Adding shares - Transaction Date vs Date Acquired

Unknown

I received shares as a gift. I have the original cost basis and date acquired by the person who gave them to me. In the "Add shares" window, I'm supposed to enter the transaction date (is that the date I received the shares?) and the date acquired (is that the date acquired by the donor?). If I enter the date acquired by the donor, the register shows that as the transaction date, which is earlier than when I opened the account. If I then click edit, the transaction date has changed to be the same as the date acquired. Is this what's supposed to happen? Am I doing this right?

NotACPA

For a gift, the donor's cost basis and the donor's acquisition date are irrelevant.

YOUR cost basis is the value of the shares when received, which is your acquisition date.

Tom Young

Actually, for income tax purposes, a gift requires that you carry over the donor's basis and holding period.  You should also record in memo form the FMV of the gift on the date you received it as that can also play into what basis you use when you sell the stock.

One way of doing this is to use the "Add - shares added" action to record the receipt of the stock.  You can use the date you acquired the stock as the transaction date - the fact that it's before you actually opened the (brokerage?) account is completely immaterial.  You then enter the number of shares and price paid by the donor to set the basis and in the "Date acquired" field enter the date the donor acquired the stock.  In the memo field record the FMV of the stock on the date of receipt.

Rocket J Squirrel

Go to the horse's mouth. Here's the precise info on gift basis from the IRS:

What if I sell property that has been given to me?

The general rule is that your basis in the property is the
same as the basis of the donor. For example, if you were given stock
that the donor had purchased for $10 per share (and that was his/her
basis), and you later sold it for $100 per share, you would pay income
tax on a gain of $90 per share. (Note: The rules are different for
property acquired from an estate).

Most information for this page came from the Internal Revenue Code:
Chapter 12--Gift Tax (generally Internal Revenue Code §2501 and
following, related regulations and other sources)

https://www.irs.gov/help-resources/tools-faqs/faqs-for-individuals/frequently-asked-tax-questions-an...

Rocket J Squirrel

NotACPA - QW HBRP 2019 said:

For a gift, the donor's cost basis and the donor's acquisition date are irrelevant.

YOUR cost basis is the value of the shares when received, which is your acquisition date.

This is incorrect. See below.

Jim_Harman

Tom Young said:

Actually, for income tax purposes, a gift requires that you carry over the donor's basis and holding period.  You should also record in memo form the FMV of the gift on the date you received it as that can also play into what basis you use when you sell the stock.

One way of doing this is to use the "Add - shares added" action to record the receipt of the stock.  You can use the date you acquired the stock as the transaction date - the fact that it's before you actually opened the (brokerage?) account is completely immaterial.  You then enter the number of shares and price paid by the donor to set the basis and in the "Date acquired" field enter the date the donor acquired the stock.  In the memo field record the FMV of the stock on the date of receipt.

My experience has been that when I use the "Add - shares added" action as you describe for shares received as a gift, Quicken records the cost basis correctly, but its performance reporting is incorrect for periods that include the date the shares were added. Quicken (incorrectly IMO) uses the cost basis rather than the market value on the date added in its performance calculations.

A work-around for this is to add the shares another account then use the "Shares Transferred Between Accounts" action to move them to the correct account. I have created a dummy investment account in Quicken just for this purpose, and it seems to work correctly.

Tom Young

q.lurker said:

In the "Add shares" window, I'm supposed to enter the transaction date (is that the date I received the shares?) and the date acquired (is that the date acquired by the donor?).

To directly answer your question, the transaction date would be the date you received the shares.  The Date Acquired is the date to be used by Quicken to ascertain long-term or short term capital gains.  If as others have suggested, you carry forward with the giver's acquisition dates and basis, those would be the dates and values to use for acquisition and basis.  That implies 'yes' to your two questions I cited.  If you believe or know that the basis is 'stepped up', then the acquisition date matches the transaction date and the cost basis is the fair market value on that date.  

Specifics of the 'gift' are important and I am not a tax pro, so I will withhold my opinion on which approach is correct in your specific case.  "The Date Acquired is the date to be used by Quicken to ascertain long-term or short term capital gains."

It shouldn't be.  It's the "Date acquired" entered in the "Add - Shares added" wizard that should control here.