Gifted Stock- Schedule D

The missing data. The value at the time of the gift was important only for your parents to not have to pay gift tax, or to track their gifting. You take on their cost basis, what did THEY pay for these shares?

You have 97.5 more shares, what was the dollar total of those reinvested dividends. You declared them (good) but you must add the dollar total to the basis your parents paid. That sum is your cost. The $5977 as you know is the sale price. Make sense? JOE

"McCormick's" wrote

Which doesn't matter at all except for posterity.

What matters is your parents cost basis, as that is gifted to you with the stocks.

So find out from them, what they had as basis in that stock.

Except for any dividends reinvested that create a short term gain/loss, the rest is long-term gain/loss.

if 275*22 is greater than the amount they could gift to you tax free in the year that they gave you the gift (amount this year is 12k - the annual exclusion), then they have to pay a gift tax.

However, the cost basis of the shares is what they paid for it. I think a step-up of basis only happens when they pass the shares to you at death, as they will have paid the necessary inheritance taxes if any, but I'm not sure of this.

You have to track the dividends. Suppose you got net dividends of 1k and reinvested that in year 2005. Then in the tax return for year

2005 you would have reported 1k as income and paid taxes on it. However, you purchased more shares at say $10 on 12/31/2005. So you have 285 shares from your parents at a cost basis of XYZ, 100 shares purchased on 12/31/2005 cost basis 1k. Say you got dividends on 12/31/2006 1k and reinvested at $20 a share; so cost basis is 1k on 12/31/2006. If you sell the shares on 1/1/2007, then the 12/31/2006 batch is a short term gain or loss, and the 12/31/2005 batch is a long term gain, and what your parents gave you is also a long term gain (in my example).

Actually, it might matter. If the parent's basis was greater than 22/ share then 22 is the OP's basis for a sale at 15.

Sorry, need to clarify two things. If you parents had to pay a gift tax, it is in the year that they made the gift. Say they gifted this money in 1998 and were subject to the gift tax, then they would have to pay the gift tax in 1998 (though perhaps form 709 and the gift tax money could be filed on April 15 1999). They don't have to pay anything now. My paragraph above suggests that they have to pay a gift tax now; I should have wrote "then they would have had to pay a gift tax when they gifted you the stock". Second, the limit of 12k includes all gifts to you -- so if they give 275*22`50 plus 6000 cash, then they have to pay tax on $50. If your parents are married, then they can give 24k tax free.

And if they are not married, they can give you 24K with no tax consequences.

The original gift was made in 1998. I believe the annual exclusion that year was $10,000.

Stu

From Pub 950;

Annual exclusion. A separate annual exclusion ap- plies to each person to whom you make a gift. In 1998, the gift tax annual exclusion became subject to cost-of-living increases. The exclusion for 1998 through

2001 was $10,000 and for 2002 through 2005 the exclu- sion was $11,000. For 2006 and 2007 the amount is $12,000. Thus, in 2007, you generally can give up to $12,000 each to any number of people in 2007 and none of the gifts will be taxable.

You are correct. JOE

But only 12k from each of them, seperately, right?

I not jointly owned property, yes...

But, it should also be noted there's no requirement that even if it were over the statutory limit that a tax has to be _paid_ -- the requirement is a return must be filed and the excess counts against the eventual marital exclusion...