If an individual is gifted highly appreciated stock is there a holding period required? I was informed that the grantors cost basis is inherited by the receipient but that if that stock is sold within one year of receipt it's short term cap gains but if sold one year or later after receiving it's long?
USA Appreciated stock gift taxation for receipient
- Thread starter CaptBrap
- Start date
You seem to have lumped together multiple thoughts.
If an individual is gifted highly appreciated stock is there a holding period required? Yes - for it to be taxed at capital gains
rates vs ordinary rates it must be held for more than one year. However - your word "gifted" is mixed in with another principle.
If it's gifted, then valuation is the lower of cost basis or FMV at time of gift. When it's INHERITED, that's when the FMV value on
date of death is used - and when inherited, it makes no difference how long the asset is held, it's considered long term.
I was informed that the grantors cost basis is inherited by the receipient but that if that stock is sold within one year of receipt it's short term cap gains but if sold one year or later after receiving it's long? If property is INHERITED, grantor's cost basis is irrelevant. FMV on DOD is used. If it's GIFTED, then the normal rules of short term vs long term apply.
If an individual is gifted highly appreciated stock is there a holding period required? Yes - for it to be taxed at capital gains
rates vs ordinary rates it must be held for more than one year. However - your word "gifted" is mixed in with another principle.
If it's gifted, then valuation is the lower of cost basis or FMV at time of gift. When it's INHERITED, that's when the FMV value on
date of death is used - and when inherited, it makes no difference how long the asset is held, it's considered long term.
I was informed that the grantors cost basis is inherited by the receipient but that if that stock is sold within one year of receipt it's short term cap gains but if sold one year or later after receiving it's long? If property is INHERITED, grantor's cost basis is irrelevant. FMV on DOD is used. If it's GIFTED, then the normal rules of short term vs long term apply.
I'll be more clear: My parents, who are alive, want to gift 100 shares of XYX stock to their adult grandchildren. The shares were bought by my parents 15 years ago for $1 and are now worth $100. This gift will count against my parents $13M per per person lifetime exclusion.
Now, let's say those stocks were sent via DTC and received in their grandkids accounts Feb 22, 2024. My CPA has explained that the grandkids must hold that stock for one year, so until, Feb 22, 2025 to be able to sell at long term cap gains. Is this correct? Meaning, he is implying that the first year their grandkids hold the stock as their own, and if it's sold, it will be taxed as short term/ordinary income.
Now, let's say those stocks were sent via DTC and received in their grandkids accounts Feb 22, 2024. My CPA has explained that the grandkids must hold that stock for one year, so until, Feb 22, 2025 to be able to sell at long term cap gains. Is this correct? Meaning, he is implying that the first year their grandkids hold the stock as their own, and if it's sold, it will be taxed as short term/ordinary income.
I strongly suggest you don't use language you don't understand as you seem to have gotten your facts mixed up.
The shares were bought by my parents 15 years ago for $1 and are now worth $100. Your parents' basis for valuation to their grandchildren is $ 1. However for GIFT TAX calculation, gift value is $ 100.
This gift will count against my parents $13M per per person lifetime exclusion. Wrong. Lifetime gift and estate exclusion is like $ 12 million
(exact number I don't recall, it changes practically every year) . The ANNUAL threshold for not having to file a gift tax return to report gratuitous transfers is $ 17,000 per donee per year.
My CPA has explained that the grandkids must hold that stock for one year, so until, Feb 22, 2025 to be able to sell at long term cap gains. Is this correct? Yes - because the value of the shares is your parents' lower of cost or FMV because it was transferred while they were alive. That then requires your children to hold it a minimum of 1 year in order to get the capital gains tax rate. Anything sold before the one year period is up is taxed at ordinary tax rates.
The shares were bought by my parents 15 years ago for $1 and are now worth $100. Your parents' basis for valuation to their grandchildren is $ 1. However for GIFT TAX calculation, gift value is $ 100.
This gift will count against my parents $13M per per person lifetime exclusion. Wrong. Lifetime gift and estate exclusion is like $ 12 million
(exact number I don't recall, it changes practically every year) . The ANNUAL threshold for not having to file a gift tax return to report gratuitous transfers is $ 17,000 per donee per year.
My CPA has explained that the grandkids must hold that stock for one year, so until, Feb 22, 2025 to be able to sell at long term cap gains. Is this correct? Yes - because the value of the shares is your parents' lower of cost or FMV because it was transferred while they were alive. That then requires your children to hold it a minimum of 1 year in order to get the capital gains tax rate. Anything sold before the one year period is up is taxed at ordinary tax rates.