Gifted Stock


DEFINITION of 'Gifted Stock'

Stocks given from one person or entity to another person or entity. Gifted stocks do not include equities that were either received from a spouse or those stocks received through an inheritance from a descendent. For tax purposes, the cost of the stock is the original donor's cost upon purchasing the securities and capital gains taxes will have to be paid based on the original purchase amount.

BREAKING DOWN 'Gifted Stock'

Gifting stocks can be legally executed as an income-shifting strategy to experience tax benefits. Since capital gains taxes are paid based on the applicable tax rate of the receiver, if the original buyer of stocks is in a higher tax bracket, less tax will be paid.

  1. Common Stock Equivalent

    Securities such as stock options, warrants, preferred bonds, ...
  2. Uncle Sam

    A nickname dating back to 1812 used to refer to the U.S. government. ...
  3. Penny Stock

    A stock that trades at a relatively low price and market capitalization, ...
  4. Runoff

    The procedure of printing the end-of-day prices for every stock ...
  5. Tax Bracket

    The rate at which an individual is taxed. Tax brackets are set ...
  6. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
Related Articles
  1. Options & Futures

    How Restricted Stock And RSUs Are Taxed

    This form of executive compensation limits how these stocks can be sold. Find out more here.
  2. Retirement

    To Sell Or Not To Sell

    Learn some tips on how to exit a position to the best of your advantage.
  3. Mutual Funds & ETFs

    4 Steps To Building A Profitable Portfolio

    This is a step-by-step approach to determining, achieving and maintaining optimal asset allocation.
  4. Taxes

    Avoid Capital Gains Tax On Your Home Sale

    If you have property to sell and want to avoid capital gains tax, a Section 1031 exchange may be the answer.
  5. Retirement

    Saving Money With A Private Annuity Trust

    Learn about a strategy that could help you reduce taxes, diversify your portfolio and generate income.
  6. Taxes

    The Top 10 Caribbean Tax Havens

    Discover relevant tax policy information about the top 10 tax havens located in the Caribbean, including the Cayman Islands and the Bahamas.
  7. Professionals

    Tips for Retaining Your Client's Heirs

    It's a good idea to start working with your clients' children early on to forge relationships and hopefully continue to manage that wealth.
  8. Investing

    How ETFs May Save You Thousands

    Being vigilant about the amount you pay and what you get for is important, but adding ETFs into the investment mix fits well with a value-seeking nature.
  9. Savings

    Passing Down Values and Money to the Next Generation

    Amassing wealth to pass down to your kids is great unless your values don't come with it. A priceless gift is teaching them to be financially responsible.
  10. Investing

    Estate Planning for Singles

    Now that singles dominate the population, it's important they understand the essentials of estate planning for indivdiuals.
  1. Why is the Cayman Islands considered a tax haven?

    The Cayman Islands is one of the most well-known tax havens in the world. Unlike most countries, the Cayman Islands does ... Read Full Answer >>
  2. Why is Luxembourg considered a tax haven?

    Luxembourg has been the tax haven of choice for many corporations and mega-rich individuals around the world since the 197 ... Read Full Answer >>
  3. Why is Panama considered a tax haven?

    The Republic of Panama is considered one of the most well-established pure tax havens in the Caribbean due to extensive legislation ... Read Full Answer >>
  4. What are the biggest disadvantages of annuities?

    Annuities can sound enticing when pitched by a salesperson who, not coincidentally, makes huge commissions selling them. ... Read Full Answer >>
  5. Why is Andorra considered a tax haven?

    Andorra is one of many locations around the globe considered a tax haven because of its relatively lenient tax laws. However, ... Read Full Answer >>
  6. How often do mutual funds pay capital gains?

    The frequency with which mutual funds pay capital gains varies. However, funds that generate a profit within a given year ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  2. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  3. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  4. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  5. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  6. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!