Tax question Options

[Oasis]

I know you're taxed on capital gains when selling stock that you buy. But what about stock that you're given?

If you buy XX stock for $1k and you sell it for $2k you pay taxes on gains, which is $1k. But if you're given $1k worth of stock and you sell it for $2k, are you taxed on capital gains ($1k) or what the total value of what you sell it for? ($2k)

[dauss]

Look at the gift tax. You can give up to $12,000(for 2008, $11,000 for 2007) to anyone and you don't have to pay the gift tax. Generally the person giving the money would pay for the tax if it is over the exclusion limit.

If you sell the stock for a profit, you just pay the capital gains, minus the cost base or whenever it was bought.

So, Mr. X bought 100 shares of XYZ at $10/share. Mr. X then gives you all 100 shares(lets say it was at $15/share when you received it). You then sell the 100 shares of XYZ for $20/share. So, you'll be taxed on $1,000 because you'll have to subtract out the cost base of $1,000 that Mr. X paid for in the beginning. The $1,000 cost base is not taxable because it is not income.