What is Gifted Stock?
How Does Gifted Stock Work?
Let's say John Doe bought 200
Instead of donating $20,000 of , John Doe wants to just donate the stock to an animal shelter. The animal shelter receive the stock, sell it, and use the $20,000 cash proceeds to its operations, as John wishes.
This saves John 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 per share, on which he would have to pay, say, 15% in . 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 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 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 gains. However, the rules can be very complicated, and what we provide here is a generalization. Consult a for details.without paying on the