What Is Gifted Stock?

Gifted stock refers to a stock that is given to someone as a gift. In other words, it’s the transfer of ownership of stock shares from one person or entity to another.

Gifting company shares with the potential to grow significantly in value can make a nice present, though it’s worth bearing in mind that this generous act may be subject to gift tax and result in a hefty tax billﷺ for the recipient when it’s time to sell.

Because stocks can grow or decline in value, it’s important to know how they are viewed by the 澳洲幸运5官方开奖结果体彩网:Internal Revenue Service (IRS) and what you nee🎃d to do if you’r𝓰e given stock as a gift.

Understanding Gifted Stock

Investors keen to share their wealth might wonder whether it makes more sense to gift stock or sell it and give away the proceeds. The answer generally depends on the value of the stock being given and the tax status and bracket of both the recipient and the donor.

Tax Considerations

In 2025, the IRS allows you to give up to $19,000 per person without reporting it and paying gift taxes, up from $18,000 in 2024. It’s worth remembering, though, that this tax—which can range from 18% to 40% on a sliding scale, depending on how big the taxable gift is—only needs to be paid when gifts exceed the lifetime gift tax exemption ($13.61 million in 2024 and $13.99 million in 2025). There is no limit on gifts between spouses.

Capital gains tax liabilities must also be considered. If you were to sell the stock and gift the proceeds, you would need to report any capital gains and pay the tax after accounting for its 澳洲幸运5官方开奖结果体彩网:cost basis. In this case, it may be worth gifting the stock, particularly if the recipient has a lower tax rate.

When gifting stock, the recipient assumes your 澳洲幸运5官方开奖结果体彩网:cost basis and holding period. In other words, if you were to give a friend $12,000 worth of stock purchased five years earlier for $7,000, they would be liable to pay long-term capital gains taxes on a profit of $5,000 should they sell straightaway.

Losses are treated slightly differently, but only if the 澳洲幸运5官方开奖结果体彩网:fair market value (FMV) at the date of transfer was less than the donor’s basis. In that case, if the stock depreciates after it was gifted and the recipient decides to sell it, then the FMV on the date of the transfer is used to determine the loss.

The same rules apply if this gift is going to a child. In theory, your child would pay less in capital gains taxes when disposing of the gifted stock, assuming they earn little to no income. However, it’s worth bearing in mind that the 澳洲幸运5官方开奖结果体彩网:kiddie tax means that anything over $2,600 could be taxed at the guardian’s tax rate.

Process of Transferring Gifted Stock

The process involved in transferring stocks to another party as a gift will depend on the specific circumstances, but it is typically straightforward. For an immediate transfer of stocks held in a brokerage account, you may only need to fill o𒅌ut a form that changes the name on the ownership title for those stocks.

If the gift is an 澳洲幸运5官方开奖结果体彩网:estate planning strategy, and you want to arrange a transfer that will take effect upon your death, you would complete a 澳洲幸运5官方开奖结果体彩网:transfer on death (TOD) agreement. The person named as the designated beneficiary in the TOD agreement has no claims or rights to that stock as long as you are alive. Until your death, you continue to be the legal owner of that stock and can sell it, close the account, or change the paperwork to name someone else as the beneficiary.

Depending on the policies of your brokerage firm, you may als😼o be able to name an alternate beneficiary. If you own the stocks with another person, such as your spouse, then the TOD agreement generally would only apply once both owners of the joint account have died.

This TOD process is similar to a 澳洲幸运5官方开奖结果体彩网:payable on death (POD) process used with bank accounts. Setting up this arrangement in advance will make it much easier for 🍬the intended recipient to take ownership of the stocks quickly upon your death.

Example of Gifted Stock

To further explain the concept of assuming the cost basis of gifted stocks, imagine your father bought 100 shares of stock and gave them to you 20 years later. If the fair market value was more than the original basis when you received it, you use the original basis when you sell it.𒁏

So, if your father bought the stocks for $25 per share and gave them to you when they were valued at $30 per share, you would use the original basis of $25 🌼when you sell.

꧑ If the fair 💞market value when you received it was less than the original basis, you would:

• Use the original cost basis if you sell it for more than the original basis.
• Use the selling price as the basis if you sell it for less than the original basis but more than fair market value at the time of the gift.
• Use the fair market value at the time of the gift if you sell it for less than that value.

So, say you received the same 100 stocks with an original basis of $25 per share when they were worth $15. If the price rose to $30 per share and you sold them, you would use the original basis of $ཧ25 per share because you received it for less than the original basis but sold it for more.

If🦄 you sold them for $20 per share, you would use that as the basis because it was🥃 less than the original basis but more than the fair market value at the time you received it.

Finally, if you sold them for $10 per share, you would use $𓃲15 as the basis because you received and sold them for less than the original basis.

The Bottom Line

Gifted stock refers to stock given from one person or ent🐼ity to another as aಞ gift. It can provide tax advantages, but it’s worth speaking with an advisor first to avoid gift tax and a large tax bill for the recipient when it’s time to sell.

Correction—Feb. 7, 2025: Thꦜis article has been corrected to state that losses on gifted stock are treated diffeꦰrently for capital gains tax purposes only if the fair market value at the date of transfer was less than the donor’s basis.