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My son is in his sophomore year of college and I need to sell some appreciated stock to pay for his next semester (last year he paid about 40% of the cost from his own savings but that is gone now). Since he is in the 15% tax bracket, can I give him the stock as a gift and then have him sell it and pay his college bills from the proceeds? As I understand, he would still owe capital gains taxes, but at 10% instead of 20% that I would owe. I also know that if the gift is for more than $10,000, I have to look out for gift taxes. Also, I read about a lower capital gains rate of 8% after Jan. 1. If I gave him the stock (which is more than 5 years old), could he sell it after Jan. 1 and only owe 8% capital gains tax?

Correct on all fronts. You've already been told about gift splitting and the possible effect on student aid.

With respect to the 8% rate, if the taxpayer is in the 15% bracket, the 8% rate applies for all sales after 12/31/2000 if the holding period exceeds 5 years. For all other taxpayers, the holding period must begin after 12/31/2000.

Phil Marti
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