Gift Question - Combine Gift w/Repay of Short Term Loan

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
boglesmkcents
Posts: 88
Joined: Tue Jul 24, 2012 4:57 pm

Gift Question - Combine Gift w/Repay of Short Term Loan

Post by boglesmkcents »

I have a question regarding a gift to our daughter...

We plan to gift highly appreciated stock (Vanguard S&P 500 Index mutual fund) to our adult daughter, so she can sell the stock and use the proceeds to pay for her tuition. She is no longer a dependent. Since she is in a low tax bracket, she should not owe CG tax on the sale of the appreciated stock.

So far so good, except that the first installment of tuition is due this week before the stock will be transferred to her. Is there any IRS issue if we pay the first installment, and she then uses proceeds from the gift to reimburse us after she sells the stock? How do we make this transactions "IRS-OK"?
Should we write up a short agreement to document the tuition payment as a loan with nominal interest to make it legal?

Any advice/opinion appreciated.
samsmith
Posts: 126
Joined: Sun Mar 15, 2015 9:33 am

Re: Gift Question - Combine Gift w/Repay of Short Term Loan

Post by samsmith »

Make this simple. Have your daughter call school and explain tuition will be ~10 days late because she is waiting for some CDs to mature. I have had to do this on occasion and the schools have never made an issue nor were there any late fees. I think they were just glad to have the money by the start of the semester.
Topic Author
boglesmkcents
Posts: 88
Joined: Tue Jul 24, 2012 4:57 pm

Re: Gift Question - Combine Gift w/Repay of Short Term Loan

Post by boglesmkcents »

Thank you for the idea Sam -- in general, I think that is a good idea, however in this case, school starts this week and not sure I want to give her more things to worry about, hence my feeling that I want to make the first payment on time this week direct from my checking account.
Gill
Posts: 6782
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Gift Question - Combine Gift w/Repay of Short Term Loan

Post by Gill »

Yes, your idea should be fine. Write a letter to her explaining the transaction and keep a copy.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
Topic Author
boglesmkcents
Posts: 88
Joined: Tue Jul 24, 2012 4:57 pm

Re: Gift Question - Combine Gift w/Repay of Short Term Loan

Post by boglesmkcents »

Thank you for your input, Gill and Sam...
Post Reply