Valuation of Stock or Property For Federal 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 $15,000 annual Gift Tax exclusion for a gift made in 2018, Gates could still come under the $11.2 million (for 2018 through 2025) lifetime umbrella exclusion (the Tax Cuts and Jobs Act of 2017 doubled the applicable exclusion for 2018 through 2025; in 2026, the limit will revert back to the pre-2018 amount adjusted for inflation). 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.