Hi there, all...I promised you some additional information on gifts of stock , so here it is. This is from the Taxes FAQ section on the AOL side of things. Hope you enjoy...Here is some information that may be of use to you when dealing with gifts ofstock. It is more detailed than my web site answer.A number of questions have come up about gifts of stock. Let's kick this onearound a little bit.If you receive (or give) stocks as a gift, you MUST know (or provide) thefollowing information:1. The donor's (i.e., the person who gave you the stock) tax basis (or cost)of the stock.2. The Fair Market Value (FMV) of the stock at the date of the gift.3. The amount of the gift tax paid by the donor, if any.Why do you need to know all of this? Because YOUR basis in the gifted stockwill depend upon the donor's basis and the FMV at the date of the gift. Therules are as follows:1. If the FMV of the stock is LESS than the donor's basis at the time of thegift: A) Your basis for gain is the same as the donor's adjusted basis. B) Your basis for loss is the FMV at the time of the gift. C) If you use the donor's basis to compute a gain and get a loss, andthen use the FMV to compute the loss and get a gain, here is neither a gain NOR loss.2. If the FMV of the stock is MORE than the donor's basis at the time of thegift, then your basis is the donor's basis. If the donor was required to paygift tax, your basis is increased by the amount of gift tax paid that isattributable to that gift.Let's talk for a minute about gift tax issues. You can give $10,000 to anyperson. The gift is not deductible by you, nor taxable to the recipient. Ifthe gift is $10,000 or less, you don't even have to file a gift tax return,much less worry about gift taxes.Ifyou're married, you can "gift split." Thatis, you can give $10,000 to one person, and your spouse can give $10,000 tothat same person. In effect, you have transferred $20,000 worth of wealth tothe same person without having any type of estate tax or gift tax filingproblems.Let's look at an example of gifting stock. Dad buys 100 shares of XYZ stockfor $5 per share on January 15, 1995. Then Dad gifts the stock to you onApril 4, 1996. On the date of the gift, the stock was valued at $15 pershare. You then receive the stock, and sell it on April 8th for $15 pershare. Your capital gain is long-term,even though you only held the stock fora few days. This is because when you are given a gift, not only are youforced to keep the donor's basis, but you also keep the donor's holdingperiod. So this transaction would be reported on Schedule D, using apurchase date of 1-15-95, a sale date of 4-8-96, and a long-term gain of$1,000.Another example: You bought 500 shares of XYZ at $20. The stock is now worth$30 per share. You want to help Mom buy a car, pay off a loan, whatever; soyou gift 300 shares of stock to Mom. You have gifted stock worth $9,000 (300X $30), so you are under the $10,000 limit. The basis of the shares in Mom'shands is $20 per share. If she turns around and sells the stock for $30, shewill have a gain of $3,000 (300 X $10) that will be taxable to her. This is agood example of "income shifting." This works really well if Mom is in alower tax bracket than you. By giving Mom stock and letting her sell it, shewill receive much more money "after taxes" than if you gave her the cashafter you sold the stock and paid your taxes. This type of income shiftingalso works well for children, but be aware of the kiddie tax issues.And please, make sure that you don't confuse gifts with charitablecontributions. They are two totally different animals with different sets ofrules and regulations.
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