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A mother makes a gift of appreciated securities to her 10-year-old son. the son's cost basis in the stock is the original cost of the securities to the mother.
When a gift of securities is made while the donor is still living, the cost basis—rather than the value of the security on the gift date—is its original purchase price. Gift taxes are applied based on market value at the time of the gift.
Both the donor and the relative receiving the stock have no tax consequences when giving it as a gift. There is nothing the donor needs to file if the gift's value falls under the annual gifting caps.
Again, there would be no tax repercussions unless the donation exceeded their lifetime gift and estate tax exemption. If the gift surpasses that amount, they would need to file an estate and gift tax return.
The family member who receives the shares may be subject to tax consequences. Before the shares are sold, the recipient of the stock does not have to pay capital gains taxes. The cost basis and holding time of the donor determine any tax liability with relation to capital gains.
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