To gift stock certificates, you either endorse the paper certificate (or a separate stock power form) with a Medallion Signature Guarantee and send it to the company’s transfer agent, or you instruct your brokerage to move electronic shares to the recipient’s account. If the value to any single person exceeds $19,000 in 2026, you also file IRS Form 709 by April 15 of the following year, though most donors won’t actually owe tax because of the $15 million lifetime exemption.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
The mechanics and the tax reporting are separate problems, and both need to be right. Here’s how each part works.
Transferring a Paper Certificate
A physical stock certificate is a paper document registered in your name with the company’s transfer agent. It’s the legal title to the shares, so moving ownership means signing the certificate, having that signature guaranteed, and getting the paperwork to the transfer agent.
You can sign the back of the certificate itself, or sign a separate stock power form. The stock power is the safer choice because you can mail the certificate and the signed form in different envelopes. If one goes missing in transit, whoever finds it can’t do anything without the other.
Either way, your signature needs a Medallion Signature Guarantee. That’s a stamp from a financial institution confirming the signature is authentic and that you have authority to transfer the shares.2Investor.gov. Medallion Signature Guarantees – Preventing the Unauthorized Transfer of Securities Banks and brokerages that participate in a Medallion program provide it, but not every branch does. Call first. Most institutions offer the stamp free or cheaply to existing customers and may turn away non-customers entirely.
Send the endorsed certificate (or the stock power) with the Medallion stamp to the company’s transfer agent. The agent re-registers the shares in the recipient’s name and issues a new certificate or converts the holding to book-entry form. The gift is legally complete when the transfer agent records the new ownership on the company’s books.
Transferring Electronic Shares Through a Broker
Most shares today sit in brokerage accounts, and you never handle a paper certificate. You instruct your broker to move the shares to the recipient’s account through the Depository Trust Company system. Your firm will have a gift transfer form (sometimes called a third-party transfer form) asking for the recipient’s account number, the receiving firm’s DTC participant number, and the number and type of shares.
The recipient needs an open brokerage account before you submit the form. If they use a different firm, you’ll need their account details there. Some brokerages allow transfers into a custodial account for a minor. After you submit the paperwork, settlement usually takes a few business days.
Shares held directly with a transfer agent in book-entry form work similarly. You complete the agent’s own instruction form and may still need a Medallion Signature Guarantee depending on the agent’s rules and the value involved.
If You Can’t Find the Certificate
Contact the transfer agent right away. The agent places a stop on the missing certificate so no one else can transfer the shares. You’ll then complete an affidavit of loss and buy a surety bond, which is an insurance policy that protects the company if the original ever resurfaces in someone else’s hands.
The surety bond premium typically runs about 2% of the current market value. Replacing a certificate for $50,000 worth of stock costs roughly $1,000 in bond fees alone. The transfer agent may also require a Medallion Signature Guarantee on the affidavit. Once the bond is in place and the paperwork clears, the agent issues a replacement or converts the holding to book-entry form. Expect several weeks before you’re ready to gift.
Setting the Value on the Gift Date
The date the gift is complete controls which day’s price you use. For a paper certificate, that’s when the transfer agent records the new owner. For a brokerage transfer, it’s when the shares settle in the recipient’s account. Prices can move meaningfully between when you submit paperwork and when ownership actually changes hands.
For publicly traded stock, the IRS defines fair market value as the average of the highest and lowest quoted selling prices on the gift date. High of $50 and low of $46 means a fair market value of $48.3Internal Revenue Service. Publication 561 – Determining the Value of Donated Property If no trades occurred that day, use a weighted average of prices from the nearest trading days before and after.
This number drives whether you have to file a gift tax return, and in some cases it also affects the recipient’s tax basis.
What the Recipient Takes On
The person receiving the shares doesn’t pay income tax on the gift itself, but they inherit tax attributes that will matter when they sell. You need to pass along three things: your original purchase price, the date you acquired the shares, and the fair market value on the gift date. Without those, they can’t correctly report a later sale on Schedule D.4Internal Revenue Service. Property (Basis, Sale of Home, etc.)
Your Cost Basis Carries Over
The recipient takes over your original basis. Bought at $20, gifted at $80? Their basis is still $20, and when they sell, they’ll owe capital gains tax on the difference between the sale price and that $20 figure.5Office of the Law Revision Counsel. 26 U.S. Code 1015 – Basis of Property Acquired by Gifts and Transfers in Trust Gifting appreciated stock shifts the eventual tax bill to the recipient rather than erasing it.
Your Holding Period Also Carries Over
The recipient doesn’t restart the clock. As long as they use your carryover basis (the normal case), your holding period tacks onto theirs.6Office of the Law Revision Counsel. 26 U.S. Code 1223 – Holding Period of Property If you held three years before gifting, they can sell the next day at long-term capital gains rates.
Losses Don’t Transfer Well
If the stock is worth less than you paid when you gift it, a special rule applies. The recipient’s basis for calculating a loss is the lower fair market value on the gift date, not your higher cost.4Internal Revenue Service. Property (Basis, Sale of Home, etc.) Paid $50, gift at $30, and the recipient’s loss basis is $30. Your unrealized $20 loss simply vanishes; neither of you ever deducts it. The practical move: sell the losing shares yourself, claim the loss on your own return, and gift the cash.
When You Have to File a Gift Tax Return
The $19,000 Annual Exclusion
For 2026 you can give up to $19,000 of stock to any one person without filing anything or touching your lifetime exemption.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 There’s no limit on the number of recipients. Ten people at $19,000 each is fine, and nothing gets reported.
Cross $19,000 to any single recipient and you file Form 709. That doesn’t mean you owe tax. The excess reduces your lifetime exemption, which for 2026 is $15 million per individual. The One Big Beautiful Bill Act, signed in July 2025, set that amount and eliminated the sunset that had been scheduled under the 2017 tax law.7Internal Revenue Service. What’s New – Estate and Gift Tax Starting in 2027 the $15 million baseline is indexed for inflation. The rate above the exemption is 40%.
One catch: the annual exclusion only applies to gifts of a “present interest,” meaning the recipient can use or enjoy the property immediately.8eCFR. 26 CFR 25.2503-3 – Future Interests in Property Stock transferred directly to a person qualifies. Stock placed in a trust that restricts access until a future date does not, and you’d file Form 709 regardless of size.
Splitting Gifts With a Spouse
Married couples can elect to treat a gift by one spouse as made half by each, effectively doubling the annual exclusion to $38,000 per recipient. Both spouses must consent, and both generally file their own Form 709 for the year even if only one actually made the gift.9Internal Revenue Service. Instructions for Form 709 (2025) Each spouse becomes jointly and severally liable for the gift tax in any year they split.10Office of the Law Revision Counsel. 26 USC 2513 – Gift by Husband or Wife to Third Party
Gifts to a Non-Citizen Spouse
Gifts between spouses are usually unlimited, but not when the recipient spouse is not a U.S. citizen. The annual exclusion for that case is $194,000 for 2026.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Anything above that goes on Form 709 and reduces your lifetime exemption.
Gifting to a Minor
You can gift stock to a minor through a custodial account under the Uniform Transfers to Minors Act or Uniform Gifts to Minors Act. A custodian manages the account until the minor reaches the age set by state law, usually 18 or 21. These gifts qualify for the annual exclusion because the custodian can spend the assets for the minor’s benefit right away, meeting the present-interest requirement.11eCFR. 26 CFR 25.2503-4 – Transfer for the Benefit of a Minor The carryover basis and holding period rules apply the same way.
Filing Form 709
The donor files Form 709, not the recipient. It’s due by April 15 of the year after the gift. Filing an extension on your personal income tax return automatically extends Form 709 too.12eCFR. 26 CFR 25.6081-1 – Automatic Extension of Time for Filing Gift Tax Returns The extension covers filing, not payment. If you actually owe gift tax, which is rare given the $15 million exemption, that money is still due April 15.13Internal Revenue Service. Form 4868 – Application for Automatic Extension of Time to File U.S. Individual Income Tax Return The recipient files nothing and owes no income tax on receipt.
Should You Gift Now or Leave the Stock at Death?
For highly appreciated stock, this question can be worth more than every other tax consideration combined. Property inherited from a decedent gets a stepped-up basis equal to fair market value at the date of death, which wipes out all the unrealized gain that built up during the owner’s lifetime.14Office of the Law Revision Counsel. 26 U.S. Code 1014 – Basis of Property Acquired From a Decedent
Bought at $10,000, now worth $200,000. Gift it during your lifetime and the recipient takes a $10,000 carryover basis with $190,000 of built-in gain waiting to be taxed.5Office of the Law Revision Counsel. 26 U.S. Code 1015 – Basis of Property Acquired by Gifts and Transfers in Trust Hold it until death and their basis resets to $200,000, erasing the capital gains tax on that appreciation.14Office of the Law Revision Counsel. 26 U.S. Code 1014 – Basis of Property Acquired From a Decedent
One anti-abuse rule to know: if you gift appreciated stock and the recipient gives it back to you or your spouse, and the original donor dies within one year, the stepped-up basis doesn’t apply to the person who gifted it back. Congress closed that loophole long ago.
Gifting during your lifetime still makes sense in many situations: when you want the recipient to have the shares now, when the stock hasn’t appreciated much, or when you’re trying to reduce a large taxable estate. For highly appreciated shares where estate size isn’t a concern, the stepped-up basis is one of the most valuable provisions in the code, and it belongs in the decision.