Unknown Basis, Untapped Opportunity

How to Turn Low-or Zero-Basis into Reliable Retirement Income

Mark D. Quant

Many CPAs and financial planners have faced this seemingly unsolvable tax problem: Clients hold securities with zero or unknown basis. They receive little or no dividend income from these stocks, but they don't want to sell them and face a huge capital gains bill. Indeed, if an investor does not know the basis, the IRS assumes it is zero and imposes capital gains on every dollar received on the sale. Typically, these stocks sit in a brokerage account collecting dust. Currently, however, there are ways to both avoid tax and turn these stocks into retirement income.