How to determine tax on the sale of stock received as a gift

By Investing Basics Consumer Reports

Q: My father gifted me some stock that I sold this year. How do I account for this on my taxes? —R.C., Brooklyn, N.Y.

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A: First, for tax purposes you'll need to determine the basis of the asset. If the stock has gone up, you'll pay tax on the difference between that amount and your sale price. With some exceptions, your basis is what your father paid for the stock, plus commissions. If the shares lost value between the time your father bought them and gifted them and declined further when you sold them, you normally have a deductible loss. In that instance, your basis is the value of the stock at the time of the gift. 

You'll need to know what your father paid (including the commission), plus the value of the shares on the gift date. You'll also need to account for stock splits and mergers. If your father doesn't have the original sales documents, you might have to work backward to figure that out. Contact the investor-relations department of the company or its successor for guidance. A CPA also can assist.

Send your questions to askourmoneyexperts@cro.consumer.org.

—Consumer Reports Money Adviser

Get much more tax-related information through the Consumer Reports Income Tax Guide.

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