You can gift as much as $13K in appreciated securities to each child without a gift tax and without needing to declare the gift on a return. My question is who pays the capital gain on those appreciated securities? I would have guessed the parent pays, but a book I read is claiming "The tax on any gain would fall from your 15 percent rate to as low as 0 (zero) percent...." That certainly implies the tax obligation is on the receiver of the gift. Can someone clarify?
Gifting Appreciated Stock to Children
Dec 31, 2009
2 Replies
Sure. Basis follows the gift. You gift $13K in securities, you also need to tell the recipient the cost basis, so when they sell they know the tax consequences. There are a number of tangents to this, such as if the recipient is a minor, they might be subject to the kiddie tax, so the sale winds up taxed at the parents rate regardless. Joe
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If the stock had gone up in value at time of gift, then child's basis and acquisition date is same as donor's basis and date.
If not, stock holds a dual basis, actual basis is determined at time of sale by using donor's basis to compute gain and using FMV at time of gift and date of gift to compute loss.
If child sells, the first 1900 is taxed at child's rate and then kiddie tax may apply to use higher of child's or parent's rate.
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