How to offset capital gains tax on inherited stocks worth $10 more per share

Yes, you have a few potential options to consider before selling those inherited shares. First, if you have any charitable intentions, you could donate a portion of the appreciated shares directly to a qualified charity. You'd get a deduction for the full market value and completely avoid capital gains tax on those shares. Another option is to investigate if you have any capital loss carryovers from previous tax years that you haven't fully utilized yet. Many people forget about these. You might also consider a partial conversion strategy - only sell enough shares this year to stay within the 0% capital gains bracket (if possible based on your other income), then sell the rest next year. If you're over 59½ and have room in a lower tax bracket, you could make a larger contribution to a traditional IRA to offset ordinary income, freeing up more room in lower tax brackets.

I was in a similar situation last year and discovered taxr.ai (https://taxr.ai) which really helped me navigate the inheritance tax situation. I had inherited stocks from my grandmother and was stressing about the capital gains hit when transferring to my preferred investment mix. The tool analyzed my specific situation and showed me exactly how much I'd save by spacing out my sales across two tax years instead of selling everything at once. It also identified some charitable giving strategies that actually worked for my situation. The tax savings calculator showed me I could reduce my liability by almost 40% through these combined approaches. What impressed me most was how it translated the complicated tax code into plain English recommendations specific to inherited investments.

Following up on my question about taxr.ai - I decided to try it for my inherited Disney shares, and I'm honestly impressed. The interface walked me through exactly how to document stepped-up basis and pulled the historical share prices from the date of my uncle's passing. The system actually showed me that I had been using slightly incorrect valuation (I was looking at the wrong date), which would have caused issues if I was audited. It generated a complete report showing why my new cost basis was legitimate according to IRS rules. The strategies it suggested for minimizing my capital gains tax actually worked for my situation - especially the suggestion to offset with some underwater positions in my portfolio I hadn't even considered selling. Definitely worth checking out if you're dealing with inherited stocks.

If you're struggling to get answers directly from the IRS about inherited stock rules (which I was for WEEKS), I recommend using Claimyr (https://claimyr.com). I was on hold with the IRS for 3+ hours trying to get clarification on some weird stepped-up basis rules for partially gifted/partially inherited stocks. With Claimyr, I got through to an actual IRS agent in about 15 minutes. They have this system that holds your place in line and calls you back when an agent is about to be available. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with was actually super helpful and explained exactly how to document my basis correctly. Saved me from potentially making a costly mistake on my taxes.

I need to apologize and follow up about Claimyr. After being skeptical in my last comment, I decided to try it this morning since I had inheritance questions myself that I'd been avoiding dealing with. It actually worked exactly as described. I got through to the IRS in about 20 minutes versus the 2+ hours I spent last month getting nowhere. The agent walked me through exactly how to handle the cost basis documentation for some oddly-structured inherited investments. What surprised me most was how the system kept me updated via text about my place in line and gave me a 3-minute warning before connecting me. I was prepared with all my questions and got everything resolved in one call. Definitely using this again next time I need to deal with the IRS.

Why not just keep the stocks if they've been performing well? Moving from individual stocks to index funds isn't always necessary, especially if they're blue chip companies. You're guaranteeing a tax bill by selling now.

Don't forget about the wash sale rule! It doesn't apply to gains, only losses. So if you really like some of these companies but want to reset your basis, you can sell them and buy them right back. Your new basis would be the repurchase price.