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Unorthodox Yuletide Gifts: Unraveling the Tax Implications of Holiday Stock Gifting

As the festive season approaches, gifting becomes the order of the day. As you deliberate on what to give your loved ones, have you considered unorthodox yuletide gifts like stocks? Yes, stock gifting is not just a novel idea but also a profitable one. However, like any financial transaction, it comes with its tax implications. This article aims to guide you on the tax nuances of holiday stock gifting.

Yuletide gifts

Stocks as Gifts: Why?

Gifting stocks, especially to younger family members, can be a significant financial boon. It not only potentially grows in value over time but also instills a sense of financial literacy from an early age. Stocks can be a stepping stone to understanding investments, financial markets, and long-term savings.

Tax Implications: The Good and the Bad

The tax implications of gifting stocks are twofold, affecting both the giver and the receiver. The Internal Revenue Service (IRS) stipulates that any gift, including stocks, worth more than $15,000 per person in a year, is subject to gift tax. However, the tax is not always due immediately as the IRS allows a lifetime exemption of up to $11.7 million as of 2021.

For the recipient, the capital gains tax applies when the stock is sold. The tax rate depends on the stock’s cost basis, which is the original price paid for the stock, and the holding period. If a stock was held for over a year, it is subject to long-term capital gains tax, which is significantly lower than the short-term capital gains tax for stocks held for less than a year.

Navigating the Complexities

While the tax implications may seem daunting, effective tax planning can help you navigate these complexities. It’s crucial to maintain accurate records of the cost basis and holding period of the gifted stock. Professional tax advisors can provide valuable guidance on optimizing these gifts to minimize tax liabilities.

This holiday season, think outside the box. Stocks can be a gift that keeps on giving, potentially growing in value over the years. But like with all gifts, it’s not just the thought that counts. Understanding and planning for the tax implications is crucial to make the most of this unique gift.

If you need further guidance on tax planning around stock gifting, you can click here or call (800) 875-5509 to be connected with a tax specialist who can help you with your IRS tax issues.

In the spirit of gifting, why not share this valuable information with others? Spread the word about the tax implications of holiday stock gifting. Remember, knowledge shared is knowledge multiplied.

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