Stock Gifts

Today TaxMama hears from Harry in Connecticut who asks, “If my wife and I give gifts to my grandson of stock worth $12,000 each, what is his cost basis when he sells the stock 10 or 20 years from now, if he has no clue what the cost was.”

Dear Harry,

This is an excellent question. And I am so glad that you asked.

We tax professionals struggle with this problem all the time. And the solution is so simple, it will make you laugh.

But first, let me tell explain what the tax cost or basis of a gift is. And why this is a such a problem for us.

The basis of a gift, to the person who receives it, is the basis or cost when it was in the hands of the kind, generous person(s) who gave it to him or her. It’s not the market value on the date of the gift, as so many non-tax professionals believe.

And there’s really only one sure way to know that value, especially 10 or 20 years later. Do you know what this is?

Yes it is – you must tell them. If you are kind enough to provide the information at the time you make a gift of stock, or property, they will be able to look it up when they sell the asset years from now. In fact, if you provide several copies, so they can put one copy in a bank safe or someplace they’ll still have access to years from now, they won’t lose that paper.

Of course, if you don’t tell them, they might be able to get the information from the corporation’s shareholder services department, if they have records that old. Or they might be able to guess when you bought it and try to reconstruct the cost that way.

But…the best way for them to know is…just tell them. Make life easy.

And remember, you’ll find answers to lots of questions about gifts of property and other tax information, free. Where? At TaxMama.com

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