Gifts are not taxable income and do not have to be reported on your tax return. You will have to report the income when you sell or redeem the stocks and bonds.
Could you explain how is the cost basis calculated? Is it the cost basis of the donor or the fair market value at the time of the gift?
What if the cost basis of the donor is unknown?
Thank you!
@HarryW wrote:
Could you explain how is the cost basis calculated? Is it the cost basis of the donor or the fair market value at the time of the gift?
What if the cost basis of the donor is unknown?
Thank you!
The cost basis of a gift is the givers cost basis. If you cannot get that and don't have documentation to prove the cost basis then the IRS will assume that the cost basis is zero. That is why the giver of a gift that will have taxable gain when sold, should always provide the proof of cost basis when the gift is given, otherwise the entire amount will be taxable income.
If the value of the gift is $100,000 or more, you must report it to the IRS on Form 3520. See this IRS reference for details: https://www.irs.gov/businesses/gifts-from-foreign-person