Author Topic: can you gift stock or mutual fund shares to another person?  (Read 491 times)

CCCA

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can you gift stock or mutual fund shares to another person?
« on: August 03, 2018, 08:51:41 PM »
I borrowed some money from my sibling to make a down payment a while back.  I am wondering if it is possible to pay them back with stock shares instead of with cash.  Is that technically possible through Fidelity and allowed via the IRS without paying taxes or any other issues?


The reason is I have lots of appreciated assets and I'm thinking of just paying it off in a lump sum but want to avoid paying capital gains taxes upon liquidation.  If my sibling agrees to the appreciated assets (they would be buying the same assets anyway) and paying taxes on those when they liquidate (at a lower cost basis) it is that possible? 

markbike528CBX

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Re: can you gift stock or mutual fund shares to another person?
« Reply #1 on: August 03, 2018, 09:46:55 PM »

if it less than 14K (yearlygift tax limit) then no problem.

https://www.schwab.com/resource-center/insights/content/how-to-value-a-gift-of-stock

Abe

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Re: can you gift stock or mutual fund shares to another person?
« Reply #2 on: August 04, 2018, 12:15:11 PM »
To clarify: You can give as much as you want up to $5.43 million lifetime limit without paying any taxes. If you keep all of your gifts to everyone under this amount over your lifetime, you will not pay any gift tax. The $14k limit is the amount you can give without reporting to the IRS and having it count against your $5.43 million limit. Thus, if you are a super generous person, if you kept your annual gifts to everyone under $14,000, you could theoretically give millions of dollars away without ever reporting.

If you are giving back $50,000 - you will report 50 - 14 = $36,000 to the IRS. 
Your remaining lifetime limit across all gifts to all people is now $5,400,000 - 36,000 = $5,426,400.

Bottom line: you're doing a smart move since your sibling will get assets with a much better cost basis than you had, thus saving them a bunch of taxes. You will never have any taxes related to this transaction, but report anything over $14,000 on your tax form.
« Last Edit: August 04, 2018, 12:17:50 PM by Abe »

CCCA

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Re: can you gift stock or mutual fund shares to another person?
« Reply #3 on: August 04, 2018, 12:27:43 PM »
Thanks. It would be more than $14000 per year or even $28k between my wife and I. I suppose we have $11million in tax free gifts allowed in our lifetimes so we should be safe there!

I think the point about my sibling saving taxes is a little backwards since we have a lower cost basis than if they bought today (it is an appreciated asset). It’s mostly just to save us taxes but at least they would be long term capital gains from their perspective and not short term.

MDM

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Re: can you gift stock or mutual fund shares to another person?
« Reply #4 on: August 04, 2018, 12:31:17 PM »
Bottom line: you're doing a smart move since your sibling will get assets with a much better cost basis than you had, thus saving them a bunch of taxes.
It may be a smart move on the giver's part, but it's equally dumb (or kind, as the case may be) on the receiver's part, because the cost basis doesn't change.

E.g., see How do I determine the cost basis of stock received as a gift?

MustacheAndaHalf

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Re: can you gift stock or mutual fund shares to another person?
« Reply #5 on: August 05, 2018, 02:13:14 AM »
From a brief look online, a gift to another person comes with the original "cost basis".  You would transfer your tax burden to the person receiving the gift.

Think of it another way: is there a tax loophole where you can gift shares to someone this year, and they gift them back next year, and you sell them immediately and pay no tax?

Either you can sell the shares and pay taxes, or you're transferring that same tax burden along with the shares you gift.  Your sibling will need to know what you paid for the shares - your cost basis - and when you bought them.

Abe

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Re: can you gift stock or mutual fund shares to another person?
« Reply #6 on: August 05, 2018, 11:32:23 PM »
I stand corrected on the cost basis issue. In this particular case, if the sibling was planning on purchasing the assets anyway and not selling them, they obviously have a benefit. Otherwise, you all are right, they don't get any benefit (unless their income is low enough to put them at the 0% capital gains threshold: $38.6k for single, $77k for couples).