Valuation of Stock or Property For Federal Gift Tax Purposes

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 16, 2021

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Suppose Bill Gates gives you 1,000 shares of Microsoft stock on a day when the price of Microsoft stock is $100. His “cost basis” in the shares may have been $0.01.

The Microsoft stock would be valued at its fair market value at the time of the gift, even though Gates purchased the stock for a penny. The gift was $100,000, and, since the $100,000 is well over the $15,000 annual Gift Tax exclusion for a gift made in 2019, Gates could still come under the $11.4 million lifetime umbrella exclusion (under the 2017 Tax Cuts and Jobs Act, the basic exclusion amount for an estate tax return for a 2018 date of death was doubled to $10,000,000, before taking into account the necessary inflation adjustment; the same 2017 Act also provided for the expiration of the increased exclusion amount at the end of the year 2025). Gates would not pay a current Gift Tax to the IRS. At the time of his death, however, the total amount of his prior years’ taxable gifts and the current year’s taxable gifts would be accumulated and subtracted from his regular unified credit.

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