Weather you pay with stock, or your sell the stock and pay with cash, you still have a reportable and taxable transaction here, any way you look at it. There's no way out of this. If you doubt me, please seek the services of a CPA or tax attorney in your local area.
Basically, when you transfer the stock to her, you are disposing of it. That means you will pay taxes on the difference between what you paid for it, and it's value on the date you execute the transfer. (assuming the stock has increased in value). Of course, if it's decreased in value, then you may have a deductible investment loss.
The fact is, you "are" selling the stock to your sister. But instead of her paying you for that stock with cold hard cash, she is paying you with property that does have monetary value. When you transfer the stock to her, the broker will do what they are required to do by law, and issue you a tax reporting document reporting that sale/transfer. Generally that document will have on it your cost basis, as well as the value of the stock on the date of the transfer.
So you're not going to get out of paying any taxes that may be due on that stock transaction. But it's possible that at least some of those taxes may be offset by any qualified sales expenses you may pay. Doubtful, but possible.
