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Strategies & Market Trends : Income Taxes and Record Keeping ( tax )
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To: Kaye Thomas who wrote (1509)3/30/1999 12:24:00 PM
From: jbn3  Read Replies (2) of 5810
 
re: figuring capital gains on gifts

Kaye,

First, thank you for one of the most useful (and generous) contributions to netizens that I have ever found! Your web site is superb, as is this thread!

Situation: my in-laws gifted my wife 250 shares of Exxon recently. She would like to sell and use the proceeds for other investments. Her plan may be impacted by the amount of tax due if she sells.
* their cost basis was about $5.00 per share;
* share price at time of gift was about $75 per share;
From reading the material on your web site, it seems to me

a) if my wife sells, she will pay a long term capital gains rate on the difference between sale price and ORIGINAL acquisition costs by her parents. Is that true?

b) if 'a' is true, does it make any difference as to when my wife sells the stock (assuming the price never varied again); i.e. the price at the time of transfer will never play a role in her basis, nor will the date of the transfer ever play a role in her basis?

c) if the gift is continually evaluated at her parents' original cost basis, could they have gifted 4,000 shares (4,000 x $5 /share = $20K) without paying a gift tax?

d) her parents inherited the stock.... does that impact the cost basis for them or for her?

I'm sure that this has probably been answered before, but I have been reading all morning and haven't found it addressed.

Thanks once again, both for your help and for the superb site!

bachman nabors
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