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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: of 121150  
Subject: Re: Stocks as Gift Date: 12/9/1997 3:59 PM
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<<Looking for some help on the implications of receiving stocks as a gift - I just received 75 shares of
GE as a wedding gift. How will I calculate the tax burden for 1997, assuming I don't sell any shares
(i.e. will I have to pay tax on the gift as if it were cash). If I am considering selling shares, is there
any tax advantage to selling now versus in 12 or 18 months? I assume there would be. I guess what
I'm essentially trying to figure out is how to calculate my cost basis. My first instinct is to treat the
transaction as a stock purchase made on the date of the share transfer, therefore my purchase cost
might be the closing price for that day (this seems way too simple). >>

First, congrats on the recent wedding, Jack. My invitation must have gotten lost in the mail :-))

Anyway, in simple terms, you will retain the same basis and holding period for this gift as it was in the hands of the donor (ther person giving the gift). So you REALLY must go back to the donor and obtain this information. The donor should be able to tell you (and, hopefully provide proof..such as a stock purchase confirmation slip) when the shares were purchased, and how much was paid for the shares. You would then "step into the shoes" of the donor for tax purposes, and would retain the same basis and holding period.

This being the case, it is very possible that you could sell the shares today, and still realize the preferred tax for a more than 18 month holding period.

Finally, remember that you have NO tax burden until and unless you sell the shares. The receipt of this type of gift doesn't have any tax implications to you until the shares are actually sold.

If you would like some additional information on gifts of stock, check out the Frequently Asked Question on this very issue. You'll find the Taxes FAQ area from the main school screen, and going directly to the Fools School area. Just follow the roadsigns from that point to the Taxes FAQ area.

So check with the donor and get the information that you'll need in the future, if and when you decide to sell the shares.

TMF Taxes
Roy
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