ACA and Gifting

[GravitySucks]

A question for all the smart folks here.

I started ACA this year to get me through the next 3 years but unfortunately over 90% of my funds are in an IRA. I want to gift my daughter around $60k for a house purchase. My regular brokerage account has a mutual fund purchased at $30k now worth $60k. If I gift DD the shares of the mutual fund will the $30k capital gains be counted against the MAGI limit?

Will DD be responsible for the capital gains taxes?

Any other ways around the MAGI limits im overlooking?

Thanks in advanced!

 

[cathy63]

If you give your DD securities, then she will get your cost basis and purchase date. So when she sells them, she will pay cap gains on $30K. The gains will be long or short depending on your purchase date. Your MAGI will not be affected.

If you and she are both unmarried, then you need to file a gift tax return since the value of the gift is greater than $15K. If you and she are both married, then you and your spouse should each give $15K to her and her spouse and no gift tax return will be required.

 

[RunningBum]

A question for all the smart folks here.

I started ACA this year to get me through the next 3 years but unfortunately over 90% of my funds are in an IRA. I want to gift my daughter around $60k for a house purchase. My regular brokerage account has a mutual fund purchased at $30k now worth $60k. If I gift DD the shares of the mutual fund will the $30k capital gains be counted against the MAGI limit?

Will DD be responsible for the capital gains taxes?

Any other ways around the MAGI limits im overlooking?

Thanks in advanced!

Your daughter is responsible for the cap gains, so this has no impact on your taxes/MAGI.

If you are married and she is married that there's no gift paperwork either, since it's $15K from each of you to each of them for $60K total. Otherwise you have to account for the excess gift over the $15K exemption amount. This does not affect your taxes or MAGI either, but it counts against your exemption limit when you die. I've never done this so I don't know the form.

EDIT: cathy63 beat me to it, but I'm happy to see that my answer matched, because I don't think I've ever seen her wrong on a question like this!

 

[GravitySucks]

Thanks.
This is what I thought but googleing tax code issues is confusing at best.

 

[Koolau]

Thanks.
This is what I thought but googleing tax code issues is confusing at best.

I nominate this as "understatement of the week."

Best of luck!!

 

[Alan]

I believe you each can gift $15k to a single person meaning a married couple can gift $30k to someone.

https://www.nerdwallet.com/article/taxes/gift-tax-rate

The annual exclusion also is per person, which means that if you’re married, you and your spouse could give away a combined $30,000 a year to whomever without having to file a gift tax return.

 

[street]

If money was from cash that taxes were already paid, then no tax implication would apply. This might be a little off track, from the question you asked, but it is a great tool to use for a larger junk of dough to gift.
IRS Form 709 is used to report taxable gifts made during a taxpayer's lifetime, and it also allocates the lifetime use of a taxpayer's generation-skipping transfer tax exemption. You might have to file IRS Form 709 and pay gift tax if you make one or more transfers of cash or property, but there are several exceptions.

 

[GravitySucks]

Thanks for the responses.
Woke up this morning and realized if I gift her that holding and she sells it to buy the house it will push her over the ACA limits. I'll have to sell some dogs along with the winner to even it up.
This real estate market is nuts anyway. She just was out bid on a house on the market 3 days, 20 offers all over asking. She was 5% over with a cash offer. Realtor hinting that it went for over 20%
NPR had an item last month that 900,000 houses are in a Covid mortgage protection program. Some of those might hit the market soon.

 

[tmm99]

Thanks for the responses.
Woke up this morning and realized if I gift her that holding and she sells it to buy the house it will push her over the ACA limits. I'll have to sell some dogs along with the winner to even it up.
This real estate market is nuts anyway. She just was out bid on a house on the market 3 days, 20 offers all over asking. She was 5% over with a cash offer. Realtor hinting that it went for over 20%
NPR had an item last month that 900,000 houses are in a Covid mortgage protection program. Some of those might hit the market soon.

So sorry to hear that. The housing market here has been going crazy as well. I know some people here are now looking at houses that are much further away from home as they're being priced out of their target area. One good news is that last month, for the first time in a long time, the sales numbers came down, so hopefully, things will ease a bit in your area as well.