The cost basis of stock you received as a gift (“gifted stock”) is determined by the giver’s original cost basis and the fair market value (FMV) of the stock at the time you received the gift. If the FMV when you received the gift was more the original cost basis, use the original cost basis when you sell.

Is gifted stock long-term?

Special rules apply if the shares you’re selling were a gift or an inheritance: Gifts — Your holding period includes the time the person who gave you the shares held them. So, when you sell the inherited stock, it’s subject to long-term capital treatment. This applies regardless of the actual holding period.

What are the benefits of gifting stock to a child?

One of the biggest benefits to gifting appreciated stock to children is that younger taxpayers often fall within a lower tax bracket. This means that the capital gains tax you would incur when you sold the stock can be passed along to your children, who likely pay less in taxes on it.

Can you gift appreciated stock to a child in California?

High income parents subject to California’s 37.1% capital gains tax rate could gift shares of appreciated stock to their children living in Washington who could then sell the stock and not be subject to any capital gains tax.

What does it mean to gift a stock?

Gifting stocks simply means giving shares to someone else. You can gift stocks that you own or you can buy shares specifically to give away. Stocks can be gifted to children, other relatives, charitable organizations or anyone else you want to receive them.

Can a stock be gifted to a family member?

Stocks can be gifted to family members upon the client’s death. If they are held in a taxable brokerage account, this can be accomplished via the client’s will, a transfer on death designation in a brokerage account, via a beneficiary designation in a trust if the securities are held there, or via an inherited IRA, among other methods.