thanks for your input.
Just one point of confusion for me.
For the example stock2: My cost basis was 12, the FMV per share at transfer was 10, he sold at 13, your interpretation is that he basis is the donor’s basis because there is a gain using both basis. OK, got it.
But let me make one small change:
stock2: My cost basis was 12, the FMV per share at transfer was 10, he sold at 10.01. Now there is a loss using the donor’s basis but a gain using the FMV basis. Seems that the it would be to the government’s advantage to tax a gain on the FMV basis rather than to permit a tax loss based on the donor basis. I say that be cause if someone has a stock with a huge capital loss on paper they could transfer that tax loss to someone else (if the price goes up slightly after the transfer and is then sold). The recipient might be in a much higher tax bracket, making the tax loss more valuable. Seems like the government would frown on that.