Gift of appreciated stock

His cost basis and acquisition date for appreciated stock are the same as yours. If he is under age 18, however, he may have to pay the Kiddie tax, which increases his tax rates on some income to be the same as yours. Thus it is possible that even if he sells his gifted stock, the tax rate he pays is the same as you would have paid. __ Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH

His cost basis will be your cost basis in the shares. Your gift includes the untaxed capital gains/appreciation.

Your basis transfers to your son. The amount of the annual gift exclusion is now $12000. You didn't tell us the age of your son. The tax ("Kiddie Tax") on investment income of minor children now extends to children that are under age 18 (used to be age 14).

I suppose he could sell the stock to his son, on a long term note. Dad would have taxable income spread out over however many years the note goes for (whether son actually makes a payment or Dad forgives it for the year in question). But son would have current market value as his basis.

Can you think of any reason that wouldn't work?

Stu

How are you going to handle the imputed interest on that investment loan? __ Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH

That's the reason for the installment sale - he'd have to recognize the income, but could stretch it over a number of years to minimize the effects of bracket creep. Stu

Sure.

But the imputed interest on the unpaid principal still has to be taken into account somehow. __ Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH

Of course.

Actually after thinking about it, perhaps it's not such a good idea. He'd have imputed interest and he'd also have imputed principal income. The longer the principal income gets stretched out, the more the imputed interest. So it may get expensive. Stu