Gifting Appreciated Stock to Family

Updated August 3, 2026. Quick answer: when you give appreciated stock to a family member, they take your cost basis, not the value on the day you gave it. The unrealised gain travels with the shares. That is the opposite of what happens when the same shares pass at death, and it is why the choice between giving now and leaving later is a tax decision and not just a timing preference.

The rule

If the property was acquired by gift after December 31, 1920, the basis shall be the same as it would be in the hands of the donor or the last preceding owner by whom it was not acquired by gift, except that if such basis (adjusted for the period before the date of the gift as provided in section 1016) is greater than the fair market value of the property at the time of the gift, then for the purpose of determining loss the basis shall be such fair market value.

— 26 U.S.C. §1015(a)

Two rules live in that sentence, and the second one surprises people.

Carryover basis, the usual case

You bought at $20, the shares are worth $100, you give them to your daughter. Her basis is $20 (2026 values used only to illustrate). If she sells at $100 she reports $80 of gain. You did not erase the gain; you moved it to her.

That can be exactly the point. If she is in a lower capital-gains bracket than you, the same gain costs the family less when she realises it than when you do.

The dual-basis trap, for losers

Now the other branch. You bought at $100, the shares are worth $60, you give them away. Her basis is $100 for measuring a gain but $60 for measuring a loss. If she sells at $70 she has neither: no gain against the $100 figure, no loss against the $60 one.

The built-in loss simply disappears. Never gift a loss position. Sell it yourself, take the loss on your own return where it is worth something, and gift the cash.

Compare the two other ways this can happen

• At death the basis is reset to date-of-death value instead of carrying over — which is why holding appreciated shares until death can be worth more to your heirs than giving them away. Though a step-up can also be a step-down.
• To charity the analysis differs again: a gift of appreciated stock held long enough generally avoids the gain entirely, which is why charitable giving is usually done with appreciated securities rather than cash.

Family, death, charity: three different basis outcomes for the same shares. Choosing among them is the actual decision.

The gift-tax question is usually not the problem

People worry about gift tax and it is rarely the binding constraint — annual exclusion gifts and the lifetime exemption cover most family transfers. The gift tax limits. The basis consequence above is the part that actually costs money, and it is the part nobody mentions.

Honest gaps

Holding-period rules, gifts to minors, the kiddie tax on a child’s investment income, and state income tax treatment are all live considerations not covered here. Charitable gifts of appreciated property carry their own deduction limits and holding-period requirements.

General information drawn from the Internal Revenue Code, Treasury regulations and IRS publications, not legal or tax advice. Thresholds and dollar figures are adjusted regularly and several of the rules here turn on facts this page cannot see, so check the current year before you act on a number.