Gifting appreciated stock


J

joetaxpayer

I understand that when gifting appreciated stock, there must be a long
term gain to take the current value as a charitable deduction (otherwise
if short term, the deduction is limited to cost, in which case one comes
out ahead selling the stock and donating cash.)

Is there any such restriction on gifting to an individual? Client owns a
stock which has more than doubled since its purchase and it will be
LBO'd (purchased by a private company in a leveraged buy out) shortly.
He'd like to gift some shares to his mother, who is in a low bracket,
and can use the money. I googled and found no such restriction. Hard to
find what hopefully doesn't exist.

JOE
 
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R

Rich Carreiro

joetaxpayer said:
I understand that when gifting appreciated stock, there must be a long
term gain to take the current value as a charitable deduction
(otherwise if short term, the deduction is limited to cost, in which
case one comes out ahead selling the stock and donating cash.)

Is there any such restriction on gifting to an individual?
No. The rule for gifts to individual is relatively simple:
* If the asset is held at a paper gain when it is gifted,
the recipient takes on the giver's basis and holding period.

* If the asset is held at a paper loss when it is giften,
the receipient takes on a dual basis. To wit, if the asset
is sold for less than FMV on day of gift, basis is FMV
on day of gift. If asset is sold for more than giver's basis,
basis is giver's basis. If asset is sold in between those
numbers, basis is sales proceeds. I believe holding period
tracks accordingly.

See IRS Pub 550.
 

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