How might you find basis in old stock?

1887_Standard_Oil_Stock_Certificate_of_DM_HarknessI’m not a stockbroker, but I do get people coming in who want to sell stock in order to better diversify their portfolio. Sometimes the stock they hold is in an old company who has been through multiple mergers, acquisitions or name changes. There may also have been stock splits.

This is typically a problem for people, or heirs of people, who held the stock certificates rather than leave them with a broker. But it may also be a problem to establish basis because brokerage companies were not required to keep this information until purchases made in 2011 or later (although some did keep the information before that – it’s hit or miss).

So when people sell this stock, how do they find their basis for tax purposes? Do they have a gain or a loss? What if the stock is really just worthless? The challenge is to know how to calculate the cost basis of the stock, not just what was paid for it. Now add to this the complication of the stock being held for such a long time that the name has changed – it’s no longer called that company anymore – yet you still own it! If you bought it yourself this is easier.

First you need to determine the name of the company today. You may use the company’s Investor Services division (go to company’s website and search for “Investor Services”) if they are large enough of a company to have one.

You’ll need to find a record of the purchase date and price of the stock you hold. This is the tough part since it’s the key piece of information to establish the cost basis. Nobody would know this except by looking at any available records showing the purchase date and price, or perhaps old tax records. Or, the present company may have a record of some useful details for the specific stock certificate(s). Note, current tax law for inherited stocks is the date of death value that is the basis, so this makes finding date and price info for inherited stocks a bit easier since the death certificate gives the date.

Once you know the purchase date and price …

Do-It-Yourself: Wolters Kluwer Capital Changes has historical data that may be useful in establishing your basis changes since the purchase/inherited date.

Use a broker: Turn the stock certificates over to a broker and have them research the basis. Of course there’s a fee for this (which may be tax deductible). You’ll probably eventually need to turn the stock over to a broker, if they don’t hold the stock already for you, so they can sell it for you so you get the sales proceeds.

Give the shares to Charity: You’ll get a tax deduction for the current value and won’t have to worry at all about the details you need for the basis calculation.

A good Enrolled Agent, CPA or Registered Tax Return Preparer can help you prepare your tax return, with the research, or both.

Photo source: See page for author [Public domain], via Wikimedia Commons

About Larry Frank, Sr.

Larry R Frank Sr., MBA, CFP®, is an experienced financial advisor and a published author on Retirement Planning Research. Have a financial question? Click Here to Ask Larry

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