Sell Stock at a Loss to Your Daughter

Here is a scenario that might interest you. Say, you bought stock in 2022 for $17,000, and in 2024 you sold it to your daughter at fair market value for $9,000. What would be the loss deduction you claim on your 2024 tax returns? The answer is $0. This is how it works. The loss cannot be deducted because the sale was made to your daughter, who is related to you.

Now, if she sells the stock at a loss, her basis is $9,000, and the sale is at a gain, she may use your unrealized loss to reduce her gain.

Here are a few examples:

Case 1: Your daughter sells the stock for $7,000, and she loses $2,000 ($9,000-$7,000). Your loss is lost.

Case 2: If your daughter sells the stick for $11,000, she has zero gain ($11,000-$9,000=$2,000 gain -$2,000 of your loss, which she may use because she has a gain). The key point $6,000 of your loss is lost.

Case 3: Your daughter sells the stock for $30,000, and she has a $13,000 gain ($30,000-$9,000-$8,000 unrealized loss, your loss on the sale to her, which she may use because she has a gain.

Here are some planning tips:

Plan 1: Don’t sell stock to your daughter at a loss

Plan 2: If you sell stock to your daughter at a loss, ensure you let her know the amount of your loss plus the rules that apply to her on this loss.