Background: 50s, married, household income 60k, debts 30k from auto, credit cards, medical, and student loan.

Situation: Coming into HIGH six figure amount with 9/10s in stock market and 1/10th in cash. By stock market, I mean in stocks and not a mutual fund.

Goals: Pay off debt and buy a house paying mainly cash (house will probably be 300k).

Where I need help is how do I turn the stocks into cash without incurring a massive tax debt?

Thanks for any replies.

When you inherit the stocks you will inherit whatever tax basis the previous owner had. The simple answer would be to liquidate those stocks that have shown the least amount of profit (or loss). The better answer would be to speak to a professional tax planner in your local area, who is an expert on capital gains, and has extensive experience in this exact area.

You may just luck into selling in a good spot, even if you have large capital gains. People will argue with me, but you could do much worse than selling after the Dow has gone from 6,500 to 17,000. If you MUST spend a large amount of cash, and if that requires selling some stock with large capital gains, then paying the tax on that isn't the worst thing in the world. The goal is to have gains.

speak to a tax professional, when you inherit stock the cost basis for you is usually the value at time of death

http://www.investopedia.com/articles...cost-basis.asp

Inherited Stocks and Gifts
In addition to corporate actions, other situations can impact the cost basis; one such situation is receiving a stock gift or inheritance. Calculating cost basis for inherited stock is much easier than on a gift. Cost basis from inheritance becomes the average price on the date of the benefactor's death. Conversely, gifted stock is complicated. If an investor sells the stock, cost basis becomes the purchase price on the date the gifter bought the stock, unless the price is lower on the date of the gift.

also, with rates so low now, you might want to still take out a mortgage-if the stocks are dividend payers you would likely be able to make the mortgage payment with the dividends

you can also space out your stock sales to not get hit in one year with a huge tax bill and pay more towards the mortgage, when you choose

since you can writeoff stock at current price, you might use that to attenuate the amount you have to give to the govt

Don't pay cash for a house. Not when you can get 3 or 4 % money. That's crazy. Pay off the debts to raise your FICO score (may take a few months) and put enough down to avoid PMI, but borrow that cheep money!

If you really are inheiriting the stock and will have pretty much no immediate tax liability, find someone that REALLY knows what they're doing to go over the portfolio to get rid of the risky or crappy stuff. It won't be easy to find someone that doesn't just want to sell you THEIR crap, or has any idea what they're doing, but it's worth the effort. Most "professionals" are just going to look at the approved list from coporate hq for their reccos.

Basis in the stock should be the basis at date of transfer if you are inheriting it, if you are getting it some non standard way then that may not be the case

Please never hold yourself out as authority ever again. This post is terribly wrong.

Did someone call?



Definitely find a professional in your area and I hope you already thought about that.

Thanks for the replies.

Yes, definitely going to get professional help but how to keep from getting reamed on that?

We will have to have a mortgage, but want to minimize it so we don't have a mortgage for thirty years.

It would be easier if we were selling holdings in a mutual fund.

Should say in conclusion that we are fine in terms of retirement as we work for places that have defined benefit plans.

Thanks again.

you can take out the 30 yr mortgage, keep the stocks and cash, and pay it off whenever you want (extra payments, lump sums) so it doesn't last 30 years.

Please crawl under a rock. I told the man to seek a tax professional. I have been involved in three separate transfers of stock. On two of those I "came into the money" by way of a gift from a relative while they were still alive. In one of the cases it was a grandparent who was likely to die soon.

The cost basis in those cases is/was certain to be the cost basis of the the original buyer. That is without question. In my mind, I inherited the money from my grandmother.

Now, if you are talking about the settling of an estate, and the estate through an executor, then that might be different, and that is why I said to seek a tax professional. If I am wrong about the tax consequences in those situations then so be it, but most people get stock before the death of another, and in that case, 100 percent of the time the cost basis transfers to you...period. It makes sense that if taxes are paid out of an estate, then whatever the value going to the one receiving the gift would be the value of the gift at the time of the gift, since the taxes are going to be paid by the estate.

If you had 5 million in stocks right now and wanted to give that stock as a gift to anyone in the world, including your children you could do so and receiver would not have to pay anything until they sell the stock. The tax at the time they sold the stock would be based on the original price. You are allowed to give 5.25 million to any one person without paying a gift tax on either side (over the lifetime). Each year you are allowed to gift $14,000 in cash or stock without even mentioning it on anybody's return. A receiver of a gift of stock from another can receive the lifetime maximum of 5.25 million in one stock transfer and never say a word on any form. When they sell the stock they will pay Capital Gains based on the cost basis of the person who gave them the stock that was likely purchased many years before the gift.

That is how most people "come into" shares of stock. I made a mistake by using the word inheritance. I will admit that it was a mistake, but most inheritances these days happen before the person giving the gift dies, and when that happens, the cost basis transfers over, and it is the original purchase price, NOT the value at time of transfer.

I'm tops in the world on about 37 topics. I will misspeak, and even make mistakes once in a while. That's what happens when you play in the big leagues. I stumbled around in the Monte Hall dilemma thread a month ago, too. Disregard my posts all you want, and maybe we'll meet one day at the Mental Olympics and we'll see who is standing on the podium when the competition is over.

You are incredibly mistaken about how the vast majority of people come into stock they didn't purchase. But I appreciate you realizing your advice was incorrect.

the exemption is now $5.34million, but still just $14k a year

http://www.bankrate.com/finance/taxe...x-amounts.aspx

I don't think this is a correct answer. It is the average price on the date of death. If it is a gift, it is the price paid.

Regarding the house, are you getting the size of house you need or the size of house you think you need based on what society thinks?

The wife and I just went to Ikea and I was suprised to realize we could live quite nicely in 590 square feet.

I don't know where you live, but around here 300k will get a house at least three times the size we saw and with you in your 50s, I am guessing any children are out of the house or close to it. Do you really need all the bedrooms that amount of money would buy?

Really think about the size of house you need. Not want, but need.

A HUGE percentage of the people I know in their 50s and 60s right now are downsizing their houses because they are sick of keeping up with it, using the stairs etc. My parents included.

I would definitely listen to Doc T River. If you buy a house bigger than you need you end up filling it with a bunch of extra **** you don't need. Then that stuff just collects dust.

As part of the topic is home ownership and the OP is older, here is an article I just saw online.

http://www.dailyfinance.com/2014/10/...s/?cps=gravity

Not sure the source of the assets is really relevant, but just to let people know I know what the cost basis is going to be.

What I am looking for is any advice on how to reduce the tax burden we will face from turning the assets from stock into cash. Yes, we will be seeking professional advice but that gets us the advice/opinion of one person. I posted because I want to hear from many people and a lot of people here seem pretty knowledgeable.

One thing I didn't mention is we are going to give ten percent away to charities. I know charitable deductions can reduce taxes, but how would people suggest approaching it. Should I do the giving and all the selling in one year or spread it out?

In terms of a house, we have four children with two out of the house and we have four grandchildren with probably more in the future. A 590 sq ft, or even 1000 sq ft, wouldn't work for us. Thanks for the suggestions, though.

Sorry that I don't post very often, but my access to a computer is limited. Any replies are appreciated.

One question I have is why are you so determined to cash out?

You can make a charitable donation in stock-

another question-does the portfolio generate any dividend income? Use that income to pay off some debt-also with a substantial portfolio you can borrow against it (margin) and pay off some bills w/o a tax hit from selling

Obviously if you sell some now, and some after January, you will delay some of the tax due until April 2016 (I'm assuming you are in the US)

also, if you can hold off selling for a year, you will have long term capital gains which is usually lower tax rate than short term (taxed like ordinary income)

and the source does matter, for example if you are the beneficiary of an IRA

What is your current house size and do you use all the rooms you have now? I was reading an article in Success magazine about living with less and if you are thinking about moving, it suggests thinking about your current place and whether you use all the rooms you have. If you don't, it is probably a good indicator your house can be smaller. Remember, whether you use it or not, a room will still require cleaning.

1) We will need to cash out enough to have enough of a down payment and get the size of mortgage we can live with.

2) I should have said that I know donations can be in stock and that is what we are going to do.

3) From what I understand, the company whose stock produced most of the income got bought out so any future income will be greatly reduced. This is another reason we need to cash out as opposed to using income from the stock. I will look into borrowing against it, though.

It is something of a generational inheritance. An ancestor left money to his heirs, then they did it for their heirs, and so on. Due to it having been going on for generations and the number of inheritors in this generation, the amount of assets each heir is getting has been greatly reduced.

There won't be much to leave to our heirs so I want to do things right.

Hi, it's really relevant how you are coming into the stocks. is it by inhereitance by any chance? Or?

I think OP said it is an inheritance in the post above yours. Guess he had a robber baron ancestor who left a fortune to his family who passed it on to their family and so forth.

OP, nothing against the people on here but you might also post your question on nerdwallet.com.

You might look at Personal Capital as they have financial tools for someone in the asset bracket you are in. I know nothing about them and saw a story about the company on Tech Crunch.