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Archive for the ‘Gift Tax’ Category

PostHeaderIcon Gifts of Appreciated Stock

This question came up recently.  I had a financial adviser ask me if a client could gift some appreciated stock to their child and receive a step up in basis.  Unfortunately, you only get a step up in basis when it’s an estate situation.  When you gift appreciated stock, both the holding period and the basis carry over. So if your parents bought stock back in 1980 for $1,000 and now it’s worth $100,000 your basis would be $1,000 but you’d get the 1980 holding period so it would be long term capital gain if you sold it.  For gift tax purposes, the value of the gift would still be the fair market value, which in this case, would be $100,000.

Note that this is different than if you gift your shares to a charity.  In that situation, there is no gain triggered but your charitable deduction is the full fair market value of the shares.


PostHeaderIcon Gift Tax Primer

It’s the end of the year and you want to move some money to your kids for estate tax planning purposes.  Or they just need a helping hand.  What can you do and what can’t you do and when do you have to file a dreaded gift tax return?  As always, these are general rules so be sure to talk to you adviser to discuss your personal situation.

Since 2009, the annual gift tax exemption has been $13,000.  That means you can give anyone a gift of up to $13,000 in a calendar year without filing a gift tax return.  Pretty straightforward but you can do even more if you’re married.  Since you can technically say that your spouse gave the same amount, if you’re married you can give up to $26,000.

To take this a step further, if you’re married and you’re gifting to your child that’s part of a family of four, you could give $26,000 per person, or $104,000, all without needing to do a gift tax return.

You can give gifts to your spouse without any gift tax implications so that’s one of the exclusions.  Also keep in mind, if you exceed the limit and have to file a return, you probably won’t have to pay tax because of the unified credit but once you start chewing into your unified credit, it could eventually affect how much your estate can shield from taxes.

For more information, be sure to check out Publication 950.