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Author: vincy4fish98 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121338  
Subject: gift of stock Date: 2/6/2000 2:32 AM
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I had a question in regards to gifts of stock. If I were to gift stock to my mother, besides providing the brokerage with my cost and tax basis, is there anything else I need to do such as have Schwab transfer the certificates over from street name over to my name or my mothers name? I am 29 years old, earn 22,000/yr at my current job. I plan on gifting to my mother $9,000 to $10,000 max. So I guess I would be in the 28% tax bracket right? My mother is retired and doesn't have any income coming in except for her social security. She is 63, from what I understand she is in a lower tax bracket say 15%. So if I were to gift the stock over to her and she subsequently sold at a later date for her own use, the money would be taxed at a lower rate as opposed to my rate correct?

Thanks for any info or additional insight.
Vince
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Author: hghcpa Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 27431 of 121338
Subject: Re: gift of stock Date: 2/6/2000 7:54 AM
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I had a question in regards to gifts of stock. If I were to gift stock to my mother, besides providing the brokerage with my cost and tax basis, is there anything else I need to do such as have Schwab transfer the certificates over from street name over to my name or my mothers name? I am 29 years old, earn 22,000/yr at my current job. I plan on gifting to my mother $9,000 to $10,000 max. So I guess I would be in the 28% tax bracket right? My mother is retired and doesn't have any income coming in except for her social security. She is 63, from what I understand she is in a lower tax bracket say 15%. So if I were to gift the stock over to her and she subsequently sold at a later date for her own use, the money would be taxed at a lower rate as opposed to my rate correct?

Thanks for any info or additional insight.




You are correct - gift will transfer your cost basis to her. If she is in the 15% bracket and the gain on the stock is long-term she will pay tax at 10% on the gain.

But if you are making less than 25k per year and are single - you too will be in the lower 15% bracket and the gain would be taxed at the same rate for you.

So it may be of no advantage - depends on what bracket you are in.


Pete




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Author: pmarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 27440 of 121338
Subject: Re: gift of stock Date: 2/6/2000 10:24 AM
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<< If I were to gift stock to my mother, besides providing the brokerage with my cost and tax basis, is there anything else I need to do such as have Schwab transfer the certificates over from street name over to my name or my mothers name? >>

Pete already addressed your tax issues. I just want to add that it's not the broker who needs the basis information, it's your mother. She also needs to know the date(s) you purchased the stock.

Phil Marti
Tax Preparer

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Author: vincy4fish98 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 27442 of 121338
Subject: Re: gift of stock Date: 2/6/2000 10:28 AM
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Thanks for the response Pete. I was wondering though if I would still qualify for the 15% tax bracket if my stock portfolio is worth close to $50,000. I have built this protfolio up over the years through gift monies received through my dad. However I really haven't sold or liquidated any positions as of yet. I just let the money keep compounding and reinvest the dividends and basically pay taxes on the dividends. Does this really change the complexity of the situation? any response you could give is really appreciated. I know my mother would qualify but would I still qualify under the 15% bracket in light of the new situation or would it be better to gift the stock to Mom?

Thanks
Vince

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Author: hghcpa Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 27462 of 121338
Subject: Re: gift of stock Date: 2/6/2000 12:55 PM
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Thanks for the response Pete. I was wondering though if I would still qualify for the 15% tax bracket if my stock portfolio is worth close to $50,000. I have built this protfolio up over the years through gift monies received through my dad. However I really haven't sold or liquidated any positions as of yet. I just let the money keep compounding and reinvest the dividends and basically pay taxes on the dividends. Does this really change the complexity of the situation? any response you could give is really appreciated. I know my mother would qualify but would I still qualify under the 15% bracket in light of the new situation or would it be better to gift the stock to Mom?
=============

The value of your portfolio does not enter into the equation. Only the value of any sales you actually generate which result in "recognized" gain.

The gain is added to your other income. Should your income prior to the gain result in you being in the 15% bracket the gain, assuming it is longterm, is taxed at 15%.

If your income exclusive of the gain is in the 28% bracket then the gain would be taxed at 20%

One other thought,

If Mom's only income is social security I could see where you could gift over a period of years amounts that would result in gains equivalent or less than her standard deduction plus personal exemption (about 7k for a single taxpayer) and she would not have to pay tax at all on the gain since it is less than this base amount of income allowed to any taxpayer before they are required to pay tax.


Pete

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Author: timm Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 27483 of 121338
Subject: Re: gift of stock Date: 2/6/2000 4:31 PM
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But if you are making less than 25k per year and are single - you too will be in the lower 15% bracket and the gain would be taxed at the same rate for you.

Except that selling the stock would put him above the $25K/yr. and put him the the 20% LTCG rate.

It might put his mother in that bracket as well, assuming that you intended to sell the whole $10K worth of stock in one year.


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Author: timm Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 27485 of 121338
Subject: Re: gift of stock Date: 2/6/2000 4:39 PM
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The gain is added to your other income. Should your income prior to the gain result in you being in the 15% bracket the gain, assuming it is longterm, is taxed at 15%.

If your income exclusive of the gain is in the 28% bracket then the gain would be taxed at 20%


I don't understand now, because I asked this question a week or so ago and received a different answer.

In your first paragaph, I believe that it should be 10% at the end, not 15%.

Also, don't you mean "inclusive" of the gain?

I have almost zero income for the current tax year, which would put me in the lowest tax bracket. I have some large long-term capital gains. My question was "Do these gains count as income to establish the tax bracket in which I would fall for determining the tax on the capital gains?"

And the answer I received was "Yes", but the answer above seems to say "No".


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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 27528 of 121338
Subject: Re: gift of stock Date: 2/6/2000 7:00 PM
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<<I have almost zero income for the current tax year, which would put me in the lowest tax bracket. I have some large long-term capital gains. My question was "Do these gains count as income to establish the tax bracket in which I would fall for determining the tax on the capital gains?">>

And the answer is still yes. You would receive the 10% LTCG preferred tax until your 15% bracket was "used up". Then you would move to the 20% LTCG rate.

I agree that the statements from the prior posts were a bit hazy on this issue. But you are exactly correct in your assessment, and the responses that you were given in the past are right on the money.

TMF Taxes
Roy



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