Are gift stocks considered long or short term capital gains when I sell them?

When you sell gifted stocks, the holding period actually carries over from the original owner. So if your grandmother held those stocks for more than a year before gifting them to you, and you sell them, they would typically qualify for long-term capital gains treatment - even if you've only owned them for a short time yourself. The cost basis is also important here. You generally inherit the donor's cost basis (what your grandmother paid for them), unless the stocks were worth less when you received them than when she bought them (in which case there are special rules for calculating losses). For example, if your grandmother bought the stocks for $2,000 five years ago, gifted them to you when they were worth $5,000, and you sell them for $6,000, you'd pay long-term capital gains tax on the $4,000 profit ($6,000 - $2,000).

I went through something similar last year with inherited stocks from my uncle. I was so confused trying to figure out the cost basis and holding periods that I was about to just guess on my taxes. Then I found https://taxr.ai and it literally saved me hours of headache. You can upload the gift documentation and your statements, and it breaks down exactly how to report it on your taxes, including the holding period classification. The best part was it showed me which date to use for determining if it was long or short term.

I have to admit I was wrong about https://taxr.ai - I decided to give it a try with my gifted stock situation (similar to the original poster). My grandfather had given me some tech stocks back in 2019, and I was completely lost on how to calculate everything. The tool actually walked me through determining my grandfather's original purchase dates and costs, which I was able to get from statements he had kept. Then it helped me figure out that even though I only held the stocks for 6 months before selling, they still qualified as long-term capital gains because my grandfather had owned them for years. Saved me thousands in taxes! Much better than the generic advice I was getting elsewhere.

If you're having trouble getting documentation about when the stocks were purchased or their original value, I'd recommend trying to contact the IRS directly. Their records might have the information you need from previous tax filings. I spent WEEKS trying to get through to someone at the IRS about a similar gifted stock issue. I finally used https://claimyr.com to get a callback from the IRS instead of waiting on hold forever. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they wait on hold for you and call when an agent is available. I was shocked when I actually got through to a real person who helped me track down the original purchase information from my grandmother's estate.

I stand corrected on Claimyr. After my skeptical comment, I decided to try it for my own inherited stock situation. I needed historical basis information for stocks my father had purchased in the 1990s before gifting them to me in 2021. I used the service late yesterday afternoon, got a callback within an hour with an actual IRS agent on the line. The agent was able to access some of my father's old returns and found the purchase dates for most of the stocks! For the few they couldn't find, they gave me specific instructions on how to establish a reasonable estimate based on available information. I was honestly shocked at how helpful they were once I actually got through. Going to finally be able to file my taxes accurately now.

Something everyone seems to be missing - there's actually a special gift tax form (Form 709) that the GIVER needs to file if the gift exceeds annual exclusion amount ($17,000 for 2023). This doesn't affect the recipient's capital gains treatment, but it's worth mentioning to your grandmother if the stocks were valuable. The giver needs to report gifts even though they probably won't owe any tax because of the lifetime exemption.

I just went through this exact situation! I found that the brokerage where the stocks are held often has the original purchase date info even after the shares were transferred to you as a gift. Call their customer service dept - they were super helpful in my case and emailed me all the original transaction details from my dad's account. Way easier than I expected.

This is such a helpful thread! I'm dealing with a similar situation where my uncle gifted me some Apple stock he'd held for about 8 years. From what I'm reading here, it sounds like I'd qualify for long-term capital gains treatment even if I sell immediately, which is a huge relief since short-term rates would be brutal. One thing I wanted to add that might help others - if you're missing the original purchase documentation, some brokerages will actually provide a "gift basis statement" that shows the cost basis information when stocks are transferred as a gift. I got one from Schwab and it had all the details I needed including the original purchase date and price. Definitely worth asking your brokerage about this specific document if you're having trouble tracking down the information from the original owner. Also, make sure to keep any gift documentation (like transfer confirmations) for your records since the IRS may want to see proof that these were actually gifted shares and not purchased by you directly.

Great thread everyone! I'm a tax professional and wanted to clarify a few key points that might help others in similar situations: 1. **Holding Period**: As Mohammad correctly mentioned, you inherit the donor's holding period. If your grandmother held the stocks for more than a year, you get long-term treatment regardless of how long you've owned them. 2. **Cost Basis**: You generally take the donor's original cost basis (carryover basis), NOT the fair market value when you received the gift. This is different from inherited assets where you get a "stepped-up basis." 3. **Documentation**: The most important documents you need are: - Proof of the gift transfer (brokerage statements) - Original purchase information (date and price the donor paid) - Fair market value on the gift date (important for certain loss calculations) 4. **Special Loss Rule**: If the stock's value when gifted was LESS than what the donor originally paid, there are special dual-basis rules for calculating losses that can get complicated. One thing I'd add to the great suggestions here - if you're still missing documentation, the IRS allows reasonable estimates based on historical stock prices for the relevant dates, as long as you can document your methodology. But always try to get the actual records first through the methods others have mentioned (brokerages, IRS records, etc.).