Helen gave her daughter Nicole 100 shares of stock on Nicole’s birthday. The stock had cost Helen $2,000 and had a market value of $3,000 when Helen gifted it to Nicole.

Question

Helen gave her daughter Nicole 100 shares of stock on Nicole’s birthday. The stock

had cost Helen $2,000 and had a market value of $3,000 when Helen gifted it to Nicole. Eighteen months later, Nicole sold the stock for $4,000. How much gain or loss does Nicole have from these events and is it short or long term?

Answer 1

The basis of stock received as a gift that has appreciated in value is the donor's cost basis. In this scenario, Helen is the donor and had a cost basis of $2,000. Since the stock has appreciated in value from the day that it was purchased by Helen and then gifted to Nicole, there will be a gain of $2,000. The calculation is, Nicole sold the stock at $4,000 less the stock basis of $2,000 (Helen's cost). The $2,000 capital gain would be long term since it is from the day Helen bought it and Nicole held it for over a year.