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Is there any way to avoid long term capital gains tax? I read somewhere that if you gift stock to an immediate family member that is in a lower tax bracket, the capital gains tax could be lower or zero. I am in the 28% tax bracket so I know I have to pay at least 15%. However, my sister is in the 15% income tax bracket, so it appears that the capital gains tax would be zero.
I'd be gifting her about 89,000 dollars in stock... However, I know there's an annual limit of 14,000 without being hit with a gift tax.
so, my questions are..
1. First of all, is gifting stock even a viable method of avoiding or reducing capital gains?
2. I've never gifted any stock or property to anyone else before. If I gift 89k in stock, how do I determine what the gift tax is? Is it 40%?
3. If I only gift up to 14k, I understand that I don't have to report that amount. If that's the case, then personally I'd be paying tax on 75k (89k-14k). This would save me about 2100 dollars in tax. Is it worth it to gift 14k in stock to save 2100 dollars or are there other costs or fees associated with gifting that I'm not thinking of?
When you gift to anyone the cost basis changes for them, might not apply to a spouse I forget but anyone else gets new basis. If you bought at 1.00 and a year later gifted it to your sister when it was at 100.00, for tax purposes her cost basis is 100.00 and if she sold immediately she could have zero cap gains.
Gifting stock is pretty popular we do it all the time
If you go over the 14,000 you simply report and apply it against your lifetime exemption
When you gift to anyone the cost basis changes for them, might not apply to a spouse I forget but anyone else gets new basis. If you bought at 1.00 and a year later gifted it to your sister when it was at 100.00, for tax purposes her cost basis is 100.00 and if she sold immediately she could have zero cap gains.
Gifting stock is pretty popular we do it all the time
Interesting. So why wouldn't you do that to your kids and have them cash it out and give it back to you? It would be difficult to track cash by the IRS, especially if you are retired and maybe have a hundred k or so in savings already.
Interesting. So why wouldn't you do that to your kids and have them cash it out and give it back to you? It would be difficult to track cash by the IRS, especially if you are retired and maybe have a hundred k or so in savings already.
I'm actually misleading there, it's charities that get the step up not individuals. Terrible mixup
I purchased the stock at 2.12 and it's now worth 89 a share. I've had them for 3 years. I was going to sell 1000 shares, but started contemplating this whole gifting scenario. I'm not sure what my personal AGI will be for this year, but it's most likely over 74k.
So, does anyone know what the gift tax rate actually is? I understand that if I gift up to the annual limit of 14k, then there's no gift tax. However, if I want to gift all 89k of this money, I'm going to have to pay a gift tax correct? Also, if my sister sells the stock, will that influence her income tax?
I purchased the stock at 2.12 and it's now worth 89 a share. I've had them for 3 years. I was going to sell 1000 shares, but started contemplating this whole gifting scenario. I'm not sure what my personal AGI will be for this year, but it's most likely over 74k.
So, does anyone know what the gift tax rate actually is? I understand that if I gift up to the annual limit of 14k, then there's no gift tax. However, if I want to gift all 89k of this money, I'm going to have to pay a gift tax correct? Also, if my sister sells the stock, will that influence her income tax?
Thanks
If you gift more than the $14k the excess can charged to your unified credit (estate tax limit) which is $5.4 million in 2015 (the unified credit is a lifetime amount, not a per year amount).
If by chance you did pay gift tax on a gift, the amount you pay is added to the cost basis of the recipient of the gift.
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