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How is stock or property valued for gift tax purposes?
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 $12,000 annual Gift Tax exclusion for a gift made in 2006, Gates could still come under the $1,000,000 lifetime umbrella exclusion. Gates would not pay a current Gift Tax to the IRS. At the time of his death, however, the total amount of taxable gifts given during his life would be cumulated and subtracted from his regular unified credit (in 2006 equivalent to tax on gifts or an estate of $2,000,000). |
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