Selling stocks

[One day at a time]

I'm hoping someone can help with a basic stock question.  My grandfather gifted me a small amount (<10k) of stock for my daughter.  I've never owned stock before outside of mutual funds or ETFs.  I'd like to sell the individual shares to put them in an ETF as part of a PP set up.  He has sent me the original purchase prices and dates.  My questions:

1.  Do I need something more official than his handwritten notes of the purchase details for tax purposes? 
2.  What are the tax implications of selling the stocks?
3.  Anything else I should be considering? 

Thanks in advance. 

[KevinW]

Was this gift an inheritance?

[dualstow]

Was this gift an inheritance?

Probably not if he's up and around sending purchase data. But, I get your point. If it's an inheritance, then the stock cost is whatever the value was when it was gifted, or something like that. Right?

[KevinW]

Yes, AFAIK if this was in inheritance it would be subject to a cost basis step-up:
http://www.investopedia.com/terms/s/stepupinbasis.asp

[notsheigetz]

I believe if you sell the stock you are going to be responsible for the capital gains tax using your grandfather's original cost basis. If your grandfather's income is low enough that he would have no tax liability you might suggest that he sell the stock and give you the cash. That way neither one of you would have to pay it.

As for the paperwork required for schedule D, usually you get a form 1099B from your broker when you sell stock. This form shows the details of the transaction but it sounds like in your case it might not have the cost basis (they didn't use to have it at all until recently). If your cost basis is unknown on that form then it sounds like your notes have all the necessary details.

(Caveat: My tax advice is worth what you paid for it)

[One day at a time]

Thanks for the replies.  To clarify, my grandfather is alive, so it was not an inheritance.  I guess it would just be a gift, since he just transfered the stock to my brokerage account.  I am assuming there is not a gift tax since it is below the IRS minimum (11k or whatever it is now.)  The stocks were purchased in 2007-2009, so they are recent.  It sounds like he should have some kind of official documentation about the purchase price given the recency of the purchase??

Thanks.

[dualstow]

I found a couple useful links.

What Are the Tax Implications for Transferring My Stocks?
http://www.ehow.com/list_7321899_tax-im ... ocks_.html
This one has links to two IRS pages/passages that will help you determine the cost basis.

How to Sell Out of Date Stocks
http://www.ehow.com/how_7920382_sell-ou ... tocks.html

This one is a good starting point toward answering your question about missing documentation. Looks like you first need to determine if your grandfather has stock certificates, if he bought them electronically (probably not or you would not be asking), and if he still has access to the broker he used.

EDIT: I guess the transfer has already been made, but check this out in case anyone else wants to transfer stock to you or your daughter.
http://www.ehow.com/how_5050242_transfe ... erson.html

[One day at a time]

Thanks a lot Dualstow.