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Author: Simper One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: Gift of stock sale: income or cap gain? Date: 2/11/2000 8:17 PM
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Hi.

I think the answer to the following is implied in the FAQ, but it isn't quite explicit, so I want to make sure I understand it correctly.

I received a gift of stock. I know that my cost basis and holding period are those of the giver. (Its FMV was higher than the cost basis.) My understanding is that I now proceed just like I would with any other gain: the holding period is well over a year, so the income is a long-term capital gain, not income. In other words, it should be taxed through schedule D at the long-term CG rate (20% for me), NOT reported on the 1040 and taxed at my (higher) marginal tax rate. Is that correct?

Thanks so much,

Erik
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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28367 of 121061
Subject: Re: Gift of stock sale: income or cap gain? Date: 2/11/2000 8:34 PM
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<<I think the answer to the following is implied in the FAQ, but it isn't quite explicit, so I want to make sure I understand it correctly.>>

Thanks for taking the time to look. It's much appreciated by all who answer questions here. It allows you to be more precise with your question (since you have a backround of the issues), which allow us to be a bit more precise with our answers.

<<I received a gift of stock. I know that my cost basis and holding period are those of the giver. (Its FMV was higher than the cost basis.)>>

Right you are...for appreciated stock those are the rules.

<< My understanding is that I now proceed just like I would with any other gain: the holding period is well over a year, so the income is a long-term capital gain, not income.>>

Yup. If your "tacked on" holding period is more than one year, you can sell the shares and realize long term capital gain...even if you only held the shares personally for a few weeks (or even minutes).

<< In other words, it should be taxed through schedule D at the long-term CG rate (20% for me), NOT reported on the 1040 and taxed at my (higher) marginal tax rate. Is that correct?>>

Correct.

See...you read the FAQ better than you thought you did, eh??

Hope this helps...
TMF Taxes
Roy

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