Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (4) | Ignore Thread Prev Thread | Prev | Next | Next Thread
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: of 121563  
Subject: Re: Converting EE Bonds to HH Bonds Date: 11/18/1998 11:03 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
[[My mother has some old EE bonds earning minimum interest and wants a way transferring them to
my son tax free and avoiding capital gain taxes. If she were to simply cash in the EE Bond she
would have a $6000 gain.]]

OK...so far...so good.

[[ A broker told her that she could convert the EE Bonds to HH Bonds and list my son as a co-owner
of the bond under his SS number. He also said that after 6 months,
my son could cash in the bond free of any capital gain taxes. I'm aware of the 10K gifting strategy
but this broker led my mom to believe that she could also avoid capital gains by this
conversion/transfer. My mom asked
her attorney but he admittingly was clueless.]]

I don't think so.

RevRul 55-278 says that if the taxpayer transfers ownership of Series E or EE bonds (or, by virtue of a tax free exchange into HH bonds) to a co-owner or beneficiary (by having the bond reissued in the name of the co-owner or beneficiary), the taxpayer must report all the previously unreported interest in the year of transfer (reissue). The taxpayer is also considered to have made a gift to this other person.

[[Does anyone know the whether this scheme is valid? Or can someone refer me to some on-line
publication that might validate this scheme?]]

I took a brief look and couldn't find any information that would confirm that this could be done and avoid all current income and future estate taxes. I would love to see the tax information that your broker would have that claims this is a valid technique. So if you happen to get a code section and/or revenue ruling and/or procedure from the broker, please let me know and I'll be happy to try and research it in a bit more detail.

TMF Taxes
Roy

Want to learn more about taxes and investing? Then we have a deal for you!! The Motley Fool Investment Tax Guide is now available through Fool Mart. Be the first one on your block to own this masterpiece. There is still time available to do that tax planning (and tax saving) before the end of the year. So just click on this link (http://www.foolmart.com/market/product.asp?pfid=MF+013+I) to read more about this amazing collection of tax information. (Apologies for the shameless plug…but it is a pretty good book…if I do say so myself). In addition, if you would like to visit the Taxes FAQ (Frequently Asked Questions) area, click on http://www.fool.com/school/taxes/taxes.htm and you'll be right at the home page. Pay special attention to the "archives" section. Check it out. Finally, if you need to get to the IRS web site, click on http://www.irs.ustreas.gov to go directly there.
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (4) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Post of the Day:
Macro Economics

Russia Collapsing Again?
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement