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PostHeaderIcon Gifts of Appreciated Stock

This question came up recently.  I had a financial adviser ask me if a client could gift some appreciated stock to their child and receive a step up in basis.  Unfortunately, you only get a step up in basis when it’s an estate situation.  When you gift appreciated stock, both the holding period and the basis carry over. So if your parents bought stock back in 1980 for $1,000 and now it’s worth $100,000 your basis would be $1,000 but you’d get the 1980 holding period so it would be long term capital gain if you sold it.  For gift tax purposes, the value of the gift would still be the fair market value, which in this case, would be $100,000.

Note that this is different than if you gift your shares to a charity.  In that situation, there is no gain triggered but your charitable deduction is the full fair market value of the shares.