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

Hey all, I'm in a bit of a predicament with some stocks my grandmother gifted me last year. I'm planning to sell them soon but I'm confused about how the capital gains will be taxed. Do gift stocks count as long-term or short-term capital gains when I sell them? Does the holding period start when I received them, or does it somehow carry over from when my grandmother purchased them years ago? I've tried looking this up but keep getting conflicting information. I'd really appreciate any clarity on this since it could make a significant difference in how much tax I'll need to pay. Thanks in advance!

0 coins

19 comments

Mohammad Khaled

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).

0 coins

Mohammad Khaled

If you already have stocks that qualify for long-term capital gains treatment based on the original owner's holding period, holding them longer yourself doesn't change anything tax-wise - they're already considered long-term. Documentation is definitely helpful. Ideally, you should have information about when your gifter purchased the stocks and at what price. This establishes both the holding period and cost basis. If possible, ask for purchase confirmations or statements. If you can't get the exact purchase price, you might need to work with a tax professional to make a reasonable estimate based on historical prices.

0 coins

Finnegan Gunn

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.

0 coins

Finnegan Gunn

Yes, it actually does work for inherited real estate too! The tool has specific sections for different types of inherited assets. For real estate, you can input the fair market value at the time of inheritance, and it helps calculate the stepped-up basis correctly. Regarding accuracy - I completely understand the skepticism. Initially, I was hesitant too. What convinced me was that it specifically references IRS publications and shows you exactly which tax rules apply to your situation. I did have my regular accountant review the results, and he was impressed with how detailed and accurate the calculations were, especially for the trickier scenarios like partial year holdings.

0 coins

Ashley Simian

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.

0 coins

Oliver Cheng

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.

0 coins

Oliver Cheng

It's pretty simple - you provide your phone number and what IRS department you need to reach, and they use their system to wait in the phone queue. When an actual IRS agent picks up, the service calls your phone and connects you directly to the agent. No more listening to that horrible hold music for hours! The IRS does have access to certain records, but you're right that they don't always have everything, especially for very old transactions. In my case, they were able to access my grandmother's Schedule D from previous years which showed when she bought the stocks and for how much. It can vary depending on how the stocks were reported on past tax returns. Even when they don't have the exact records, the agents can advise you on how to proceed with limited information or what alternative documentation might be acceptable.

0 coins

Ella Cofer

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.

0 coins

Kevin Bell

No, you don't need a copy of Form 709 for your own tax filing when you sell the stocks. The form is strictly the responsibility of the person who gave the gift, not the recipient. In your case with the Disney shares worth around $20k, your aunt would have been responsible for filing Form 709 since the amount exceeded the annual gift tax exclusion. But that's completely separate from your eventual capital gains tax obligations when you sell. When you do sell, you'll just need to know the original purchase date and price your aunt paid to determine if it's long or short-term gains and calculate your tax liability correctly.

0 coins

Cedric Chung

@Felicity Bud You might need to specifically mention that you re'the recipient of a gifted stock transfer. When I called, I had to provide the transfer confirmation number and explain that I needed the original purchase information for tax purposes. They initially said they couldn t'help, but when I mentioned it was for calculating cost basis on inherited/gifted securities, they transferred me to a specialized department that handles these requests. Each brokerage probably has different procedures, but it s'worth asking to speak with their tax support team specifically.

0 coins