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Subject:  Re: Transfer stocks to nephews Date:  11/18/1998  11:12 AM
Author:  TMFTaxes Number:  6361 of 127637

[[I have 2 nephews (6&10) that I opened brokerage accts for but have not yet funded. I would like
to know the tax ramifications for me if I transfer some stocks I now own to them. ]]

Without knowing more about the accounts, it's impossible to really provide any information. Are the accounts in your name, simply "earmarked" for the kids? Or are these UGMA/UTMA accounts? Or are they other custodian type accounts with you as the custodian? Whose social security number will the account be reported to? You? The kids?

I just need some additional information on this issue because it is the crux of the matter.

[[Specifically, I
have some short&long term capital gains this year that I need to offset with either selling some
lagging stocks that need time to recover (oil service) or transferring them to the youngsters accts.]]

A transfer would do you no good at all.

[[ Would transferring them give me the loss I need to offset my gains, or would it just give my
nephews the benefit when they recover and sell them? The stock current value would be approx
$2k each child, although I paid approx $4k.]]

In generally, you NEVER want to gift DEpreciated shares of stock. You are much better selling the stock, taking the loss, and then gifting the cash.

But you have a number of issues here that you need to do a bunch of additional reading. You can find posts regarding gifting of stocks, the basis rules, the gift tax rules, and the kiddie tax rules all in the Taxes FAQ area (some are in the "archives" section...some are "up front"). You really need to spend some time reading that information (since you need the backround in order to take this discussion further).

Then I would suggest that you visit the Fairmark tax site ( and read the discussion there about UGMA/UTMA accounts. That will give you some idea of what you might be getting into.

Finally, the gift of stock issues are discussed in detail in The Motley Fool Investment Tax Guide. You might also want to check that out since you are obviously new to taxes and investing.

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