Today, my wife and I went to our stock broker and transferred fifteen thousand dollars worth of stock to our daughter's brokerage account. Although the account is in my wife's name, we, as husband and wife, get an annual exemption far in excess of that figure. What puzzled me was the the broker (on the phone) asked my wife if this were a gift. Does this mean that the IRS will be expecting a gift tax return?
You must file gift tax returns to elect gift splitting. Otherwise, as I believe the exemption is still only $14000, your wife might have to file a return and use up $1K of the $10M lifetime gift tax exemption.
-- Arthur Rubin, AFSP, CRTP, Brea, CA
YES! And there's a limit above which the recipient must pay taxes. The limit once was $7500, but that was a few years ago ---best check with IRS.
My understanding is that the annual gift tax exemption was raised to $15,000 starting in 2018.
The gift tax exemption amount for years was $10,000 per donor per donee. Then at one point that amount was indexed for inflation, and since then has gone up. For the last few years it was $14,000, but starting in 2018 it's $15,000.
So if the amount of the gift was exactly $15,000 or less, or OP lives in a community property state, then no gift tax return is required. If the gift from wife was the only gift she had to daughter during the year, then no gift tax return is required.
But if the total gifts from either (but not both) of you to daughter during the year will amount to more than $15,000, a gift tax return is required. If total gifts are under $30,000, you can elect to "gift split" so the gift is treated as exactly half coming from each spouse. But you need to file a gift tax return for that.
The gift tax exclusion for 2018 may or may not be $15,000. While it was scheduled to increase to $15K this year, the passage of the TCJA changed the inflation index to the chained CPI for all indexed values. The IRS has not yet reviewed all of the values to see which, if any, are affected this year. They have announced that the retirement plan contribution limits are unchanged from the previously released values.
Ira Smilovitz, EA
Thanks for the information, Ira.
Gift taxes, if any, are paid by the gifter, not the recipient.
Nobody answered the question: I did not ask whether a gift tax return was required to be filed. I want to know whether the broker going to tell the IRS that I gave my daughter $15k.
After thinking about it, I don't think so. By declaring the stock transfer as a gift, the broker knows that my daughter inherited my cost basis. This is what will be reported to the IRS when my daughter sells the stock.
There is no gift tax equivalent of a 1099 - at least I've never heard of one. So it is highly unlikely that the IRS will expect a gift tax return. Since the annual gift tax exclusion increased to $15,000 in
2018, no gift tax return should be required anyway, even if the IRS somehow got information about the gift elsewhere.
Is there any requirement to report large stock transfers in general, analogous to the way banks are required to report large cash transactions (to help detect money laundering)? Maybe the fact that it's a gift obviates this reporting?
I'm not aware of any gift tax equivalent of cash reporting requirements. A change of ownership of stock that is in the hands of a stock broker wouldn't be something that would ordinarily be thought of as something that would aid money laundering, whether it's a gift or not. And as far as I'm aware it's not reported (except perhaps on a
1099 if appropriate) even if it's not a gift.BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.