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Question for the Money Doctors

Question submitted on Nov 9, 2022.

Question

I would like to gift shares of stock to my 2 children. Both are adults and have responsible positions. I have held the shares for many years and they are not covered at my brokerage. What would their basis be for the shares? My basis or the value of shares at transfer. Thank you

Answer

If you donate them now, while you are alive, they will remain with YOUR basis.

If you leave these stocks to your children upon your death, their cost basis will be the higher of your cost basis (which is almost always lower than the current market value) or the current market value upon inheritance. The rules behind the cost basis of inherited stock are simple.

Most of the time, you calculate the cost basis for inherited stock by determining the fair market value of the stock on the date that the person in question died. Sometimes, however, the person's estate may choose what's known as the alternate valuation date, which is six months after the date of death.

Hopefully I explained this well enough. If not, please reach out to me again. 

If you or your children utilize someone to prepare taxes or use a financial planner or an estate attorney, these professionals should be able to answer your question at no cost. 


For additional information visit //www.360financialliteracy.org/

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