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What to Know About Gifting Appreciated Stock

What to Know About Gifting Appreciated Stock

| December 09, 2021
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This holiday season, gifting a share of stock may be worth considering as a present, particularly for those with a long investing timeline, such as young people or others who might not be able to invest themselves. For those who hold highly appreciated stocks in their portfolios, gifting them to a family member or loved one may be a way to manage taxes. Here are some things you should know about gifting stocks during the 2021 holiday season.

Some Advantages of Gifting Stocks

Depending on how a stock is held—in a 401(k), an individual retirement account (IRA), a Roth IRA, or a taxable account—you may potentially owe significant capital gains taxes on any appreciation in its value.

Gifting stocks may also be preferable to selling the stocks and giving the recipient cash instead.

Gifting shares to someone else's brokerage account may allow the recipient to benefit from any appreciation in the stock's value. If they eventually sell the stock, they may owe capital gains taxes on the difference between the original purchase price and the sale price unless the stock goes down in value. If the stock pays dividends, the recipient may reinvest these dividends and increase their cost basis.1

Someone in a high tax bracket, who gifts stocks to someone in a lower tax bracket, may be able to lower their taxable income without significantly increasing the recipient's taxable income. Gifting stocks that have declined in value since their original purchase may allow the recipient to sell them and use these losses to offset any other capital gains.

How to Gift Stocks

Gifting stocks is generally easiest when the giver and the recipient both hold accounts at the same brokerage. This circumstance allows for a near-instant electronic transfer between accounts instead of a stock transfer that may cost money and take a few days to arrive from the transferring broker. If you are transferring stocks from one brokerage to another, you may need to fill out a paper form from the receiving brokerage to ensure these stocks get to the correct place.

To gift stock to someone through a brokerage transfer, you should have the recipient's full legal name, Social Security number (SSN), and brokerage account number. At some brokerages, simply providing the name and SSN may be sufficient.

To purchase an individual stock (or stock certificate), you may use a broker or purchase from a company that issues single shares. Giving a physical stock certificate may be a nice way to get children, teens, or other market novices interested in investing.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

1 https://www.investopedia.com/terms/g/gifted-stock.asp

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