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.

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RELATED FAQS
  1. What is the difference between income tax and capital gains tax?

  2. If a parent transferred a house deed to their three adult children, do they need ...

    Currently, only the parents Read Answer >>
  3. How does the gifting process work with a deed transfer?

    My parents own a home that they would like to "gift" to my husband and me. The house is in my parents name and they want ... Read Answer >>
  4. Will I be taxed heavily on capital gains from the sale of gifted stock I didn't pay ...

    My father transferred (gifted) shares of DUK stock into my name when I was born in 1988. This stock grew from about $25/share ... Read Answer >>
  5. What are the differences between regressive, proportional and progressive taxes?

    Understand the differences between the most common tax systems including regressive taxes, proportional taxes and progressive ... Read Answer >>
  6. Are capital gains taxed differently in different countries?

    Learn about capital gains taxes in the Unites States as well as those of other countries, where these tax rates vary significantly. Read Answer >>
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