To buy stock for someone else, you either purchase shares directly into an account in their name or transfer shares you already own from your brokerage to theirs. For a child, that means opening a custodial account and naming yourself as custodian. For an adult, it usually means a broker-to-broker transfer into their existing account. Gifts of up to $19,000 per recipient in 2026 carry no gift tax filing requirement, and larger gifts still rarely produce any actual tax because of the $15 million lifetime exemption.1Internal Revenue Service. Whats New – Estate and Gift Tax The mechanics differ by recipient, and the tax rules that follow the gift matter as much as the transfer itself.
What You Need Before You Start
Every brokerage has to verify the identity of anyone who receives assets in an account. Under federal rules implementing the Patriot Act, the minimum information a broker must collect is the person’s full legal name, date of birth, residential address, and taxpayer identification number, which for most individuals is their Social Security number.2U.S. Securities and Exchange Commission. Customer Identification Programs for Broker-Dealers If the recipient already has a brokerage account, you also need the account number and the name of the firm.
When you open a new custodial account for a minor, you provide your own information as custodian alongside the child’s details. Most brokerages offer an online gifting portal or a downloadable gift transfer form. Missing or mismatched information is the most common reason transfers stall, so gather everything before you start.
Buying Stock for a Child
The standard route is a custodial account set up under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA). You manage the investments as custodian, but the assets legally belong to the child. When the child reaches the age of majority — 18 or 21, depending on the state — they take full control of the account and can do whatever they want with it. UTMA is the more flexible framework and has been adopted by most states; UGMA accounts hold financial assets like stocks, bonds, and cash, while UTMA accounts can also hold real estate and other property.
Three things catch people off guard with custodial accounts.
Every dollar you put in is an irrevocable gift. You can’t pull the money back out for your own use once it’s deposited, even as custodian.
Custodial account assets count as the child’s assets on the FAFSA, which reduces financial aid eligibility at a much higher rate than assets held in a parent’s name. If college aid is on the horizon, weigh this carefully.
Investment income above roughly $2,700 can be taxed at the parent’s marginal rate rather than the child’s lower rate, under the rule commonly called the kiddie tax.3Internal Revenue Service. Topic No. 553, Tax on a Childs Investment and Other Unearned Income
Gifting Stock to an Adult
Gifting to an adult is simpler because no custodian is involved. The usual method is a direct broker-to-broker transfer, where shares move from your brokerage account into the recipient’s individual account. The recipient has full control of the investment as soon as the transfer settles. If they don’t already have a brokerage account, most major firms let you open one and fund it with transferred shares in a single process.
A joint account with rights of survivorship is another option. Both of you own the shares together, and if one owner dies, the survivor automatically inherits the other’s share without going through probate. This works well for family estate planning, but neither party has sole control while both are alive. If the goal is an outright gift, a direct transfer is cleaner. Once the transfer settles, you have no legal claim to the shares.
Gifting Stock to a Spouse
Stock gifts between spouses who are both U.S. citizens are the easiest scenario in the tax code. Federal law provides an unlimited marital deduction, so you can transfer any amount to your spouse without triggering gift tax or filing Form 709.4Office of the Law Revision Counsel. 26 U.S. Code 2523 – Gift to Spouse There is no dollar cap, and the transfer doesn’t count against your lifetime exemption.
The rules change if your spouse is not a U.S. citizen. The unlimited marital deduction doesn’t apply. Gifts to a non-citizen spouse are instead covered by a separate, higher annual exclusion of $194,000 in 2026.5Internal Revenue Service. Frequently Asked Questions on Gift Taxes for Nonresidents Not Citizens of the United States Gifts above that amount require Form 709 and count against your lifetime exemption.
How the Transfer Actually Moves
Most stock transfers between brokerages go through the Automated Customer Account Transfer Service, an electronic system operated by the National Securities Clearing Corporation. NYSE and FINRA both require their member firms to participate.6U.S. Securities and Exchange Commission. Transferring Your Brokerage Account – Tips on Avoiding Delays You initiate the transfer through your brokerage’s online portal or by submitting a transfer form, and the receiving firm enters the request into the system.
Once submitted, the carrying firm (your current broker) has three business days to validate the request or raise an objection.7FINRA. Customer Account Transfers – Overview The whole process typically completes within six business days. When both accounts are at the same brokerage, internal transfers often settle within a day or two.
One detail worth watching: if a stock pays a dividend and the record date falls during the transfer window, whoever owns the shares on the record date receives the payment. If you want the recipient to get an upcoming dividend, time the transfer so it settles before that date.
Annual Exclusion and Lifetime Exemption
You can give up to $19,000 in stock (or any other asset) per recipient in 2026 without any gift tax filing requirement.8Office of the Law Revision Counsel. 26 U.S. Code 2503 – Taxable Gifts The IRS adjusts this threshold for inflation periodically.
Married couples can effectively double the exclusion through gift splitting. If both spouses agree, a gift from one is treated as if half came from each, raising the combined exclusion to $38,000 per recipient with no gift tax due.9Office of the Law Revision Counsel. 26 U.S. Code 2513 – Gift by Husband or Wife to Third Party Both spouses consent on Form 709, and the election applies to every gift you make that year. You can’t split selectively.
Gifts above the annual exclusion aren’t immediately taxed. They reduce your lifetime exemption, which sits at $15,000,000 for 2026.1Internal Revenue Service. Whats New – Estate and Gift Tax Actual gift tax kicks in only after cumulative lifetime gifts above the annual exclusion pass that number. For almost everyone, that never happens. You still have to file Form 709 to report any gift over the annual exclusion so the IRS can track the running total.
What the Recipient Inherits: Basis and Holding Period
When you give stock as a gift, the recipient generally takes your original purchase price as their cost basis. Tax professionals call this the carryover basis rule.10Office of the Law Revision Counsel. 26 U.S. Code 1015 – Basis of Property Acquired by Gifts and Transfers in Trust If you bought shares at $20 and they’re worth $50 when you gift them, the recipient’s basis is $20. When they eventually sell, they owe capital gains tax on the full $30 of appreciation.
The recipient also inherits your holding period. If you held the stock for three years before gifting it, the recipient is treated as having held it for three years from day one, which qualifies them for long-term capital gains rates immediately.11Office of the Law Revision Counsel. 26 U.S. Code 1223 – Holding Period of Property This tacking rule is what makes gifting appreciated stock attractive: the recipient gets the lower long-term rate without waiting.
The rules get trickier when you gift stock that has lost value. If the fair market value on the gift date is less than what you originally paid, the recipient has a dual basis. They use your original cost basis to calculate any gain, and the lower fair market value on the gift date to calculate any loss.12Internal Revenue Service. Property (Basis, Sale of Home, Etc.) If the eventual sale price falls between those two numbers, there is no gain and no loss. Neither you nor the recipient gets to claim the capital loss on the depreciation that happened while you owned it. If harvesting the loss matters, sell the shares yourself and gift the cash.
Filing Form 709
You must file IRS Form 709 for any year in which your gifts to a single recipient exceed $19,000.13Internal Revenue Service. Instructions for Form 709 (2025) The return is due April 15 of the year after the gift. If you extend your individual income tax return, the gift tax return extension rides along automatically.
Filing Form 709 doesn’t mean you owe gift tax. The form reports the gift and subtracts the taxable portion from your lifetime exemption. Actual gift tax only starts once you’ve used up the full $15 million.
If you do owe gift tax and fail to file, the penalty is 5% of the unpaid tax for each month the return is late, up to a maximum of 25%.14Office of the Law Revision Counsel. 26 U.S. Code 6651 – Failure to File Tax Return or to Pay Tax When no tax is owed, which is true for most people, the dollar penalty for late filing is zero. Skipping the filing is still a bad idea. Without it, the IRS has no record of how you’ve used your lifetime exemption, and that creates problems for your estate later. Document the fair market value of the stock on the transfer date and keep records of your original purchase price. Both you and the recipient may need that information if the IRS asks questions.