Inherited Stock
  
See: Gifted Equity. Same idea.
Grandpappy died with a million shares of Walmart, for which he paid a dollar a share. He left them all to you. They're trading at $100 a share today. You inherit the shares, but you also inherit the basis. That is, if you ever go to sell them at, say $110 a share, if and/or when they get there, you'll pay tax on a long-term gain of $109, not a gain of $10, i.e., waaaaay more tax than had the tax basis been stamped at the $100 price the day Grandpappy ran his Ferrari into the wall at 180 mph, with Led Zep blaring.
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Finance Allah Shmoop What is gift tax Of those I
Rs people They ruin everyone's fun You can't even give
away things anymore without it being taxed Even have some
t Khun spill into a harbor Boston gift tax party
Anyone know well so overly Simply as of two thousand
nineteen you're allowed to give about fifteen grand a year
with the expectation that this number will rise a bit
with inflation year after year And on that fifteen grand
or less there is no tax owed You have to
declare to the IRS people that you gifted but you
don't have to write them An incremental check and all
kinds of little tweaks to the definitions of givers and
receivers have made the state transfer easier in this country
For example of Family Khun Gift in multiple directions from
multiple sources like each year Mama Bear Khun Gift fifteen
grand to baby bear than fifteen grand too sulky teenager
texting bear then another fifteen grand Teo the Elder Bear
for a total of forty five grand gifted from Mama
Bear tax free Then Daddy Bear can do the same
for each kid and the elder such that they can
gift in one year ninety thousand dollars total in gifts
with no tax And there are other twists They aren't
limited to gifting Fax like they Khun gift art and
jewelry and mountain vats of honey or porridge or privately
appreciated stock like stock they bought for a dollar is
now trading at fifty and they can give fifteen grand
worth of that stock So Hugh may reasonably wonder how
they would determine the value of private stock if it's
not public or really any of the above None actively
traded and valued things like jewelry and stuff like that
Well there isn't a daily market for shares in private
companies or artwork or jewelry Usually So how do you
assess the value Well usually value is taken it whatever
the last round was invested at by professional investors of
its private stock even if it was five years ago
and the company has gone up a ton in value
But if it has well it's likely the company will
have been required to get a new four o nine
a valuation which is basically just a few high priced
lawyers assessing professionally what the company is worth based on
other similar companies that were sold or funded recently It's
the best guess of lawyers and accountants and the same
applies to appraisals of jewelry and art And like if
your parents are giving that stuff away to you too
willing to keep it under fifteen grand the arrest I
won't bug you So you can imagine that a family
wanted to transfer as much as they possibly could to
their kids Will The impetus could involve a whole lot
of downward pressure on valuations such that the fifteen grand
that was tax free gift herbal might really be worth
now something more like twenty grand or thirty grand or
maybe even fifty grand were it to sell that day
That is private valuations carry all kinds of risks The
gift ease as well Like if they want to sell
them like Mama thinks that jewelry a piece that was
made for her is really worth thirty four thousand dollars
And he's getting away with something stating It's only worth
fifteen But then baby there goes to try to sell
it on eBay and gets like three grand for it
Well may be discounting private things make sense The key
notion here is that fifteen grand of value can be
transferred tax free legally Happily the IRS has no tax
on that But above there there's all kinds of gift
tax right So what happens if Mama Bear gives baby
bear twenty thousand dollars in cash one year You know
Tio enable the baby or to buy a top of
the line Dr Braun's porridge warmer Well either Baby bear
can just pay income tax on the five thousand dollars
difference like fifteen grand was tax free and then five
thousand above that that five thousand above it is taxable
as a gift tax And in fact it's Mama Bear
who would technically be legally responsible for paying that tax
on the five grand But baby Bear can do it
if well you know if she wants or she can
write Mama bear a check for five grand back and
it's the net number that the IRS cares about There's
all kinds of other gift taxes the president's change them
limits and maximums all the time Currently a family Khun
Gift in about eleven million dollars in change with essentially
no estate tax when they died That protects the farms
in the Midwest from having to be sold When you
know great Grandpa Joe dies and he on the farm
for one hundred years That's how gift taxes air set
up And well if someone gives you a horse isn't
there a phrase about looking a gift horse in the
mouth You know be careful with those things by
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