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Posted by Phil Marti on April 16, 2006, 11:44 pm
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> This is US, tax year 2005. My father gifted me with stock
> in 2005. As part of the transfer he said he needed to move
> the money from one company to another.
We need to pause here. Your first sentence says you father
gave you some stock. The second sentence says you acted as
your father's nominee in selling some of his stock and
buying other. Which is it?
> Previously, I'd only
> worked with tax-defered Roth IRAs and the like so this
> didn't trigger any reaction. He made the gift, I sold the
> stock and bought the new stock and thanked him for the gift.
If that's all that happened, don't blame your father for the
decision to sell or your failure to find out the consequence
before you did it.
> I did my taxes as I did them last year, but during the
> "error checking" process I discovered the Capital Gains
> issue regarding this sale. I spoke to the IRS, but what
> they told me and what my father claimed are the tax rules
> regarding the gift are totally different. I will meet with
> an accountant tomorrow on this, but if anyone can give me
> some advice that would be much appreciated:
My money's on the IRS in this one, but let's look.
> Let's say it looks like this:
> Stock bought in 1980 for $100
> Stock gifted to me in 2005, value was $5000
> Stock sold immediately after gift for $5100
> In the Schedule D what is:
> Date Acquired
The date your father acquired the stock. Thoughtful givers
of stock include a copy of the purchase confirmation when
they give the stock, so the recipient will have this
information if they sell the stock.
> Cost Basis
$100
> short term or long term capital gains status
It's clearly long-term. Gifts bring with them the donor's
basis and holding period.
> My father claims his accountant claims that neither he nor I
> pay capital gains on the amount from $100-5000 because it was
> gifted, I only pay short term capital gains from $5000-$5100
> or $100.
Either your father is hosing you or his accountant is hosing
him.
> I understand from the IRS that I owe Short Term
>
> Capital Gains from $100-$5100 which are significant I don't
> know how they get short term capital gains yet still
> calculate the cost basis from 1980.
Well, too bad for me. The IRS was wrong, too.
> I read the instructions, but could not understand them
> enough to sign my name to it.
Try Publications 550 and 551.
--
Phil Marti
Clarksburg, MD
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