The cost basis of stock you received as a gift ("gifted stock") is determined by the giver's original cost basis and the fair market value (FMV) of the stock at the time you received the gift.
- If the FMV when you received the gift was more the original cost basis, use the original cost basis when you sell. This is the most commonly-encountered situation.
- If the FMV when you received the gift was less than the original basis, and you later sold the stock for:
- More than the original basis: use the original basis
- More than the FMV at the time of the gift but less than the original basis: your selling price becomes the cost basis. You won't report a gain or loss in this situation
- Less than the FMV at the time of the gift: use the FMV at the time of the gift
When you enter the sale of gifted stock, make sure you select the appropriate situation when we ask if you bought the stock. We'll calculate the proper gain or loss on your taxes.