elderly parent transfer of bonds to child to realize capital loss? (taxes, account)

[TabbyCats]

Last year, my 92-yr-old mom's investment guy transferred her Lehman Bro's to my name and then sold them. He said that since she doesn't file taxes and I have a high tax bracket, I could realize the capital loss for her.

I'm all set to do taxes, and now I'm thinking about it...... Is this right? Since she made a simple transfer, I get the cost basis (her original investment cost) with which to calculate the loss at time of sale?

I've always done our own taxes, but now I'm wishing I'd shopped around for a tax person (but we're in a new location, and I'm choosey when it comes to things like this).

Thanks!

[mathjak107]

im no tax person but to be honest while she can give you a gift up to certain limits this is just plain tax avoidance and is not going to be legal if challenged. if your under 19 or 24 if a student there is the kiddie tax which stops this.

http://www.keyfinancialsolutionsthat...meShifting.cfm

[golfgal]

I would QUICKLY consult a tax expert. I think you would have been better off getting those bonds AFTER she died for the the step up in basis but it depends on too many variables (what kind of account where they in, what kind of bonds were they, etc.).

[TabbyCats]

Update (I tried to post it previously, but something happened, mid-typing): Anyway, a "gift" (how this transfer would be considered) carries the cost basis of the giftor IF the security is later sold at a gain (so you'd owe taxes on it), BUT, if you sell it at a loss, your cost basis is the LOWER of either the market value at time of transfer OR the giftor's cost basis.....meaning you cannot realize the loss.

In checking my sister's records, though, I see that the transfer occurred before Lehman tanked, so I will get the cost basis of its value at the time of transfer.

[TabbyCats]

Originally Posted by mathjak107

this is just plain tax avoidance

Nothing to be taxed in a loss

[mathjak107]

Ooops missed the loss part.

the IRS doesn't let the child benefit from a tax loss on transfered shares. the child cannot write off the parents loss even though the cost basis was transfered.

the child can only use the parents cost basis against a gain if that stock was sold for a future profit. it only works one way when transfering shares to a child and that is to offest future gains only.

since you can longer take a gain the writeoff is lost totaly. the fact lehman tanked is the same as if it was sold.

http://www.eclecticassociates.com/content/166.htm (broken link)