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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