Gifting Appreciated Assets refers to the process of transferring ownership of assets that have increased in value, such as stocks or real estate, from one individual to another without receiving payment in return.
When an appreciated asset is gifted, the recipient typically takes on the donor’s cost basis, which is the original value of the asset plus any adjustments. This means that if the recipient later sells the asset, they may be subject to capital gains tax on the appreciation that occurred during the donor’s ownership. For example, if a donor bought shares of stock for $1,000 and the shares are worth $5,000 at the time of gifting, the recipient’s cost basis is still $1,000. If they sell the shares for $5,000, they would realize a capital gain of $4,000.
Gifting appreciated assets can be a strategic way to reduce the donor’s taxable estate and can also provide the recipient with valuable investments; however, it is important to consider the potential tax implications for both parties involved.
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