I had been helping to support my (non-live-in) girlfriend. As we rolled into 2015, she was unemployed and I had limited free cash.
We created a joint account, with her SSN, into which I put $8000 of highly appreciated securities. We then sold them.
I late did the same thing with another $24,000 of securities. The total cost basis of the two lots was, let's say, $8000. This was all done within the same brokerage, so they have accurate cost basis records.
For reasons not worth going into, though, she has given me most of that money back.
I doubt that she will make much money this year. If I understand correctly, as long as her income is under about $47,000 (total income, so after personal exemption and standard deduction about $37K), she will be in a bracket where her capital gains rate is zero. So she will not have to actually pay any tax.
My net worth is such that I never expect to have an estate anywhere close to the exempt estate limit.
So my questions are:
1) Am I right on the capital gains issue? She'll get a tax form of some sort at the end of the year showing the realized capital gains, but in practice it won't increase her tax liability unless she makes at least about $23K this year. 2) Do I have to file a gift tax return? What is the significance of the fact that she gave most of the money back to me? Actually she gave almost all of "that" money back to me, while I gave her money from other sources, although I don't think the IRS cares about "this" dollar versus "that" dollar. There won't be any gift tax anyway, right? Just some form somewhere that means that when I die, they'll add $18K to my estate (the $32K I gave her less the $14K annual exemption per donee) before concluding my estate owes no tax.It kind of occurs to me that there are a lot of unmarried couples where one makes a lot more than the other and is in effect "gifting" a lot to the other, but somehow I don't think the IRS is tracking if your significant other bought a Louis Vitton bag with your credit card and making you file it all at the end of the year.