Paying Capital Gains

Robin received a stock worth $22,000 from grandfather, so she and Dave talk about the options for what to do with it.

QUESTION: Robin has the chance to sell some stock given to her from her grandfather. She wants to sell it but isn’t sure about taxes or anything like that. The stock is worth $22,000 and they owe $150,000 on their home, a full emergency fund and college funding is going.

ANSWER:  You could either throw it at the kids college fund, and be done with that. It’s nice to have that finished. Or, you could pay down on the house and get rid of the private mortgage insurance. Your basis I the stock for calculating capital gains tax is what you’re grandfather paid for it. If he got it as compensation or a bonus, then it is income and it counts as a zero basis, which means you’ll be subject to capital gains, which means about a $3,000 tax bill on this. So set that money aside so it doesn’t sneak up and get you.