Author Topic: Sale of old Pepsi stock - capital gains question  (Read 955 times)

Rollin

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Sale of old Pepsi stock - capital gains question
« on: September 07, 2018, 12:32:51 PM »
My MIL wants to sell about $13,000 in stock she has had since she was a kid (she is now 82). I'm wondering if she will pay capital gains? If so, any suggestions on how to minimize these (e.g., sell in different tax years)?

Second, she would like to use it to pay off her grandchild's student loan. Will this cause the student to get a tax hit as well?

markbike528CBX

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Re: Sale of old Pepsi stock - capital gains question
« Reply #1 on: September 07, 2018, 02:57:44 PM »
Given that the stock is that old, and cost basis is not available, I'd assume all of the sales is capital gains.

However, if MIL is filing single and has income less than ~36K, then most of those capital gains are taxable at 0% (ie not really taxed).

Alternatively, she  could gift them "in kind" ie as stocks and the grandchild sells them, then no taxes (ie no gift tax if<14K).

The amount is small enough to do either way, but the hassle factor will be the key thing.

MDM

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Re: Sale of old Pepsi stock - capital gains question
« Reply #2 on: September 07, 2018, 02:59:29 PM »
My MIL wants to sell about $13,000 in stock she has had since she was a kid (she is now 82). I'm wondering if she will pay capital gains? If so, any suggestions on how to minimize these (e.g., sell in different tax years)?
Need to know the rest of her income.  If minimal, she could pay $0.  If large, she could pay 23.8%.

Quote
Second, she would like to use it to pay off her grandchild's student loan. Will this cause the student to get a tax hit as well?
No.  Gift tax applies only to the giver, and she would be under the annual exclusion amount anyway.

MDM

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Re: Sale of old Pepsi stock - capital gains question
« Reply #3 on: September 07, 2018, 03:02:57 PM »
Alternatively, she  could gift them "in kind" ie as stocks and the grandchild sells them, then no taxes (ie no gift tax if<14K).
Careful - with a gift of stock, the original basis carries over, so the grandchild would incur the same amount of capital gain on sale.  Whether that would be subject to kiddie tax for the parents, or tax for the grandchild, depends on all the other circumstances.

Rollin

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Re: Sale of old Pepsi stock - capital gains question
« Reply #4 on: September 07, 2018, 05:25:41 PM »
Very good. I think she is less than $36K/year, but I'll double-check. Good idea to pursue as well and just send over to the grandchild. Notify them of the potential tax consequence and let them deal with it.

Thank you.

MustacheAndaHalf

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Re: Sale of old Pepsi stock - capital gains question
« Reply #5 on: September 07, 2018, 11:56:50 PM »
My MIL wants to sell about $13,000 in stock she has had since she was a kid (she is now 82). I'm wondering if she will pay capital gains? If so, any suggestions on how to minimize these (e.g., sell in different tax years)?
Need to know the rest of her income.  If minimal, she could pay $0.  If large, she could pay 23.8%.
And here large means a taxable income of over $425,000/year.

Married vs single also matters, since the 0% long-term capital gains bracket ends at $38.6k for single filers, and $77.2k for married/filing jointly.  Both of those ignore the standard deduction(s).

$13k of PEP stock is 115 shares.  Pepsi's own website only goes back to 1990, when the stock price was around $10/share.  Tracing it back another 30 years will probably find it around $1/share, which means a cost basis of $115 versus $0.  Even in the 15% long-term capital gains tax bracket, that's less than a $20 difference in taxes.

Rollin

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Re: Sale of old Pepsi stock - capital gains question
« Reply #6 on: September 08, 2018, 06:17:52 PM »
The grandchild had $28000 in income reported in 2017, so I think we'll just have grandma gift the stock.

Rollin

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Re: Sale of old Pepsi stock - capital gains question
« Reply #7 on: September 09, 2018, 06:07:52 AM »
My MIL wants to sell about $13,000 in stock she has had since she was a kid (she is now 82). I'm wondering if she will pay capital gains? If so, any suggestions on how to minimize these (e.g., sell in different tax years)?
Need to know the rest of her income.  If minimal, she could pay $0.  If large, she could pay 23.8%.
And here large means a taxable income of over $425,000/year.

Married vs single also matters, since the 0% long-term capital gains bracket ends at $38.6k for single filers, and $77.2k for married/filing jointly.  Both of those ignore the standard deduction(s).

$13k of PEP stock is 115 shares.  Pepsi's own website only goes back to 1990, when the stock price was around $10/share.  Tracing it back another 30 years will probably find it around $1/share, which means a cost basis of $115 versus $0.  Even in the 15% long-term capital gains tax bracket, that's less than a $20 difference in taxes.

Per share?

walkwalkwalk

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Re: Sale of old Pepsi stock - capital gains question
« Reply #8 on: September 09, 2018, 09:43:42 AM »
Total

Rollin

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Re: Sale of old Pepsi stock - capital gains question
« Reply #9 on: September 09, 2018, 05:28:33 PM »
Not bad!

Anything to know about gifting them? Do you just hand them over?

walkwalkwalk

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Re: Sale of old Pepsi stock - capital gains question
« Reply #10 on: September 09, 2018, 05:47:41 PM »
Are they physical share certificates or are they on a brokerage account or Computershare, etc? If physical, yes just hand over. Otherwise I am unsure of the mechanics. In that case its be best to talk to customer service of the brokerage firm.

Rollin

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Re: Sale of old Pepsi stock - capital gains question
« Reply #11 on: September 09, 2018, 09:01:51 PM »
I'll find out for sure, but I think they are physical.

Thank you.

MustacheAndaHalf

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Re: Sale of old Pepsi stock - capital gains question
« Reply #12 on: September 10, 2018, 12:25:01 PM »
Lacking records, you could look at the "price per share" of PepsiCo to determine what was originally paid for it.  Let's assume it was $1 per share years ago.

Right now this person has $13k of PepsiCo stock ("PEP"), which dividing by the current share price means they have about 115 shares.  So with a "$1 per share" purchase price (which I made up - it's not accurate enough), that would mean an original purchase of 115 shares at $1/share, or $115.

Rather than rely on that, it's easier to consider the original purchase price as $0, and slightly overpay taxes by an unknown amount.

wbranch

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Re: Sale of old Pepsi stock - capital gains question
« Reply #13 on: September 11, 2018, 11:59:36 AM »
Pepsi has had 4 stock splits. https://www.stocksplithistory.com/pepsico/
With 115 shares now, it looks like she would have started with 2 shares. This website shows an adjusted price of <$1 in 1972 https://www.macrotrends.net/stocks/charts/PEP/pepsico/stock-price-history

Rollin

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Re: Sale of old Pepsi stock - capital gains question
« Reply #14 on: September 14, 2018, 06:51:48 PM »
Wow, that is some complex stuff that you both laid out there. Not sure how you do all that!

Thank you.