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Subject Author Date
Gift Tax Exclusion aturchin45 06-28-2008
Posted by aturchin45 on June 28, 2008, 11:55 pm
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 I want to give my son common stock, which has zero cost basis. The
gift tax exclusion is 12K.

Does 12K is the current value of the stock? Or is a gift of 14K which
after pays 15% cap gain tax equals around 12K. So really is the 12K
pretax or after tax?

Thanks, Alex

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Posted by Bill on June 29, 2008, 8:53 am
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aturchin45@hotmail.com posted:

>I want to give my son common stock, which
>has zero cost basis. The gift tax exclusion is
>12K.
>Does 12K is the current value of the stock? Or
>is a gift of 14K which after pays 15% cap gain
>tax equals around 12K. So really is the 12K
>pretax or after tax?

If you're giving him the stock, you will be transferring your basis
along with the shares -- i.e., zero -- and a contingent tax liability
for when he sells the stock. The "theoretical value" of your gift would
be the average market valuation on the day of transfer (or the closing
value on that date) -- without considering tax implications. This is an
interesting question -- because it appears to be a "tax-free" gift on
the face of it -- but it's really a gift which carries a tax liability
passed on to the recipient.

If you want to give him $12,000 -- the current limit, above which a
return (Form 709) would be required, then you could sell the stock and
give him the cash. (Of course, you would owe any tax obligation
incurred.) I believe that if the value of your stock on the day you
transfer it, exceeds $12,000, then this requirement would kick in.

Bill

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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
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<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
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Posted by Bill Brown on June 29, 2008, 9:21 am
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On Jun 28, 11:55 pm, aturchi...@hotmail.com wrote:
> I want to give my son common stock, which has zero cost basis.  The
> gift tax exclusion is 12K.
>
> Does 12K is the current value of the stock?  Or is a gift of 14K which
> after pays 15% cap gain tax equals around 12K.  So really is the 12K
> pretax or after tax?
>

The current value of the stock is its fair market value on the date of
the gift. As the other Bill noted, the current value is the value used
for gift tax purposes. If you also gift your son the cash needed to
pay income tax on his sale of the stock (his basis would also be zero)
that dollar amount is added to the FMV of the stock to determine the
total gift.

Good luck.

Bill B

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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
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Posted by Kurt Ullman on June 29, 2008, 10:14 am
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In article

> On Jun 28, 11:55 pm, aturchi...@hotmail.com wrote:
> > I want to give my son common stock, which has zero cost basis.  The
> > gift tax exclusion is 12K.
> >
> > Does 12K is the current value of the stock?  Or is a gift of 14K which
> > after pays 15% cap gain tax equals around 12K.  So really is the 12K
> > pretax or after tax?
> >
>
> The current value of the stock is its fair market value on the date of
> the gift. As the other Bill noted, the current value is the value used
> for gift tax purposes. If you also gift your son the cash needed to
> pay income tax on his sale of the stock (his basis would also be zero)
> that dollar amount is added to the FMV of the stock to determine the
> total gift.
>
Since the taxes would not need to be paid until April of the
following year, wouldn't it make more tax sense to give the stock now
and the cash to pay income taxes the next year? Then you would get
another round of the exclusion.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Bill Brown on June 29, 2008, 6:42 pm
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>
>    Since the taxes would not need to be paid until April of the
> following year, wouldn't it make more tax sense to give the stock now
> and the cash to pay income taxes the next year? Then you would get
> another round of the exclusion.
>

Yep, it sure would.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

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