College Tuition Stock Sales

[antonr01]

When my son was born, my in-laws gave my son $5000 worth of
AT&T stock. Over the years there have been many spinoffs,
etc. In 2005, I sold some of the stock which was a spinoff,
Comcast, $5000 worth. Since it was a spinoff, I have
essentially all profit and no cost.

I intend to report this income on my son's tax return, not
my tax return. Is it a straight deduction if the money is
being used for college tuition, or are there some things I
need to be careful of.

 

[Rich Carreiro]

When my son was born, my in-laws gave my son $5000 worth of
AT&T stock. Over the years there have been many spinoffs,
etc. In 2005, I sold some of the stock which was a spinoff,
Comcast, $5000 worth. Since it was a spinoff, I have
essentially all profit and no cost.

That's not true. It being a spin-off does NOT intrinsically
make it "all profit and no cost". You need to get from ATT
a copy of their spinoff worksheet so you can determine how
much of the original basis flowed through to Comcast.

I intend to report this income on my son's tax return, not
my tax return.

It's not a matter of intent -- you simply have no choice.
The transactions MUST be reported on your son's return. You
can NEVER report a child's stock sales on your own return.

 

[Benjamin Yazersky CPA]

When my son was born, my in-laws gave my son $5000 worth of
AT&T stock. Over the years there have been many spinoffs,
etc. In 2005, I sold some of the stock which was a spinoff,
Comcast, $5000 worth. Since it was a spinoff, I have
essentially all profit and no cost.

I intend to report this income on my son's tax return, not
my tax return. Is it a straight deduction if the money is
being used for college tuition, or are there some things I
need to be careful of.

When there is a spinoff, you have to allocate the basis
between the 2 companies. So, you do have basis in the
spinoff stock sold. The co website may have info on how much
to allocate to each spinoff.

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