My brother is having his first child. I would like to give the infant a gift of securities of some sort, but in a way that has no tax consequences. I'm not planning to give that much, just a few hundred dollars. Other than a non-dividend paying stock, is there any way to do this? Alas, since he will only be 8 months old by year-end, I don't think I can pay him $250 to mow my lawn, then suggest that he contribute the $250 to a Roth IRA.
Any ideas?
When my son was born I wanted to do something like that for him. A friend who was a very successful investor suggested gold. Unfortunately at that time it didn't work out the way I'd wanted - my son sold it 13 years later, for about the same price it was bought for, and put it into the stock market (and proceeded to triple it over the next year).
How about a 529 plan? It will go toward his college education, and my understanding is that there is normally no tax on the interest, etc., it earns.
How about U.S. Series I Savings Bonds?
Well, I guess it depends on exactly how strict you want to be with the "no tax consequences" part of this.
As long as the investment income is less than (currently) $950 per year, there would not be any need to file an income tax return for the child. So, any gift of securities of a few hundred dollars would likely fit that criteria. [If anyone happens to know of an investment where a few hundred dollars generates more than $1000/year of return, please send me a private Email] Technically this has some tax consequences, but since they don't involve a need to file a return, that may suffice. Remember that if you do give securities, to also pass on the information about the cost basis, since that will transfer to the recipient.
Other options would be some account like an Education IRA or 529 plan contribution, but that might not be practical for only a few hundred dollars. Ed-IRA account fees might be too onerous, and a 529 plan would be a bit of overkill. Still, they might be viable.
What does your brother think?
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