Gifting stock to family

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Topic Author
RobG
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Gifting stock to family

Post by RobG »

I stumbled across this article: http://www.forbes.com/sites/ashleaebeli ... -tax-hike/ and it gave me an idea.

I am paying back a loan from my father at $1000/month. According to the article I can gift appreciated stock to him and he will pay taxes on the gains, but he is retired and doesn't make enough money to pay taxes, thus it is an arbitrage of sorts. Making my monthly payment to him in this way is desirable since I want to reduce the amount of an appreciated ETF that I have in a Scottrade account.

While I have found info on gifting to charities, I can't quite figure out how to gift an ETF to a family member. I've a quick search of both the IRS and Scottrade but the info seems buried. Can someone point me in the correct direction and/or point out possible pitfalls from doing this?

I am also paying him interest on this loan which I deduct from my taxes. Will this affect anything?
Stay thrifty my friends.
JW-Retired
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Re: Gifting stock to family

Post by JW-Retired »

RobG wrote:I stumbled across this article: http://www.forbes.com/sites/ashleaebeli ... -tax-hike/ and it gave me an idea.

I am paying back a loan from my father at $1000/month. According to the article I can gift appreciated stock to him and he will pay taxes on the gains, but he is retired and doesn't make enough money to pay taxes, thus it is an arbitrage of sorts. Making my monthly payment to him in this way is desirable since I want to reduce the amount of an appreciated ETF that I have in a Scottrade account.

While I have found info on gifting to charities, I can't quite figure out how to gift an ETF to a family member. I've a quick search of both the IRS and Scottrade but the info seems buried. Can someone point me in the correct direction and/or point out possible pitfalls from doing this?

I am also paying him interest on this loan which I deduct from my taxes. Will this affect anything?
I gifted some stock to a daughter some years ago. My Fidelity brokerage account people said to just have my daughter open an account with them, and once I knew the account number I could just transfer some of my stock into it. She opened the account and I think I did the transfer into it online. It's been a while so I can't be sure of the details but I can recall it was a trivial process.
JW
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Peter Foley
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Re: Gifting stock to family

Post by Peter Foley »

I gifted appreciated mutual fund shares to both my daughters last year. I had them set up an account at Schwab, where I have a taxable account, and then provided Schwab with a letter to transfer xxx number of shares to their account numbers.
hicabob
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Re: Gifting stock to family

Post by hicabob »

Vanguard requires you go through the Medallion Signature process to do the same, but other than that it's straightforward enough.
Retread
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Re: Gifting stock to family

Post by Retread »

RobG wrote:I am paying back a loan from my father at $1000/month. According to the article I can gift appreciated stock to him and he will pay taxes on the gains...
I hate to be the guy who always drops you-know-what in the punch bowl, but this won't work or, at the very least, it's tax evasion. Your father is not the one to pay tax on the gain, you should, when you transfer appreciated stock in satisfaction of a debt obligation. OK, there you have it.
Bruce
absit iniuria verbis
Topic Author
RobG
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Re: Gifting stock to family

Post by RobG »

OK, it sounds like I (or him) just open a Scottrade account in his name and transfer the stock to him and he can sell it or whatever - just like he bought it.

Looking at For 709 instructions it doesn't look like I have to report it if it is under $14,000.
Stay thrifty my friends.
Topic Author
RobG
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Re: Gifting stock to family

Post by RobG »

Retread wrote:
RobG wrote:I am paying back a loan from my father at $1000/month. According to the article I can gift appreciated stock to him and he will pay taxes on the gains...
I hate to be the guy who always drops you-know-what in the punch bowl, but this won't work or, at the very least, it's tax evasion. Your father is not the one to pay tax on the gain, you should, when you transfer appreciated stock in satisfaction of a debt obligation. OK, there you have it.
Bruce
Is this your opinion of a moral obligation or the IRS's determination of a legal obligation?
Stay thrifty my friends.
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Eric
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Re: Gifting stock to family

Post by Eric »

Retread is right. See Treas. Reg. sec. 1.1001-2(a)(1) ("[T]he amount realized from a sale or other disposition of property includes the amount of liabilities from which the transferor is discharged as a result of the sale or disposition.").
Topic Author
RobG
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Re: Gifting stock to family

Post by RobG »

Eric wrote:Retread is right. See Treas. Reg. sec. 1.1001-2(a)(1) ("[T]he amount realized from a sale or other disposition of property includes the amount of liabilities from which the transferor is discharged as a result of the sale or disposition.").
Yeah, that occurred to me after I posted. Because it is a debt obligation I can't do it. :oops: This is good information none-the-less so thanks Retread. Dang IRS is more clever than people give them credit for :mrgreen:
Stay thrifty my friends.
Retread
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Re: Gifting stock to family

Post by Retread »

RobG wrote:
Retread wrote:
RobG wrote:I am paying back a loan from my father at $1000/month. According to the article I can gift appreciated stock to him and he will pay taxes on the gains...
I hate to be the guy who always drops you-know-what in the punch bowl, but this won't work or, at the very least, it's tax evasion. Your father is not the one to pay tax on the gain, you should, when you transfer appreciated stock in satisfaction of a debt obligation. OK, there you have it.
Bruce
Is this your opinion of a moral obligation or the IRS's determination of a legal obligation?
Sorry, it's both. Otherwise, it would be a great way to avoid capital gains by just paying your creditors with appreciated stock. Satisfying a debt with appreciated stock is no different from a tax perspective than if you sold it and used the proceeds to pay the debt.
Bruce
absit iniuria verbis
bdpb
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Re: Gifting stock to family

Post by bdpb »

hicabob wrote:Vanguard requires you go through the Medallion Signature process to do the same, but other than that it's straightforward enough.
If you sign up for Voice Verification you do not need a Medallion Signature.
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