12:18 PM EDT on Monday, July 24, 2006

By Neil Downing / The Providence (R.I.) Journal

Q: A few years ago, I bought some shares from [a brokerage]. . . . I recently decided to transfer the stock to my grandson, and the paperwork requires a Medallion signature. [The brokerage] won't sign the paperwork because they are not holding the stock, and local banks won't sign the paperwork because I do not have an account at their bank. What is a Medallion signature, and how may I acquire one?

–E.P., Ruskin, Fla.

A: Certain financial transactions, including some involving investment securities, require a guarantee of your signature.

The organization involved – probably a stock transfer agent – wants to make sure that, in signing an important and valuable document, such as a stock certificate, you really are who you claim to be.

The idea is to reduce the possibility of forgery and fraud, said Robert E. Veasey Jr., former head of the Rhode Island chapter of the Financial Planning Association, a trade group for financial planners and others.

In your case, the organization involved probably wants you to sign the stock certificate in the presence of a responsible person at a financial institution. (The "responsible person" is typically an officer with supervisory jurisdiction at the financial institution, Veasey said.)

The organization also wants that person to affix a special stamp or imprint to the document. That way, the responsible person in effect attests that he knows you and that you are who you say you are, said Veasey, a Certified Financial Planner practitioner.

"It's a signature guarantee of a higher order," Veasey said in an interview at Sowa Financial Group in East Providence, a financial-planning and investment advisory firm.

As a general rule, you can obtain a signature guarantee from a bank, credit union or brokerage that takes part in a special program – a Medallion signature guarantee program.

Based on the details you provided in your call to MoneyLine, it appears that the simplest way to obtain the required signature guarantee is for you to open an account at a local bank, Veasey said.

Once you become a customer, odds are that the bank will have an officer who's authorized to apply the necessary stamp, and will do it for you without a fee, Veasey said.

Q: Could you please provide some information on how people who have inherited stock can find out what their cost basis would be? Is there some area or some place you can call to find out what the stock value was on the day you inherited stock?

–E.T., Richmond

A: To calculate profit (or loss) on the sale of stock, you must start with two basic figures: how much you received on the sale (your proceeds), and how much you paid (your basis, also known as your cost basis or tax basis). In general, the difference between these two figures is your profit or loss for tax purposes.

If you inherit stock from someone, your basis is generally the stock's fair market value on the date the person died. (There are some exceptions, so be sure to check with the person who handled the decedent's estate.)

If you determine that the date to use is the date of the person's death, one place to check the stock's value as of that date is to read the back issues of newspapers at your local public library.

Some newspapers, such as The Wall Street Journal, publish detailed listings of most – but not all – stocks.

If you don't have Internet access, odds are that your library will, and you can check historic stock prices at http://finance.yahoo.com. In the "Get Quotes" box, enter the stock's trading symbol. Then, on the left side, click on "Historical Prices."

TODAY'S TIP: For more information on calculating basis for inherited assets, read Internal Revenue Service Publication 559, "Survivors, Executors, and Administrators," and Publication 551, "Basis of Assets."

For your free copies, visit your local IRS office, call the agency toll-free at 1-800-829-3676, or use this Web site:

www.irs.gov/formspubs

MoneyLine correspondent Neil Downing is a staff writer for The Providence Journal in Rhode Island and author of "The New IRAs and How to Make Them Work for You." Do you have questions about your money matters? Call us at 1-401-277-7484 and leave a message, or e-mail moneyline@projo.com.

Sorry, no personal replies; as many questions and issues as possible will appear here.