The Motley Fool Discussion Boards

Previous Page

Financial Planning / Tax Strategies


Subject:  Re: Capital Gains on Gift? Date:  4/13/2002  1:02 PM
Author:  ptheland Number:  60249 of 131229

Does he have to pay taxes on the sale of this stock since it was a gift, or not?

Yep - he sure does. The gift just means that he takes on the donor's cost basis and holding period.

From what I can tell from the tax tables, it looks like he may owe over $2K - yikes!!

Sounds a bit high to me. His earned income will be covered by the standard deduction, so his taxable income should be just the capital gain. He's in the 15% bracket, so the long-term capital gain would be taxed at 10% or a little over $1300. Make sure you're figuring his tax on page 2 of schedule D. State taxes could add enough to the total to get to $2k, though.

Perhaps looking at it another way might help. Had you sold the stock and given him cash instead, you'd have to pay the tax on the gain, likely at twice the rate he's paying. So the gift of stock instead of cash could very well be an excellent move from a tax standpoint.

Copyright 1996-2020 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us