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When you receive stock as a gift or as an inheritance, I believe that your cost basis is based on the stock price of the day the stock was gifted (or in the case of inheritence, the date the bequestor died.)

In the case of a gift, this is not correct. See If the value at the time of the gift is greater than the donor's cost basis, your cost basis is the donor's cost basis plus any gift tax paid. The only case when the value at the time of the gift figures into your capital gains calculation is when it does not work to your advantage: computing a capital loss on a property whose value at the time of the gift was less than the donor's cost basis. Your loss is smaller in this case because you use the reduced value at the time of the gift to compute your loss instead of the larger cost basis of the donor.

This makes sense. If capital gains tax could be avoided by gifting something, that would be a gaping tax loop hole.


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