Gift of shares
ARTICLE TAKEAWAYS
- Learn how to gift shares
- What types of accounts are eligible to receive a gift of shares
- Review tax guidelines and exclusions
Individuals can give shares to another person or organization by transferring or purchasing shares. This type of transaction is considered a gift of shares.
Process
A gift of shares can be made via a new purchase or via a transfer from an existing account.
For gifts of shares that are new purchases, shares are purchased into the desired account at the breakpoint of the investor gifting the shares. The adjusted breakpoint request must be made at the time of the purchase in writing.
For gifts of shares that are transferred, the shares must be transferred in-kind, and the recipient must agree to accept the cost basis of the shares.
To gift shares to an individual or an entity’s exiting account (other than a charitable organization), complete the Gift of Shares Request (to an American Funds Account).
If the receiving party does not have an existing account, a new account application is required to establish the account to receive the funds.
To gift shares to a charitable organization, the donor and the recipient must both complete the Gift Transfer of Shares to a Charitable Organization form. Return the form along with the Entity Beneficial Owners form and a copy of the 501(c)(3) federal determination letter verifying that the organization is tax-exempt OR a government-issued document verifying the existence of the business.
A signature guarantee is required.
Accounts eligible to receive gifts of shares
- Individual or joint accounts
- 529 college savings accounts
- Coverdell ESA
- UGMA/UTMA
- Entity accounts
- Charitable organization accounts
- Traditional and Roth IRAs*
*The IRA owner must have taxable compensation, and the IRA is subject to contribution limits.
Note: A gift of shares cannot be made into an employer-sponsored retirement plan.
Tax guidelines
Because the shares are never sold, there is no tax reporting when gifting shares; however, a gift tax may apply.
Based on a contributor’s tax-filing status, the gift tax exclusion limits for 2024 are:
- Single: $18,000
- Single with five-year election*: $90,000
- Married filing jointly: $36,000
- Married filing jointly with five-year election*: $180,000
* The 5-year election allows a contributor to gift up to their limit during one calendar year and treat the gift as having been made over 5 years. No additional gifts can be made to that beneficiary over the next 4 years after the year in which the one-time gift is made. If the donor of an accelerated gift dies within the 5-year period, a portion of the transferred amount will be included in the donor’s estate for tax purposes.
Consult a tax advisor regarding your client’s specific situation.
Since the recipient of the shares agrees to accept the cost basis, once the shares are redeemed, a Form 1099-B is generated under the recipient’s taxpayer identification number (TIN) to report any capital gains or losses.
Contact us
Have questions or need additional support?
Contact us 8:00 a.m. to 7:00 p.m. ET, Monday through Friday.
For financial professionals only. Not for use with the public.
All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.
Use of this website is intended for U.S. residents only.
The guidelines and procedures provided in the Account Resource Center may not apply to networked accounts or accounts not directly held by American Funds. The guidelines and procedures provided also apply only to those retirement accounts or Coverdell ESAs invested in American Funds with Capital Bank and Trust Company (CB&T) as custodian. The guidelines and procedures provided in the Account Resource Center do not apply to plans held in our retirement plan solutions — PlanPremier, PlanPremier-TPA or RecordkeeperDirect. Information on the Account Resource Center may change periodically, and previously printed information may not be current. Please refer to capitalgroup.com for the most current information available.
Financial professionals should always contact their back office to determine if there are any restrictions on the use of American Funds products, tools, services, websites and literature.