Gifting Brokerage Account

[6d1v7x3]

Can I give the contents of my Fidelity brokerage account to someone else who also has a Fidelity account? My account is composed of ETF's and they will not be sold by either myself nor the person who will receive them. Is this going to be a taxable event for either one of us? Thank you very much for any help.

[mhalley]

Yes, Fidelity has a procedure for gifting here
https://www.fidelity.com/customer-servi ... ift-shares
And here is info on tax implications of gifting
https://www.getearlybird.io/blog/stock- ... st%20basis.
Recipients never owe gift taxes, and you can use your gift tax exclusion (17k for 2023) (or fill out a form for irs if gifting more than 17k (12.9 million lifetime)) to not owe taxes yourself.
Note that if you gift etfs, you gift your cost basis so if the recipient sells they will owe cap gains taxes on your basis.

[6d1v7x3]

Yes, Fidelity has a procedure for gifting here
https://www.fidelity.com/customer-servi ... ift-shares
And here is info on tax implications of gifting
https://www.getearlybird.io/blog/stock- ... st%20basis.
Recipients never owe gift taxes, and you can use your gift tax exclusion (17k for 2023) (or fill out a form for irs if gifting more than 17k (12.9 million lifetime)) to not owe taxes yourself.
Note that if you gift etfs, you gift your cost basis so if the recipient sells they will owe cap gains taxes on your basis.

Thank you so much for your reply. The person I am gifting to is a very close family member and I can guarantee you that they will not be selling. In fact, they want to return everything back to me in the future. Can that happen without any tax implications as well? I'm sorry for the complexity in my question.

[alex_686]

Yes, Fidelity has a procedure for gifting here
https://www.fidelity.com/customer-servi ... ift-shares
And here is info on tax implications of gifting
https://www.getearlybird.io/blog/stock- ... st%20basis.
Recipients never owe gift taxes, and you can use your gift tax exclusion (17k for 2023) (or fill out a form for irs if gifting more than 17k (12.9 million lifetime)) to not owe taxes yourself.
Note that if you gift etfs, you gift your cost basis so if the recipient sells they will owe cap gains taxes on your basis.

Thank you so much for your reply. The person I am gifting to is a very close family member and I can guarantee you that they will not be selling. In fact, they want to return everything back to me in the future. Can that happen without any tax implications as well? I'm sorry for the complexity in my question.

Why is this happening?

If this is to dodge taxes then the answer is no, it will be a taxable event. A gift must be a gift with no expectations of it being returned. If there are expectations then it is a loan.

[6d1v7x3]

I have passed along the information here and my family member will not be returning the ETFs in the future. Will my gifting these ETFs count as income for my family member?

[mhalley]

It will be income only if they sell, and only the amount above your basis.

[123]

The IRS does not consider gifts received as taxable income. Many other organizations follow the IRS guideline but different government and private programs (including financial organizations) may have their own definition of income and it could differ from the IRS.

[Navillus1968]

Can I give the contents of my Fidelity brokerage account to someone else who also has a Fidelity account? My account is composed of ETF's and they will not be sold by either myself nor the person who will receive them. Is this going to be a taxable event for either one of us? Thank you very much for any help.

Neither the donor (you) nor the donee (recipient of the gift) will pay taxes on your gift when the gift is made. However, the EFTs you gift carry with them your cost basis, so that if the donee ever were to sell the shares, their capital gains would be calculated on the price you paid & taxes would be due at that point. There are some exceptions (donations to charity, death of the donee), but that's the gist.

If your gift exceeds the Annual Gift Tax Exemption, which is $17,000 in 2023, the donor needs to report the gift to the IRS using Form 709. All this does is to keep track of the donor's gifts over his lifetime that exceed the annual exemption. That Form 709 amount reduces the donor's Estate Tax Exemption dollar for dollar.
This is a moot point for most people, because the Lifetime Gift & Estate tax exemption is huge- $12,920,000 for 2023.

Gift Tax article- https://smartasset.com/estate-planning/ ... -and-rates

[doobiedoo]

Can I give the contents of my Fidelity brokerage account to someone else who also has a Fidelity account? My account is composed of ETF's ..

Yes, Fidelity has a procedure for gifting here
https://www.fidelity.com/customer-servi ... ift-shares
And here is info on tax implications of gifting
https://www.getearlybird.io/blog/stock- ... st%20basis.
Recipients never owe gift taxes, and you can use your gift tax exclusion (17k for 2023) (or fill out a form for irs if gifting more than 17k (12.9 million lifetime)) to not owe taxes yourself.
Note that if you gift etfs, you gift your cost basis so if the recipient sells they will owe cap gains taxes on your basis.

I have gifted shares several times from my Fidelity taxable account. I followed the procedure linked above.
But I doubt you can gift the actual Fidelity account. That would involve changing Social Security account numbers, title, beneficiaries, etc. From Fidelity's point of view this is complicated, especially when you consider things like auto-invest options, and check-writing capabilities.

Instead I think you would gift all the shares of all the ETFs. I don't know if that would require multiple forms and letters of instruction.

[6d1v7x3]

And would the recipient of the gifted ETFs have to pay any additional tax while holding them? Like I said they have no intention of selling.

[delamer]

And would the recipient of the gifted ETFs have to pay any additional tax while holding them? Like I said they have no intention of selling.

If the ETFs throw off dividends/interest/capital gains, then those will be taxable income for your family member in the year the earnings occur.

Whether your family member actually owes any taxes depends on their personal tax situation.

[6d1v7x3]

I know the ETF pays dividends once in a while. If they reinvest the dividend into the same ETF, do they still have to pay income tax on the dividend?

Also, when I gift these shares will the cost basis be reset or change in any way?

[placeholder]

I know the ETF pays dividends once in a while. If they reinvest the dividend into the same ETF, do they still have to pay income tax on the dividend?

Once you give the securities to the person they own them so it's just like when you owned them so you should already know what the tax situation is.

Also, when I gift these shares will the cost basis be reset or change in any way?

No.

[doobiedoo]

OP, I am going to caution you.

You are asking very narrow questions. The answers you are getting are valid, but there could be other circumstances/details that override/dwarf the answers [or even the questions]. With such narrow questions, we on this forum have no way of evaluating your actual situation.

Most real-life in-person financial advisors would not allow you to ask such narrow questions.
They would insist on asking for and getting your circumstantial details before giving you advice.

[livesoft]

A lot of the comments assume there are unrealized capital gains, but there could be unrealized capital losses. The rules are a little different if one gifts shares that have unrealized losses.

[6d1v7x3]

A lot of the comments assume there are unrealized capital gains, but there could be unrealized capital losses. The rules are a little different if one gifts shares that have unrealized losses.

Can you please tell me what the rules are for unrealized losses? Thank you.

[Navillus1968]

A lot of the comments assume there are unrealized capital gains, but there could be unrealized capital losses. The rules are a little different if one gifts shares that have unrealized losses.

Can you please tell me what the rules are for unrealized losses? Thank you.

Try this article- https://www.schwab.com/learn/story/how- ... r-receiver

Gifting losses is quite a bit more complex than gifting shares with gains. Good record keeping is key.

[livesoft]

Can you please tell me what the rules are for unrealized losses? Thank you.

Sorry, I cannot as I have never had to do that, so I have not studied them.

[6d1v7x3]

Just so everyone knows I bought these shares back when they were worth more than they are now. So that means I'd be gifting unrealized capitol losses? Sorry for my ignorance. Does the fact that my family member won't be selling matter? Thank you again for your help.

[livesoft]

Just so everyone knows I bought these shares back when they were worth more than they are now. So that means I'd be gifting unrealized capitol losses? Sorry for my ignorance. Does the fact that my family member won't be selling matter? Thank you again for your help.

Why not sell them and gift the cash?

[Navillus1968]

Just so everyone knows I bought these shares back when they were worth more than they are now. So that means I'd be gifting unrealized capital losses? Sorry for my ignorance. Does the fact that my family member won't be selling matter? Thank you again for your help.

If your family member never sells, one would think that eventually the losses will become gains as, over time, the ETFs recover what they lost. This may make some time, depending on the particular ETFs & when they were bought, etc., but the principle is sound.

Once the share price goes above your cost basis, your basis becomes the donee's basis as well. If your relative literally never sells the shares & holds them until death, the shares will be passed to his heir with a new stepped up basis to the day of the donee's death.

Example- Today you donate shares you bought for $10/share, they are worth $8/share today. Because there's a loss donee's basis is $8/share & his holding period starts today.
If the shares rise over 2 years to more than $10/share, the donee's basis becomes $10/share (your old cost basis). His holding period also resets to what your purchase date was.

If the donee passes away in 10 years & the shares are worth $50/share, his heir inherits the shares with a $50/share basis. The heir could sell the shares the next day & pay zero taxes.

[LilyFleur]

Under current tax law, your heir would receive the equities in your brokerage account at a stepped-up cost basis at the time of your death. Why not designate the account as a transfer-on-death account, and be done with it?

You say this person will not be spending out of this account anyway.

Your heir would have access to the cost-basis information in the account when you die (which could get lost in an ETF transfer now).

This thread is odd. First you said you want to gift it to someone, and asked how it would be treated for taxes if they sold some of the ETFs. Then you checked with them, and they are not going to be selling anything. Now you are asking about capital losses. You only need that information if the equities are going to be sold.

Gifts above a certain ceiling have to be reported on your taxes. Other Bogleheads can let you know the amount and the form number.

[doobiedoo]

Under current tax law, your heir would receive the equities in your brokerage account at a stepped-up cost basis at the time of your death. Why not designate the account as a transfer-on-death account, and be done with it?

You say this person will not be spending out of this account anyway.

Your heir would have access to the cost-basis information in the account when you die (which could get lost in an ETF transfer now).

This thread is odd. First you said you want to gift it to someone, and asked how it would be treated for taxes if they sold some of the ETFs. Then you checked with them, and they are not going to be selling anything. Now you are asking about capital losses. You only need that information if the equities are going to be sold.

Gifts above a certain ceiling have to be reported on your taxes. Other Bogleheads can let you know the amount and the form number.

OP, why do you want to gift your shares? What are you trying to accomplish?

[Navillus1968]

Just so everyone knows I bought these shares back when they were worth more than they are now. So that means I'd be gifting unrealized capitol losses? Sorry for my ignorance. Does the fact that my family member won't be selling matter? Thank you again for your help.

Why not sell them and gift the cash?

6d1v7x3-

You should take this advice. The capital loss gets banked by you, for use in future either deducting from income $3k per year or deducted from capital gains you incur. Your relative gets cash, which has no cost basis that needs tracking- he invests how he sees fit. It's simple, everybody wins.

You might want to read the tax loss harvesting (TLH) wiki- https://www.bogleheads.org/wiki/Tax_loss_harvesting

Your relative can even buy back the exact same EFT, since the wash sale rule only applies to you & your spouse. Genius.

[6d1v7x3]

If my relative were to gift the ETFs to someone else in a few years would my cost basis be transferred to that third person?

[Navillus1968]

If my relative were to gift the ETFs to someone else in a few years would my cost basis be transferred to that third person?

Yes. Edited to add- unless the shares still had a loss, then the basis that transferred would be the fair market value on the day of the original gift, per the complex gifting losses rules. That's my understanding, but I am happy to be corrected.

[6d1v7x3]

If my relative were to gift the ETFs to someone else in a few years would my cost basis be transferred to that third person?

Yes. Edited to add- unless the shares still had a loss, then the basis that transferred would be the fair market value on the day of the original gift, per the complex gifting losses rules. That's my understanding, but I am happy to be corrected.

And what if the shares are worth more than I paid for them originally when my relative transfers them to someone else several years from now?

[Navillus1968]

If my relative were to gift the ETFs to someone else in a few years would my cost basis be transferred to that third person?

Yes. Edited to add- unless the shares still had a loss, then the basis that transferred would be the fair market value on the day of the original gift, per the complex gifting losses rules. That's my understanding, but I am happy to be corrected.

And what if the shares are worth more than I paid for them originally when my relative transfers them to someone else several years from now?

My understanding is that, once the share price rises above what you paid, the loss is wiped out & your original basis is what the donee would use if he gifted the shares. At that point, your original purchase date also becomes the donee's holding period for short term/long term capital gains calculations. I am not an expert in these matters, but that's what I think happens.

I still think the simplest & best path forward is for you to sell the shares & gift the cash to your relative. This gives you a capital loss to use going forward for income tax deductions & reducing capital gains in the future, plus your relative has complete flexibility to invest the cash without a lot of complex record-keeping.

[samsmith]

As others have said, it is not clear exactly what the original poster is trying to accomplish. It does feel like we are not getting the entire story. My assumption was that the plan was going to be to gift assets to his parent(s) and then presumably inherit the assets back in the future (that is why OP is so sure that the gifted assets would not be sold). Anyway that was my assumption. The concept would have been that he would gift appreciated assets and then inherit them with a stepped up basis. But if the assets have an unrealized loss, this entire "plan" is complicated and makes no sense. As someone else said, if the assets really have an unrealized loss, then just sell them and gift the cash. That would allow the original poster to "harvest" the loss. This would be cleaner, easier and better tax wish then gifting assets with unrealized losses. The gift recipient could always just rebuy the same asset (if that particular asset had to be owned). And yes that rebuy should be 30 days or greater from the sale to avoid any wash sale concern. It just feels like we are not getting the entire story.

[6d1v7x3]

I explained the situation to Fidelity and they informed me that I can simply add my relative as a joint owner to the account. This seems like the right way to go but they said I have two options: I can either add my relative as a joint owner to the existing account or create a new account with both of us as joint owners and transfer the ETFs to this new account. Does anyone know which way would prevent my cost basis from changing? Are the complex rules governing gifting stock losses going to apply in this situation? The ETFs are worth less now than when I purchased them a couple of years ago. Thank you so much for any help and sorry for all the confusion.

[Navillus1968]

I explained the situation to Fidelity and they informed me that I can simply add my relative as a joint owner to the account. This seems like the right way to go but they said I have two options: I can either add my relative as a joint owner to the existing account or create a new account with both of us as joint owners and transfer the ETFs to this new account. Does anyone know which way would prevent my cost basis from changing? Are the complex rules governing gifting stock losses going to apply in this situation? The ETFs are worth less now than when I purchased them a couple of years ago. Thank you so much for any help and sorry for all the confusion.

I am far from an expert on the ramifications of adding a non-spouse as a joint account holder, but I don't think your basis in the shares will be affected.

However, since 100% of the shares were originally bought by you, creating a joint account could result in the IRS or your state tax authority considering that a gift to the new joint account holder has been made, either at the time of the creation of the joint account or if the joint account holder were to withdraw money from the account.

"Finally, there can also be unintended tax consequences for joint accountholders. If only one person deposits money into a joint brokerage account, then that can sometimes constitute a taxable gift from the depositing accountholder to the other accountholder. In some cases, simply making the deposit could be enough to be deemed a taxable gift, while in others, it would require the accountholder to withdraw money from the account before a gift would have taken place for tax purposes. Either way, though, things can get complicated in a hurry -- even if no one ever had any intention of using the account as a gift-giving mechanism."
https://www.fool.com/the-ascent/buying- ... -and-cons/

"If you own a joint brokerage account with someone other than your spouse, any deposits you make into the joint account could be deemed a gift to the other account holder, which could trigger gift tax liabilities. Depending on the laws in your state, the gift tax could be triggered when you deposit the money or when you withdraw the money. Check with an attorney or your tax accountant in this case."
https://smartasset.com/investing/joint- ... ge-account

I am still not clear what your goal or motive for gifting/creating a joint account with your relative is, but based on the limited knowledge that I have, I still think the easiest & simplest way forward is for you to sell the depressed shares, realize the capital loss yourself & gift the cash to your relative.

This way, there are no complex capital gain/loss rules to follow & you have the capital loss to aplly against future ordinary income tax and/or future capital gains. With a capital loss realized, you save on taxes & zero complex accounting is required for your or your relative.

[placeholder]

It's still not clear what the intent is because at least originally the shares had losses and ought to at least be near even so why not sell the shares and give the cash?

[mkc]

Not knowing OP's intent with this, there can also be the issue of making an older relative a joint owner on an account, and then that older relative needing Medicaid. In some states, 100% of the assets of that joint account will be considered assets belonging to the older relative (because they can access 100% of the balance) and available to pay for long term care.

OP really needs to explain the intent of this gifting or making someone joint on an account.