Investor never sold any stock instead she continuously withdrew cash over a period of years from increased valued portfolio using a margin account. Today investor is an elder. All remaining equity is pure profit. She wishes to give party $12,000 tax free gifts of remaining stock. If she gifts $18,000 of stock still on 33% margin the net value of the gift would be $12,000.
If investor gives away 100% of her portfolio there would be nothing left to sell thus there would be no reportable (taxable profit). Does this make sense and is it legal.
Example:
1995 investor buys $10,000 worth of stock. 1996 stock value $11,000 1997 investor borrows $2000 against stock - $9,000 remaining equity 1998 stock value $13,000 - $2000 margin - $11,000 remaining equity 1999 investor borrows $4000 - $7,000 remaining equity 2000 stock value $15,000 - $6000 margin - $9,000 remaining equity 2001 stock value $18,000 - $6000 margin - $12,000 remaining equity 2002 Investor gives $18,000 gift of stock with $6,000 margin - gift value $12,000We know the recipient of $12,000 has no taxes due. What about the grantor who was relieved of the $6000 potential taxable profit..