How to determine non-covered cost basis for inherited custodial account shares I recently sold

This is actually a common issue with older securities, especially those transferred between accounts. The IRS doesn't actually have your cost basis information for non-covered securities - that's why they're classified as "non-covered" (meaning they were acquired before the mandatory cost basis reporting requirements that started in 2011-2012). For your situation, you have a few options. First, see if you can get the transfer statement from when the account was moved to your name. Sometimes this includes original value information. Second, contact the brokerage directly (not just through your online account) and specifically request historical records from the custodial account. Many brokerages maintain these records even if they don't show up in your online portal. If those options don't work, you can use the "first-in, first-out" (FIFO) method and research historical prices of when your grandfather likely purchased the shares. Financial websites like Yahoo Finance let you look up historical stock prices. For the dividend reinvestments, many companies maintain dividend history on their investor relations websites.

After reading through this thread, I wanted to share my experience with a similar situation. I had inherited stocks with no basis info and was totally lost until I found https://taxr.ai which seriously saved me hours of frustration. They have this feature specifically for handling non-covered securities and custodial account transfers. I uploaded my limited documents (just the current statement and the transfer form), and their system helped me trace back the likely purchase dates and calculate a defensible cost basis. They even generated documentation explaining the methodology used to determine the basis, which is super important if you ever get questioned by the IRS.

I was really skeptical about services that claim to help with cost basis calculations, but I finally tried https://taxr.ai after struggling with a similar inherited stock situation. Their system was actually able to trace my grandmother's Coca-Cola shares back to the 1980s, accounting for all the splits and dividend reinvestments. What impressed me was how they handled the uncertainty - they gave me three different calculation methods (conservative, moderate, and aggressive) with documentation for each approach. I went with the moderate calculation, and when I filed my taxes, everything went through without any issues. They saved me from either overpaying taxes significantly or taking a risky position with the IRS. Definitely worth checking out if you're in a similar situation with old non-covered shares.

If you're still having trouble after trying the other suggestions, you might want to try Claimyr (https://claimyr.com). I was in a similar situation with inherited stock and needed clarification from the IRS directly. Spent DAYS trying to get through their phone system with no luck. Claimyr got me connected to an actual IRS agent in about 20 minutes who walked me through the acceptable methods for establishing cost basis for non-covered securities. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent explained that in cases where no documentation exists, you can use reasonable reconstruction methods and just need to document your methodology. They actually gave me specific guidance for my situation that I never would have figured out from just reading IRS publications.

I can't believe I'm saying this, but I tried Claimyr after posting my skeptical comment, and it actually worked. I was connected to an IRS tax specialist in about 15 minutes (after trying unsuccessfully on my own for literally weeks). The agent explained that for non-covered securities from custodial accounts, I could use something called the "best available information" method, which I hadn't seen mentioned in any of my research. They walked me through exactly what documentation I needed to create to support my cost basis calculation and how to attach it to my return. This was literally information I couldn't find anywhere else, and it saved me from either drastically overpaying on taxes or taking a risky position that might trigger an audit. Sometimes you really do need to talk to a human at the IRS, and this service made that possible when I thought it was impossible.

Don't forget to check if your grandpa's old tax returns might have any relevant information. If he ever reported dividend income from those investments, that could help establish a timeline of ownership. Also, if the transfer happened 2 years ago, there should be a transfer statement that shows the fair market value at the time of transfer. While that's not necessarily your cost basis (your basis would be your grandfather's original basis), it could be useful information to have.

In my experience with old stocks, sometimes the easiest approach is to call the company's investor relations department directly. Many larger companies maintain excellent records of their stock history, splits, and dividend reinvestment programs. Just explain your situation and they might be able to provide historical information that your broker doesn't have.

I went through this exact situation with my late uncle's custodial account shares from the 1990s. What finally worked for me was a combination approach: First, I contacted the company's transfer agent (not just the brokerage) - they often have deeper historical records than your current broker. For dividend reinvestments, most transfer agents can provide a complete history of all DRIP transactions if you can prove ownership. Second, I used the Social Security Administration's earnings records to help establish a timeline. If your grandfather ever reported dividend income on his tax returns, that information might be reflected in his SSA records, which can help corroborate when he owned the shares. The key thing I learned is that the IRS doesn't expect perfection - they expect "reasonable effort" to determine basis. Document everything you try, keep records of who you contacted and when, and use the best information available. I ended up using a conservative estimate based on historical prices from the earliest date I could reasonably establish ownership, and included a detailed explanation with my return. One more tip: if the stock has been through multiple corporate actions, check EDGAR filings on the SEC website. Companies are required to file details about how stock splits and mergers affect shareholder basis calculations.

Another approach worth considering is checking with your state's unclaimed property division. When custodial accounts are transferred or when brokerages go out of business, sometimes historical records or even forgotten dividend payments end up there. Many states have online databases where you can search by name. Also, if your grandfather used a tax preparer or CPA during the years he held these shares, they might have copies of old tax returns that show dividend income. This could help you piece together the ownership timeline and potentially estimate share quantities based on dividend payments received. For the dividend reinvestment piece specifically, don't forget that many companies switched transfer agents over the decades. The current transfer agent might not have complete records, but they can often tell you who the previous agents were. Sometimes you need to trace through 2-3 different agents to get the full picture, especially for shares going back to the 1990s. One last thing - if you're still stuck after trying all these approaches, consider consulting with a tax professional who specializes in complex basis calculations. The cost might be worth it given the potential tax implications, and they often have access to specialized databases and resources that aren't available to individual taxpayers.