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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121219  
Subject: Re: Gifting limits/estate exemption/mutual fund Date: 6/1/2012 11:38 AM
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If she gifts me the fund, how does she handle the $5000 overage on the gift limit? Is it just a form on her taxes? She says she uses Turbo Tax and it never has asked her about gifts, so she's not sure how it would be put in. She doesn't want to make her taxes too complicated. Just what is entailed in doing the gifts against the estate exemption limits? Is it complicated?

It's not reported on the 1040, but on the 709 Gift Tax Return. Download a copy of the form and instructions, and you can be the judge on "complicated."

Do I then assume her tax basis for the fund? I was assuming so, but want to make sure. If I sold it after receiving it, would it still be long term capital gains because she had the fund a long time?

As long as it's worth more than her basis you acquire it with her basis. Full details are in Pub 550. You do retain her holding period regardless of its current value. Be sure you get all her purchase documentation. You'll need it when you sell.

I suggested maybe she gift me part of the shares in the fund this year, to the $13,000 limit, and part next year, but she thinks this would be a hassle. She thought about it a while and asked if maybe she could gift the whole thing on Dec 31 and count it for 2012 and 2013.

No, she can't. Maybe after you tell her about the 709 she'll decide that two separate gifts wouldn't be all that complicated.

I don't really need the money (although it would be nice, of course) and suggested maybe leaving the fund in her estate that I will inherit would be more financially beneficial, as I would then get a step up in the cost basis, and her estate is going to be lower than the estate tax exclusion limits. But she says the fund is not performing and she doesn't want it anymore, but she doesn't want to sell it herself and pay the capital gains.

Any thoughts or suggestions?


Only one. Does she make cash charitable contributions? If she does she could give shares rather than cash. She gets a contribution deduction of the current value, and the charity is tax-exempt, so it pays no tax on the gain. You can learn more about this in Pub 526.

Phil
Rule Your Retirement Home Fool
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