Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.

Recs

3

Gift Stock and Capital Gains

Gift-giving season is around the corner, as is the end of the year, with all its tax effects. So now is a good time to consider what happens, taxwise, to gifts of stocks.

Let's say you bought 100 shares of Carrier Pigeon Communications (ticker: SQAWK) at $50 per share. A year later they're trading at $100 per share and you give them all to your son. A month after that, he sells them for $110 per share. What's his taxable gain?

It might seem that your son's profit is just $10 per share, but our friends at the IRS don't see it that way. A recipient's cost basis (and holding period) for a gift of stock is the same as the donor's. So, although your son received the stock at $100 per share and held it just one month, his cost basis is $50 per share, and his holding period is 13 months. He can expect to be taxed on a gain of $6,000. And, since he's held the shares for more than a year, he'll be taxed at the more beneficial long-term rate, which is 20% for most people.

The gift is not tax-deductible by you, as it's not a charitable contribution. You're currently allowed to give up to $10,000 to any person, per year, tax-free.

Learn more in our Tax Center. Also useful is the IRS website, and our Tax Strategies discussion board, where Fools are asking and answering questions, and sharing tips.


Read/Post Comments (0) | Recommend This Article (3)

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 504097, ~/Articles/ArticleHandler.aspx, 8/29/2016 9:12:39 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 18,395.40 -53.01 0.00%
S&P 500 2,169.04 -3.43 0.00%
NASD 5,218.92 6.71 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes


Advertisement