Is it better to gift stock or leave it at death?

Usually leave it — §1015 carryover hands the heir your built-in gain, while §1014 steps it away at death. Gift cash or high-basis property instead.

What happens if I gift stock that went down?

The §1015 loss rule bites: the donee’s loss basis is the lower FMV at gift. Sell it yourself, take the loss, and gift the cash.

Does paying gift tax raise the donee’s basis?

Partly — gift tax attributable to the net appreciation increases basis, capped so basis never exceeds FMV at gift.

IRC §1015 · 26 U.S.C. §1015

IRC §1015: Basis of Property Acquired by Gift

By Paul D. Diaz, EA, MBA · Updated September 20, 2026

IRC §1015 is carryover basis — a lifetime gift keeps the donor’s basis, gain and all. Give appreciated stock and you give the tax bill with it; that is the §1014 vs §1015 planning fork.

What it governs

Donee takes the donor’s adjusted basis — appreciation carries over
Loss rule: if FMV at gift is below basis, losses measure from FMV
Gift tax paid can increase basis, but only on the appreciation slice
The §1014 step-up at death is usually worth more than a lifetime gift of gain property

In the GuideFull treatment in Chapter 15 of the Guide — THE TAX CUTTERY® Guide to Federal Income Taxation, Professional Edition (564 pages, 24 chapters).

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Questions this section answers

Is it better to gift stock or leave it at death?: Usually leave it — §1015 carryover hands the heir your built-in gain, while §1014 steps it away at death. Gift cash or high-basis property instead.
What happens if I gift stock that went down?: The §1015 loss rule bites: the donee’s loss basis is the lower FMV at gift. Sell it yourself, take the loss, and gift the cash.
Does paying gift tax raise the donee’s basis?: Partly — gift tax attributable to the net appreciation increases basis, capped so basis never exceeds FMV at gift.

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