Can I gift my parents appreciated stock and have them gift me cash in return?

This is a really common question, and you need to be careful here. What you're describing sounds like a "step transaction" which the IRS can potentially challenge. Even though gifts below the annual exclusion amount ($18,000 for 2025) don't require filing gift tax returns, the IRS looks at the substance of transactions, not just their form. If you gift stock to your parents and they immediately gift you cash of equivalent value, the IRS could view this as you effectively selling the stock to your parents for cash. That would mean you'd need to recognize the capital gains on the appreciated stock as if you had sold it. For gifts to be considered legitimate, they should be unconditional and complete. Having a prearranged agreement that they'll gift you cash in return could jeopardize the gift treatment.

Hey there! I actually tried something similar to this last year and found this incredible tool called taxr.ai (https://taxr.ai) that helped me navigate this exact situation. After struggling with conflicting advice online, I uploaded my documents and questions to taxr.ai and got detailed guidance about gift tax implications. The analysis showed me that what matters most isn't just the timing but the intent and documentation behind the gifts. The tool helped me understand the "step transaction doctrine" and how the IRS might view a series of related transactions. It also provided specific documentation suggestions to establish that these were genuine gifts rather than a tax avoidance scheme.

Just wanted to follow up about my experience with taxr.ai from my question above. I decided to give it a try with my own situation involving appreciated stock gifts. The platform was surprisingly thorough - it asked detailed follow-up questions about my specific circumstances that I hadn't even considered. What really impressed me was how it explained the "step transaction doctrine" in plain language and provided actual case examples where the IRS had ruled on similar situations. It also gave me a checklist of documentation to maintain and suggested timeline separations that would strengthen the argument that these were genuine gifts. Definitely worth checking out if you're navigating gift tax questions!

After seeing all these comments about step transactions, I wanted to share my experience trying to contact the IRS directly about a similar gifting question. Spent DAYS trying to get through their phone system with no luck. Finally discovered Claimyr (https://claimyr.com) which got me connected to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent explained that they look for patterns that suggest prearranged transactions, and that documentation of the gift intent is super important. They also mentioned that transactions between family members get extra scrutiny. Having this conversation directly with the IRS gave me much more confidence about my particular situation than just guessing based on forum advice.

Coming back to say I was completely wrong about Claimyr being a scam. After posting my skeptical comment, I decided to try it anyway because I was desperate to talk to someone about an inherited stock situation (somewhat similar to the OP's question). The service worked exactly as described - I got a call back in about 25 minutes and was connected directly to an IRS representative. The agent walked me through the specific documentation requirements for gift transactions and explained how they evaluate whether something is a legitimate gift versus a disguised sale. This was after spending literally 3 weeks trying to get through on my own. Sorry for being so quick to judge!

Has anyone considered the basis implications in this scenario? If you gift appreciated stock to your parents, they take your cost basis. If they then sell it, they'll pay the capital gains tax themselves. But if they're in a lower tax bracket than you, this could be a legitimate tax planning strategy WITHOUT needing them to gift cash back to you (which does look suspicious).

What tax software are people using that helps with tracking gifts? I've been trying to figure out how to document these types of transactions.

I'd be really careful about this arrangement, especially with the IRS's increased scrutiny on family transactions. Even if you separate the timing by several months, if there's any documentation (texts, emails, verbal agreements) suggesting these gifts were coordinated, it could still be viewed as a step transaction. A safer approach might be to simply sell some of your appreciated stock directly, pay the capital gains tax, and keep things straightforward. Yes, you'll owe taxes, but you'll have certainty and won't risk an audit challenge. Alternatively, if you need liquidity, consider taking a margin loan against your stock positions - you get access to cash without triggering a taxable event, though there are interest costs and margin risks to consider. The potential tax savings from your proposed strategy probably aren't worth the audit risk and potential penalties if the IRS decides this was a disguised sale rather than legitimate gifts.