ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Monday, January 20, 1997 TAG: 9701210014
SECTION: MONEY PAGE: 6 EDITION: METRO
COLUMN: MONEY MATTERS
SOURCE: MAG POFF
Q: We were given some stock by a family member who passed away. We were trying to figure the tax consequences of selling that stock. How do you figure the tax basis? Was it the price at which it was purchased or the value on the date it was willed to us?
A: If you received the stock through a will, your tax basis is the value on the date of the giver's death. You should make a record of that value, perhaps getting it from a stock broker. The administrator or executor of the estate also should have a record of that figure for estate tax or distribution purposes.
If the stock was a gift outside of a will or other type of inheritance at death, you assumed the giver's tax basis, which would be his or her original purchase price. You will have to obtain that figure from the records of the person who gave you the gift.
Charging estate
for nursing mother
Q: I stayed with my mother for four years prior to her death. I worked eight hours a day, but I was with her the remaining time. I also stayed with her on my days off and did not take a vacation.
Can I charge her estate for any of my time since I am a registered nurse? I only plan on charging for my days off. I took her to her doctors and to the grocery store, washed her clothes, bought her medicine, cut her grass, raked leaves and so forth. I monitored her blood pressure and pulse daily.
A: Timothy Boitnott, a certified public accountant with the Roanoke firm of Miller, Morgan, Agee & Clem, said that yours is not a clear "yes" or "no" question.
First of all, Boitnott said, if the estate is worth less than $600,000, there is no taxation. If you are the only heir, you would have no reason to charge the estate for services rendered because it would be taxable income to you. If you inherited the estate, on the other hand, it would be totally tax-free.
However, Boitnott assumed that the estate is worth more than $600,000 or that you believe you deserve greater consideration than the other heirs, if some exist.
Normally, he said, there needs to be some type of document or contract stating that you were to be compensated for services rendered.
If nothing exists to prove that there was some type of agreement, without going to court to decide your particular case, you probably cannot charge the estate for the care you provided. However, he said, if other heirs exist and they think you deserve to be compensated for the care you provided, then some arrangement may be made with them.
In addition, he said, if you have documentation you may be reimbursed by the estate for your out-of-pocket expenses that were associated with her care, such as buying medicine.
Forgiving a loan
can be a gift
Q: In one of your recent writings, you addressed tax-free gifts to family members of $10,000 or less.
The staff of one of our senator's offices and I have been trying to find out from the Internal Revenue Service where to report such gifts on Form 1040 for me to take a deduction for the gift. What should accompany the form? Can forgiving a loan to a daughter be converted into a tax-free gift to her?
A: Forgiving a loan to a daughter can be considered a gift, according to Stan Boatwright, a certified public accountant with the Roanoke firm of Lucas and Boatwright.
He said you do not need to file any form with the IRS if you give $10,000 or less a year to another person. Such gifts have no tax consequences, which means that the gift to your daughter is tax-free, as you noted.
But there are no tax consequences for you, either. A gift of money (or a forgiven loan) cannot be deducted by the giver any more than you can deduct an expensive birthday gift to a relative from your taxes. This is true even if you give money (or goods) to a person who is in real financial need.
If you give more than $10,000 a year, Boatwright said, you must file Form 709. Gifts are not listed on the 1040 form for income taxes.
You have a choice then of paying taxes immediately on the excess over the $10,000 limit or of having that amount deducted from the $600,000 tax exclusion on your estate. Most people follow the latter course.
LENGTH: Medium: 82 linesby CNB