dt,

<2. Are there any tax implications to transferring this stock to them?
3. What is their cost basis for the stock?>

When your basis in the stock is higher than the current FMV and you give away your shares nobody ever gets to deduct that loss. Their basis for gain is what you paid for the stock, their basis for loss is the FMV at the time of the gift. If they sell it for a price between
your basis and the lower date of gift FMV there is no loss or gain to report.

Why don't you sell the stock and share with them the tax savings you get for taking the loss on your return?

Choc