account, about $20K in assets if I recall correctly. (I think the primary reason my husband opened the account was to have access to Fidelity's information dashboard and/or to monitor execution times on different platforms, which was an academic area of interest for him.)

Maybe the folks I talked to at Fidelity just regarded me as a nuisance for asking them to dig up the paperwork. (They presumably had no idea that I had a lot of assets elsewhere that were potentially movable there if they had been nicer to me.)
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Re: Mother's estate payout -- reporting on my taxes

Post by Big Dog »

JazzTime wrote: Fri Jan 28, 2022 8:34 am
dodecahedron wrote: Thu Jan 27, 2022 7:25 pm It would have been easier and cheaper if Fidelity had simply been willing to provide even a month of death statement which would have satisfied the paralegal with no muss or fuss.
Exactly. I am puzzled why Fidelity would not provide a copy of the monthly account statement for the month corresponding to the date of death.

I can go into my account and get copies of back statements any time I want. Since Fidelity has the statement in its system, it would not have been difficult to provide it.
The problem with a monthly statement is that it might not show the balance on the date of death, which is what the Trust firm was seeking. In my former life, our business had an Vanguard investment account that had a mid-month reporting cycle. (I have no idea how we got that.) But such a statement would not pass muster with our Big 6 auditor. So every audit year, I would call Vanguard with the auditor in my office on speaker and ask Vanguard to confirm the June 30 balance verbally...
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Re: Mother's estate payout -- reporting on my taxes

Post by JazzTime »

Big Dog wrote: Fri Jan 28, 2022 7:09 pm The problem with a monthly statement is that it might not show the balance on the date of death, which is what the Trust firm was seeking.
For someone with a modest account and relatively few positions, a month end statement might be "close enough" for IRS cost basis purposes. If they audit, then I suppose you could go to the next level. Once you have the month end statement, you can see every position. It would not be difficult, although somewhat burdensome, to simply look up the price of every position on the date of death.

If you are dealing with an accounting firm, they are going to be much more strict - not because it is absolutely necessary, but because they are worried about their own liability. As an individual with a modest account, it is probably easier to get things accepted by the IRS provided you have given it your best estimate. Think about it. If you've estimated cost basis based on the month end statement, how much are they going to dun you if the think the date of death price is slightly different? It would be a complete waste of resources.

I am not suggesting that anyone give inaccurate information. Just give it your best shot. As I commented earlier, I can't believe Fidelity wouldn't be willing to provide accurate date of death cost basis information. This must come up hundreds of times each month with long term clients passing away and leaving their accounts to children or trusts.

I would be interested to hear from other BHers about their experiences. Everyone here discusses the advantages of "step up basis." That's only an advantage if the firm holding your account actually recomputes the cost basis on the date of death. Imagine if you had a $5MM account with 100 different positions. I don't want my heirs or trustee to be saddled with computing cost basis of every position.
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egrets
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Re: Mother's estate payout -- reporting on my taxes

Post by egrets »

JDave wrote: Thu Jan 27, 2022 12:20 pm "in the unlikely event you are audited for $180!"

- a while back, I had an IRS agent bang on my door, waking me up, threatening to freeze my accounts over - $180! The IRS had lost one of my monthly tax payments for my corporation and were saying I never sent it in.

- after some jaw-boning I managed to convince the agent it was a mistake on the part of the IRS, but never over-estimate the reasonableness of the Internal Revenue Service. After all, if you were 29,000,000,000,000.00 in debt, you too might be eager to collect every penny!
Wow they didn't send you a letter? I wouldn't believe any random person at my door was from the IRS.
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Re: Mother's estate payout -- reporting on my taxes

Post by Geologist »

JazzTime wrote: Sat Jan 29, 2022 10:47 am
Big Dog wrote: Fri Jan 28, 2022 7:09 pm The problem with a monthly statement is that it might not show the balance on the date of death, which is what the Trust firm was seeking.
For someone with a modest account and relatively few positions, a month end statement might be "close enough" for IRS cost basis purposes. If they audit, then I suppose you could go to the next level. Once you have the month end statement, you can see every position. It would not be difficult, although somewhat burdensome, to simply look up the price of every position on the date of death.

If you are dealing with an accounting firm, they are going to be much more strict - not because it is absolutely necessary, but because they are worried about their own liability. As an individual with a modest account, it is probably easier to get things accepted by the IRS provided you have given it your best estimate. Think about it. If you've estimated cost basis based on the month end statement, how much are they going to dun you if the think the date of death price is slightly different? It would be a complete waste of resources.

I am not suggesting that anyone give inaccurate information. Just give it your best shot. As I commented earlier, I can't believe Fidelity wouldn't be willing to provide accurate date of death cost basis information. This must come up hundreds of times each month with long term clients passing away and leaving their accounts to children or trusts.

I would be interested to hear from other BHers about their experiences. Everyone here discusses the advantages of "step up basis." That's only an advantage if the firm holding your account actually recomputes the cost basis on the date of death. Imagine if you had a $5MM account with 100 different positions. I don't want my heirs or trustee to be saddled with computing cost basis of every position.
Well, we had a law firm involved for both my father and mother's death. These occurred at different times, but the following procedure was the same. The law firm queried Vanguard (and other financial institutions) for the date of death values of the securities or accounts each held. Vanguard and the other institutions responded with the information. Therefore, the heirs have official values for documentation later (certainly valuable as my father's death came before institutions had to record data as covered shares).
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Re: Mother's estate payout -- reporting on my taxes

Post by Big Dog »

JazzTime wrote: Sat Jan 29, 2022 10:47 am
Big Dog wrote: Fri Jan 28, 2022 7:09 pm The problem with a monthly statement is that it might not show the balance on the date of death, which is what the Trust firm was seeking.
For someone with a modest account and relatively few positions, a month end statement might be "close enough" for IRS cost basis purposes. If they audit, then I suppose you could go to the next level. Once you have the month end statement, you can see every position. It would not be difficult, although somewhat burdensome, to simply look up the price of every position on the date of death.

If you are dealing with an accounting firm, they are going to be much more strict - not because it is absolutely necessary, but because they are worried about their own liability. As an individual with a modest account, it is probably easier to get things accepted by the IRS provided you have given it your best estimate. Think about it. If you've estimated cost basis based on the month end statement, how much are they going to dun you if the think the date of death price is slightly different? It would be a complete waste of resources.

I am not suggesting that anyone give inaccurate information. Just give it your best shot. As I commented earlier, I can't believe Fidelity wouldn't be willing to provide accurate date of death cost basis information. This must come up hundreds of times each month with long term clients passing away and leaving their accounts to children or trusts.

I would be interested to hear from other BHers about their experiences. Everyone here discusses the advantages of "step up basis." That's only an advantage if the firm holding your account actually recomputes the cost basis on the date of death. Imagine if you had a $5MM account with 100 different positions. I don't want my heirs or trustee to be saddled with computing cost basis of every position.
when my step-mom passed away, she didn't have a whole lotta money, but did have many positions -- individual stocks adn mutual funds -- held in 5+ brokerages. Everyone of them provided the stepped-up cost basis to the heirs upon date of death after presentation of a death certificate. Easy.
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Re: Mother's estate payout -- reporting on my taxes

Post by JazzTime »

Big Dog wrote: Sat Jan 29, 2022 5:06 pm when my step-mom passed away, she didn't have a whole lotta money, but did have many positions -- individual stocks adn mutual funds -- held in 5+ brokerages. Everyone of them provided the stepped-up cost basis to the heirs upon date of death after presentation of a death certificate. Easy.
Glad to hear that the brokerage houses provided the stepped-up basis.

For some crazy reason, there are folks that love having their assets, however small, spread out all over the place. My MIL and my elderly neighbor each had several bank accounts with small amounts in each. My MIL also had a drip account and some other weird "coop" account. I had to present my admin papers to every one of these places. What a pain! Lots of work to retrieve small amounts. Luckily my MIL kept some paperwork squirreled away. Otherwise, no one would even know about some of these accounts.

I urge folks: "Be kind to your heirs. CONSOLIDATE!" There's no reason to have assets scattered hither and yon. And keep a list of what you have.
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Re: Mother's estate payout -- reporting on my taxes

Post by egrets »

JazzTime wrote: Sun Jan 30, 2022 11:14 am
Big Dog wrote: Sat Jan 29, 2022 5:06 pm when my step-mom passed away, she didn't have a whole lotta money, but did have many positions -- individual stocks adn mutual funds -- held in 5+ brokerages. Everyone of them provided the stepped-up cost basis to the heirs upon date of death after presentation of a death certificate. Easy.
Glad to hear that the brokerage houses provided the stepped-up basis.

For some crazy reason, there are folks that love having their assets, however small, spread out all over the place. My MIL and my elderly neighbor each had several bank accounts with small amounts in each. My MIL also had a drip account and some other weird "coop" account. I had to present my admin papers to every one of these places. What a pain! Lots of work to retrieve small amounts. Luckily my MIL kept some paperwork squirreled away. Otherwise, no one would even know about some of these accounts.

I urge folks: "Be kind to your heirs. CONSOLIDATE!" There's no reason to have assets scattered hither and yon. And keep a list of what you have.
I have accounts at several credit unions because in the days of yore when interest rates on CDs mattered, there was often a significant difference. Also I had to watch the insurance limit on accounts. I should probably close one or two, but for example one is the only place around with safe deposit boxes but its interest rates on CDs have been the worst so I only have a share account there and the safe deposit box. Of course, I keep a list plus I get paper statements in the mail.
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Statch
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Re: Mother's estate payout -- reporting on my taxes

Post by Statch »

OP here. I did call Fidelity today. The answer seems to be that either the account was opened before 1993 or was transferred in from another financial institution that didn't provide the cost basis. So the two 1099 forms for the account that list the long-term and short-term cost basis are from while the account was in Fidelity's care, and the 1099 for that same account that says "unknown" for everything is for the portion that was either pre-1993 or that came from somewhere else. The Fidelity representative recommended I consult a tax professional (seemed to be what he was supposed to say but he did remark on how small the amount was - it's about $400).

I have to say that the two Fidelity customer service representatives I've dealt with (to get the account liquidated, and then today) were probably the friendliest customer service reps I've ever dealt with for anything. Interesting.
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