On which price will I declare the shares gifted from father?

Question

Father gifted stock shares, what rate i will declare in returns, rate on the day of gift or rate when share purchased

Answer 1

For your tax returns, you will declare the shares at the rate (cost) at which your father originally purchased (declared) them, and the date of acquisition will be his original acquisition date. The gift itself does not trigger a tax liability for either party under normal circumstances.

Answer 2

Based on the available sources, when your father gifts you stock shares, the tax treatment is as follows:

• No Capital Gain Tax on the Gift Itself: The transfer of securities by way of a gift is not considered a taxable event, and therefore, no capital gain tax is required to be computed or collected at the time of the transfer. This aligns with section 79 of the Ordinance, which states that no gain or loss is recognized on the disposal of an asset by reason of a gift.

• Cost and Date of Acquisition for You: For future tax calculations when you dispose of the shares, the original date of acquisition and the original cost of the securities in your father's hands will remain the same for you (the transferee). This means you will use the price your father paid for the shares, not the market price on the day he gifted them to you. Similarly, for a security acquired through bequest or inheritance, the cost of acquisition is defined as the market price at which the deceased person paid or would have paid to purchase the security.

• Potential Exception for Tax Avoidance Schemes: There is an important proviso to consider. If the gifted capital asset (shares) is disposed of within two years of your acquisition, and the Commissioner is satisfied that such a gift arrangement is part of a tax avoidance scheme, then specific provisions of sub-section (3) of section 79 may apply to determine the cost of the asset in your hands. This suggests a potential re-evaluation of the cost if the transaction is deemed to be for tax avoidance purposes