As discussed under Income Tax, the tax basis in stock received as a gift is the donor’s cost. (In the case of the 1,000 shares of Microsoft that Bill Gates bought for a penny, the basis is still a penny – even though the stock was worth $100,000 at the time of the gift.) If it is sold right away, there is capital gains tax due on the sales price -- $100,000 – less the basis of a penny. However, if the person who received the gift holds it for a while and sells it at a time the value of the gift has increased (say to $175,000), she is obligated to pay capital gains tax on the $175,000, less of course the basis of a penny.