<prompt> Human: Hello allIm hoping to find some advice in this sub to a question for which I have received several various answers.A few years ago, my grandmother gifted to me a mutual fund that she initially invested about 12,500 into. I kept it for about a year and it increased to 13,600. Earlier this year, I sold the mutual fund and deposited it into my bank account at one time. My grandmother is alive, so I dont think this would be classified as an inheritance, but rather a gift. What do you think? My concern is that on this upcoming tax year Im going to owe thousands of dollars on this money. It is my understand that I would only have to pay on the gains on the 1100 that it increased. Do I not have to pay taxes on the original amount of 12,500?I live in Virginia, make about 27,000 a year, and only take one federal deduction. Im anxious about whether or not a large chunk of this gift will be taken by the government.Thanks in advance for your advice!!  <response>: Youll have to pay taxes on the gains on the stock since your grandmother bought it Source So if, for example, she paid 8,000 and you sold it for 13,600, you have to pay capital gains taxes on 5,600.The good news in your situation is that the long-term capital gains rate is lower than your normal tax rate; at your tax bracket, the capital gains tax is 0 so you probably wont have to pay anything.There are also special rules if the stock went down since she bought it, which are described in the link I posted. 