Tax question: My girls recieved stock as a gift, some was reinvested, some cashed out, is all of it taxed?

Question

I've never dealt with stock before, so i'm not sure what capital gains has to do with it, does only the actuall cash get taxed. I reinvested in a 529 and also in a reg investment account. I know i'm going to have to talk to a good acct. but i'm curious at this point of what i'm looking at.

Answer 1

As a rule, it is only what was cashed out. You give very few details. If they inherited the stocks, they will inherit the stock at the price on the date of the donor's death (as a general rule). If that, and the subsequent sale, was quite recent, there will probably be a minimal tax liability. If, however, the stocks were gifted, your daughters will acquire the holding period and basis of the donor. If the donor held the shares for a long time, the basis might be very small, giving a high gain.

Please bear in mind that the so-called "Kiddie Tax" now applies to under 18's (used to be under 14's) so their income may have to be taxed on your return.

Answer 2

just what was cashed out