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I would also note that if his basis in the gifted stocks was more than the gift tax limit in the year that your brother gifted you the stocks, he should have filed a gift tax return. And if the amount that you plan on giving your niece is more than $15,000, you will need to file a gift tax return.

Gift tax is based on the value of the gift, not its basis. If the value of the stock was more than $15,000 (and perhaps less if the gift was long enough ago), a gift tax return was due.

Ira
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I wouldn't be worried based on what you said.

The IRS would need to assert that your brother assigned the income to you under a pre-arranged agreement that he would give you the stock to you, you would sell at a lower tax rate and then you would give the stock to his daughter. So, two issues: (1) was there an arrangement for you to sell the stock when it was given to you (income tax issue) and (2) was there an arrangement for you to give the stock to his daughter (gift tax issue - he is deemed to make a gift to his daughter).

The IRS typically would use a "step-transaction" doctrine to re-allocate tax consequences. For example, if you received the stock, sold it the next day and then immediately gave it to your niece, that looks fishy. Your brother may be taxed with the gains and be deemed to give the stock to your niece.

The more time you put in between these transactions, the less fishy it looks. Also, if your brother didn't make a gift to his niece that same year, there likely would be no gift tax difference. So, there would be no need to do it this way. The SOL is probably closed on the income tax issue in any case.

You likely have zero issues especially because you said it happened a few years ago.

Mike
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My brother gifted me some stocks a few years back. Due to my income at the time I didn’t pay any capital gains when I sold (his income is higher so he would have probably had to pay 15% on the capital gains).

Is there a time or amount limit of when this is allowed or is this anything I should be concerned about altogether?


Presumably, you still used his basis to determine the gains when you sold the stocks? Because the receiver of a gift retains the basis that the giver had. There is no step up in basis for a gift given while the giver is still alive.

So was it really a gift? Or was there a plan that you would sell, keep the cash without paying taxes and then 're-gift' later? Because if there was a plan for you to 're-gift', then that can be pursued by the IRS for up to 6 years after the last fraudulent act.

Otherwise, I would say that money is fungible.

I would also note that if his basis in the gifted stocks was more than the gift tax limit in the year that your brother gifted you the stocks, he should have filed a gift tax return. And if the amount that you plan on giving your niece is more than $15,000, you will need to file a gift tax return.

AJ
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I would also note that if his basis in the gifted stocks was more than the gift tax limit in the year that your brother gifted you the stocks, he should have filed a gift tax return. And if the amount that you plan on giving your niece is more than $15,000, you will need to file a gift tax return.

AJ


If the giver is married, wouldn't the limit to a person be $30,000?
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If the giver is married, wouldn't the limit to a person be $30,000?

If the giver is married and they give a combined gift, they could each give $15k, for a total of $30k. But the OP said "I" not "we", so I took that at face value.

AJ
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I would also note that if his basis in the gifted stocks was more than the gift tax limit in the year that your brother gifted you the stocks, he should have filed a gift tax return. And if the amount that you plan on giving your niece is more than $15,000, you will need to file a gift tax return.

Gift tax is based on the value of the gift, not its basis. If the value of the stock was more than $15,000 (and perhaps less if the gift was long enough ago), a gift tax return was due.

Ira
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