The annual gift limit is $13,000 to an individual. If you donate stock is $13,000 of the FMV of the stock, or $13,000 of the profit in the stock? Say the cost basis of the stock was $12,000 and you donate it when FMV is $13,000. If the person sells it right away they get $1,000, so it's as if the gift was only $1,000.
The gift is the value of whatever you give. In your example the gift would be $13,000.
-- Stu
FMV is fair market value, not fair market gain. The gift is valued at $13K. That is also the amount the person gets if sold right away in your example. How much this person nets after taxes depends upon 1. whether they even have to file a tax return, 2. the holding period on the stock (long or short term gain), 3. their marginal tax bracket.
E.g., the person is in the 15% tax bracket and the stock was owned for more than one year. Tax on a $1K gain = zero. The person received $13K in value and netted $13K after tax.
There is a reason why it's much better to give cash than stocks.
Sometimes yes, sometimes no.
The example above is based on an incorrect premise. If you give away stock with a basis of $12,000 and a value of $13,000, if the donee sells it he'll still get $13,000 - but $1,000 will be taxable to him.
However if you sell the stock and give him the cash, the $1,000 will be taxable to you. If you are in a higher tax bracket than he is, it makes sense to give him the stock rather than the cash.
-- Stu
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