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Determining Basis

Level 3

Client's husband died almost 20 years ago. In 2020 she received a check from the state for unclaimed funds. There is no paperwork available and the only notation is for dividends and stock sale. He was a pilot for one of the major airlines so I am thinking it must have been company shares but the wife has no idea when or how purchased or how many shares. Any guidance as to how to come up with basis? The amount is about $20000.

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2 Replies 2
Level 14

The state -- probably its Department of Revenue, which usually is the administrator of unclaimed property -- has the answer.  If she has waited months without asking, she must not be too concerned about paying taxes and you should just put it all under "Other Income."  Maybe file an amended return later if her curiosity gets the best of her.  Right now you're asking blind men to describe an elephant.  What I see is dividends after his death -- so income in respect of a decedent -- and loss on stock sale.  But then there's the issue of whether the statute has expired.  It doesn't start running for his estate 1041, until the return is filed.  

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Level 4

It is possible that the taxes were already paid on these transactions if those were dividends and stock sale proceeds.  The state gets the money because the financial institution holding it can't find their customer and is required to escheat it after a certain period.  Presumably, the dividends would have been reported in the year paid on a 1099-DIV, and if the taxpayer didn't report those, the IRS would've sent a matching notice.  Similar to stock sale.  If the IRS had unreported income during the matching process, the taxpayer would've received a notice.

It is possible your client may have no income to report on this transaction.