# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Gifted Stock

Written By
Paul Tracy
Updated September 30, 2020

What is Gifted Stock?

Gifted stock is stock that one person gives to another person or entity.

How Does Gifted Stock Work?

Let's say John Doe bought 200 shares of Company XYZ a long time ago when it was trading at $1 a share. Over time, the stock has risen and it's now trading at $100 a share. The total position is worth $20,000.

Instead of donating $20,000 of cash, John Doe wants to just donate the stock to an animal shelter. The animal shelter will receive the stock, sell it, and use the $20,000 cash proceeds to fund its operations, as John wishes.

This saves John a ton of money in taxes compared to selling the stock himself and then writing a $20,000 check. For instance, if John sold the shares at $100 a share, he would face a $99 capital gain per share, on which he would have to pay, say, 15% in capital gains taxes. This would cost him $2,970 in taxes.

However, if he donates the stock directly to the animal shelter, he doesn't have to sell the stock and thus doesn't have to incur the capital gains tax for his philanthropy.

If John Doe gifts the stock to his daughter instead of the animal shelter, she becomes responsible for paying capital gains tax on the Company XYZ shares when she eventually sells them, and the tax will be based on John's original basis ($1). This can trigger significant capital gains taxes for John's daughter. She might also have to pay gift taxes on the transfer if John gives her the stock while he's still alive.

Why Does Gifted Stock Matter?

Gifted stock is a philanthropic way of shifting capital gains without paying taxes on the gains. However, the rules can be very complicated, and what we provide here is a generalization. Consult a tax advisor for details.

Ask an Expert about Gifted Stock
At InvestingAnswers, all of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Gifted Stock.
Be the first to ask a question

If you have a question about Gifted Stock, then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers.

If you have a question about Gifted Stock, then please ask Paul.

Ask a question Read more from Paul

Read this next

Paul Tracy - profile
Ask an Expert about Gifted Stock

By submitting this form you agree with our Privacy Policy

Share
close
Don't Know a Financial Term?
Search our library of 4,000+ terms