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)

[Spectatrix]

I think you'd have a gift tax on 1k and capital gains on the other 1k. I'm probably wrong, though.

[jwttu]

I havent taken tax accounting (because i think the tax system is too f*ed up to try and understand) but if there was a gift tax on that transaction then the donor would pay it.

But ya hopefully someone who knows the tax system better can give you the right answer.

[fingercuffs]

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)

For stock that's given to you, assuming you hold it in a taxable account, your capital gain is calculated using THE GIVER'S cost basis. (So the value of the stock at the time of the gift is completely irrelevant; you don't get to step up the basis at the time of the gift.) Your capital gain = sale price - what your parents (or whoever gave it to you) bought it for. Hope that helps.

[Dogmeat]

I would assume you have to report the stock you are given as income regardless of whether or not it was a gift.

[impala454]

If it's in his name, the broker company will send him the 1099 as well as the IRS. If the broker has a website, might be worth checking to see if they have somewhere on there you can view your 1099 if you havent received one.

[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.