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I just had a baby girl a couple of months ago. I am going to set up a UGMA account for her. I wanted to transfer some of our stock to her so that when she turns 14, we can take advantage of the low tax rate for unearned income (and avoid the kiddie tax). However, I am a little confused as to how much we can transfer and what the basis stock price will be when we sell the stock after she is 14.

Suppose we bought a 200 shares of XYZ at $50 each about a year ago. Now the stock is trading at $100 per share. When I gift the stock to her account will I be allowed to gift the stock at $50 each, and transfer all 200 shares? Or will I be able to gift only 100 shares without incurring and taxes.

Suppose the stock splits once and rises to $100 per share when she 14. What will be the cost basis of that stock? The original $25 per share ($50 before the split) that we bought it at? Or will it be $50 per share ($100 before the split) on the day we transfered the stock to her?


Mehul Shah
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