Submitted By: Dan
Answered: March 25, 2016 12:14 pm

I gave shares of stock to my niece several years ago when the shares were worth more than I had paid. Now I’ve learned that the shares have become worthless. What’s her loss?

To determine her loss, she needs to know her tax basis. When you give property, such as stock, the recipient’s tax basis used for determining gain or loss is usually your basis. More specifically, since the value of the property equaled or exceeded your basis at the time you gave it to your niece, her basis for determining loss is your basis (plus all or part of gift tax paid on the gift). If the stock had been worth less than your basis when you gave it to your niece, her basis for determining loss would be the date-of-gift value.

Tax Glossary

Foreign tax credit

A credit for income taxes paid to a foreign country or U.S. possession. 401(k) plan. A deferred pay plan, authorized by Section 401(k) of the Internal Revenue Code, under which a percentage of an employee’s salary is withheld and placed in a savings account or the company’s profit-sharing plan. Income accumulates on the deferred amount until withdrawn by the employee at age 59?

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