question on gifting stocks

[newtoseattle]

Thought I would double check my thinking on gifting some stocks to my partner (have to admit, I'm not really looking for feedback on the idea of gifting money, more the details... having said that, to satisfy curiosity - my reasons for gifting are to help us be a bit more "partners" financially (I am very high income, she is quite low); it will not affect my ability to ER (my expenses are much higher as a "couple"))

I am in a high tax bracket and in index stocks. They will be in less than 15% tax bracket.
My plan is to simply gift some of my vanguard total stock fund
International fund has overall lost money - plan is to change cost basis to "specific dates" and gift the dates that have a capital gain. Then I was going to sell some of the funds that that have a capital loss (so I can tax harvest loss) and gift "cash". We are not legally married, etc, but just to avoid any hint of trying to "cheat" - I was going to ask that they not rebuy the international fund for 30 days (to avoid any wash sale speculation).

I had thought about worrying about timing with dividends in December, but think overall it won't really make a huge difference? I think my preference is to just make sure its all done this year so its only one year of needing a CPA to help with gift tax form 709...

On the note of the 709 gift tax - I'm thinking only "risk" is if relationship ends then future partner could be affected by reaching "limit" (but don't expect to reach 5.34million limit regardless). No kids or need for inheritance beyond any partner. Other risk would be if they change limit in future (i.e. decrease it) - have they ever retroactively decreased limit?

Anything I'm missing? (I'm one of those - knows just enough to get in trouble - people)

Thank you.

(yes, I know I should consult my tax professional - but given I use turbo tax I don't have one. Do plan to use one for 709 form though - I've screwed it up in the past when retitling house)

 

[Animorph]

Don't know if the gifting thing would work without costing you some taxes on the gains.

The wash sale looks backwards 30 days as well, so no purchases before or after for the tax lost harvesting. The dividends will only be a problem if the are automatically reinvested and trigger a wash sale problem. Otherwise, if they are taxed less for your partner it would be nice to transfer before the dividend.

 

[bingybear]

If you gift shares with LTCG, depending upon her income level the gains might not be taxed. Same would possibly be true for qualified distributions (if you transfer before the distributions).
Remember you can gift 14k/yr without gift tax issues.
Also, make sure you document the embedded gains and dates for all shares transferred. Usually that info will not transfer automatically.
Also, you may need to help her understand how to estimate withholding amounts if you drop lots of $ as typical distributions my shift her taxes.

 

[hnzw_rui]

If you're gifting in kind, then no tax on gains. Cost basis carries over to the recipient though so when the recipient sells the shares, they have to pay the capital gains.

 

[target2019]

With dividends to be paid, they might accumulate in the source account. I saw this happening in kids acct after gift to us.

We kept this under same company. The cost basis all transferred. It is a good idea to make a separate record of all this as well.

 

[Gill]

Don't know if the gifting thing would work without costing you some taxes on the gains.

The wash sale looks backwards 30 days as well, so no purchases before or after for the tax lost harvesting. The dividends will only be a problem if the are automatically reinvested and trigger a wash sale problem. Otherwise, if they are taxed less for your partner it would be nice to transfer before the dividend.

Please ignore the first paragraph of this post. There is no income tax from making a gift of appreciated securities.
Bruce



Sent from my iPad using Early Retirement Forum

 

[newtoseattle]

thanks for the replies

thank you for the replies. I didn't realize about the dividend reinvestment and wash sales - I'll make sure to stop the automatic reinvestment...

Always learn something from the folks here...

Thank you

 

[donheff]

Thought I would double check my thinking on gifting some stocks to my partner (have to admit, I'm not really looking for feedback on the idea of gifting money, more the details... having said that, to satisfy curiosity - my reasons for gifting are to help us be a bit more "partners" financially (I am very high income, she is quite low); it will not affect my ability to ER (my expenses are much higher as a "couple"))

Sure you don't want to shoot the **** about this? I am far more curious about the reasoning about this choice than the tax implications of gifting. For example, why the transfer instead of simply contributing more to expenses and designating your partner as the beneficiary of your will?

 

[jerome len]

a tax CPA will be worth the cost of an hour or two of time. Mistakes are far more expensive.