Gifting Appreciated Stock to Children


W

W

You can gift as much as $13K in appreciated securities to each child without
a gift tax and without needing to declare the gift on a return. My
question is who pays the capital gain on those appreciated securities? I
would have guessed the parent pays, but a book I read is claiming "The tax
on any gain would fall from your 15 percent rate to as low as 0 (zero)
percent...." That certainly implies the tax obligation is on the receiver
of the gift. Can someone clarify?
 
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J

JoeTaxpayer

You can gift as much as $13K in appreciated securities to each child without
a gift tax and without needing to declare the gift on a return. My
question is who pays the capital gain on those appreciated securities? I
would have guessed the parent pays, but a book I read is claiming "The tax
on any gain would fall from your 15 percent rate to as low as 0 (zero)
percent...." That certainly implies the tax obligation is on the receiver
of the gift. Can someone clarify?
Sure. Basis follows the gift. You gift $13K in securities, you also need
to tell the recipient the cost basis, so when they sell they know the
tax consequences.
There are a number of tangents to this, such as if the recipient is a
minor, they might be subject to the kiddie tax, so the sale winds up
taxed at the parents rate regardless.
Joe
www.joetaxpayer.com
 
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A

Arthur Kamlet

You can gift as much as $13K in appreciated securities to each child without
a gift tax and without needing to declare the gift on a return. My
question is who pays the capital gain on those appreciated securities? I
would have guessed the parent pays, but a book I read is claiming "The tax
on any gain would fall from your 15 percent rate to as low as 0 (zero)
percent...." That certainly implies the tax obligation is on the receiver
of the gift. Can someone clarify?
If the stock had gone up in value at time of gift, then child's
basis and acquisition date is same as donor's basis and date.


If not, stock holds a dual basis, actual basis is determined at time
of sale by using donor's basis to compute gain and using FMV at time
of gift and date of gift to compute loss.


If child sells, the first 1900 is taxed at child's rate and then
kiddie tax may apply to use higher of child's or parent's rate.
 

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