Yes, you can buy stock for someone else, but you cannot simply purchase shares in your own brokerage account and declare another person the owner. The shares have to sit in an account that legally names the recipient as an owner or beneficiary: a custodial account if the recipient is a child, a joint account if you’re sharing ownership with another adult, a transfer-on-death designation if the shares should pass at your death, or a direct gift transfer into the recipient’s own brokerage account. The structure you pick decides who controls the investment, who pays tax on it, and when the recipient gains full access.
Pick the Account That Matches Who’s Receiving the Stock
Buying Stock for a Child
The standard route is a custodial account under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA). You act as custodian and make every investment decision, but the child legally owns the shares from the moment the trade settles. The child cannot sell or withdraw independently until reaching the termination age set by their state, which ranges from 18 to 21 in most states. Some states let the custodian specify an extended transfer age when the account is opened.
UTMA accounts can hold a broader range of assets than UGMA accounts, including real estate. Either way, the gift is irrevocable. Once funded, you cannot take the money back, and using the assets for anything other than the child’s benefit exposes you to legal action for breach of fiduciary duty.
Sharing Stock With Another Adult
For two adults who want to own shares together, the usual choice is a Joint Tenants with Right of Survivorship (JTWROS) account. Both holders own the shares equally and can buy, sell, or withdraw on their own. If one dies, the shares transfer automatically to the survivor without probate, which is why spouses and domestic partners often use this structure.
Both holders report an equal share of dividends and capital gains on their own tax returns, no matter who actually put up the money.
Passing Stock at Death Without Giving It Up Now
If you want the shares to reach a specific person eventually but plan to keep full control while you’re alive, a transfer-on-death (TOD) designation on your individual brokerage account does the job. You name a beneficiary, and the shares transfer directly to that person at your death, skipping probate. You can trade, withdraw, or change the beneficiary at any time without asking anyone. The beneficiary has no rights to the account while you’re alive.
Opening the Account and Placing the Trade
Whichever structure you use, the brokerage needs identifying information for every person on the account. Federal Know Your Customer rules require the recipient’s full legal name, residential address, and Social Security number. The firm uses this information to report investment income to the IRS and to run watchlist checks.
For a custodial account, the application names you as custodian and the child as owner; some firms ask for a birth certificate. For a joint account, both holders submit identification and go through a background check. Most of this happens online, though you may need to upload a photo ID or answer verification questions. Approval typically takes one to three business days.
You fund the account by linking a bank account through the ACH network. Enter routing and account numbers, and the brokerage runs a small verification transaction before releasing the connection. Once cash lands in the account, place a trade by searching the ticker and choosing a market order (executes at the current price) or a limit order (only fills at or below a price you set). Under the T+1 settlement rule that took effect on May 28, 2024, stock trades now settle in one business day, so the shares appear in the account quickly after the order fills.
Transferring Shares You Already Own
You don’t need to buy new shares to give someone stock. If you already hold shares, most brokerages let you transfer them directly to another person through a gift transfer. The recipient needs an active brokerage account. You contact your firm and specify the stock, the number of shares, and the recipient’s account details. The shares move electronically between firms through the Depository Trust Company network without a sale, so the transfer itself is not a taxable event.
Several brokerages also offer fractional-share gifting, which makes small-dollar stock gifts practical. You can buy a fraction of a share of a major company for a few dollars inside a custodial account and send the recipient a notice about the gift.
What the Recipient Pays in Tax When They Sell
This is where a lot of well-intentioned gifts create surprise tax bills. When you give someone stock, the recipient does not get a fresh cost basis at the current market price. They inherit your original purchase price. The IRS calls this “carryover basis.”1Office of the Law Revision Counsel. 26 U.S. Code 1015 – Basis of Property Acquired by Gifts and Transfers in Trust
Say you bought 100 shares at $20 each and gift them when they’re worth $50. The recipient’s cost basis is still $20 per share. If they sell later at $60, they owe capital gains tax on $40 per share, not $10. All the appreciation that built up while you owned the stock becomes their tax problem.
One exception matters. If the stock has fallen below what you paid and you gift it anyway, the recipient’s basis for calculating a loss is the fair market value on the gift date, not your higher purchase price. If they sell at a price between your original cost and the lower gift-date value, they report neither a gain nor a loss.2Internal Revenue Service. Publication 551 – Basis of Assets
Compare that to inherited stock. Stock left through an estate, including through a TOD designation, receives a stepped-up basis equal to fair market value on the date of death, which erases the unrealized gain entirely. For highly appreciated shares, the difference between gifting during your lifetime and leaving them at death can be significant.
The Kiddie Tax on a Child’s Custodial Account
Dividends and capital gains inside a custodial account are taxed under the child’s Social Security number, not yours. But children don’t get unlimited access to low tax brackets. Under the kiddie tax rules in Internal Revenue Code Section 1(g), a child’s unearned income above a threshold is taxed at the parents’ marginal rate.3Internal Revenue Service. Topic No. 553, Tax on a Childs Investment and Other Unearned Income (Kiddie Tax)
For 2026, the first $1,350 of unearned income is covered by the child’s standard deduction and is tax-free. The next $1,350 is taxed at the child’s own rate. Anything above $2,700 is taxed at the parents’ rate. The rules apply to children under 18, and in some cases to full-time students under 24 who don’t provide more than half their own support. When a child’s unearned income exceeds $2,700, Form 8615 goes with their return.4Internal Revenue Service. Instructions for Form 8615
Gift Tax Reporting
Every stock transfer to another person is technically a gift for federal tax purposes. The annual gift tax exclusion for 2026 is $19,000 per recipient.5Internal Revenue Service. Frequently Asked Questions on Gift Taxes Stay at or below that amount per person per year and no reporting is required. A married couple can each give $19,000 to the same person, so a couple can move $38,000 to one recipient without filing.
If your gift to any single recipient exceeds $19,000 in a calendar year, you must file IRS Form 709 to report the transfer.6Internal Revenue Service. About Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return Filing the form does not necessarily mean you owe tax. The excess counts against your lifetime gift and estate tax exemption, which is $15,000,000 for 2026.7Internal Revenue Service. Whats New – Estate and Gift Tax Most people never come close to using that up, but skipping Form 709 when it’s required can lead to penalties and interest if the IRS reviews your records.
The value of the gift is the stock’s fair market value on the transfer date, not what you paid. Shares you bought for $10 that are worth $50 when handed over count as a $50-per-share gift.
One Warning for College-Bound Kids
If the child might apply for need-based financial aid, the account type matters. Assets in a UGMA or UTMA custodial account are legally the child’s, and the FAFSA formula counts student-owned assets at a 20% rate. A $10,000 custodial account can reduce aid eligibility by roughly $2,000.
A 529 education savings plan owned by a parent or the student is assessed as a parent asset at a maximum 5.64% rate, so the same $10,000 would reduce aid by about $564. Beginning with the 2024–25 FAFSA cycle, 529 plans owned by grandparents no longer count against aid eligibility at all. Custodial accounts still make sense when a child is unlikely to qualify for need-based aid or when the money is meant for something other than college, but for families near the aid cutoff, the FAFSA treatment can change the outcome.