Gifting Stock

[karen1972]

I'm a little confused about gifting as in some ways it seems like a major tax loophole but maybe only because of how I would like to apply it. The stocks/mutual funds in question are in a taxable account.

My understanding is that
1. I can gift stock to anyone I choose.
2. The only tax consequence to me is that I need to declare the gift and it counts towards my lifetime gifting limit (which I'll never reach)
3. The receiver has no immediate tax consequence and it doesn't need to get reported on their side (thus wouldn't count against say ACA subsidies).
4. On sale of stock, my cost basis, etc is treated as their cost basis.. thus it would all be LTCG even if they immediately sold it because its stock I bought in 2009.

So does that mean since my BF and I are not married, I could just gift him stock every year so he could fill up his 15% tax bracket with LTCG too and thus even though we are not married basically get the same tax treatment? Seems like a loophole or I'm missing something?

Since we are using the money to buy a joint asset (ie. a bigger home), gifting him money to put into that home to me makes sense as long as I'm obviously not doing anything wrong.

P.S for those freaked out I'd gift him the money, we've been happily unmarried for 9 years, even if he ran away with it tomorrow, he deserves it, putting up with me during menapause, he's basically a saint.

 

[target2019]

This is one article I read while trying to determine what's up with stock gifting.
https://www.schwab.com/resource-center/insights/content/how-to-value-a-gift-of-stock
I think your idea of gifting him stock to pay less tax, then using it for purchasing a home, could be interpreted as tax evasion.

 

[bingybear]

I assume your accounts are individual accounts. Not sure if that is required or not, but is more clean.

I would not call this a loophole

 

[bingybear]

I think your idea of gifting him stock to pay less tax, then using it for purchasing a home, could be interpreted as tax evasion.

I probably don't know enough about this to be sure. If The house is joint, then I could see it being legit. If the house was owned by the OP, then I would agree.

Maybe someone with more insight will post.

 

[Crabby Mike]

I don't see anything wrong with your plan. By the way, if you keep your gifting under $15,000 per year (it increased this year) per giftee, you don't have to report it, and it doesn't count against your lifetime limit (combined gifts and estate tax threshold).

 

[karen1972]

This is one article I read while trying to determine what's up with stock gifting.
https://www.schwab.com/resource-center/insights/content/how-to-value-a-gift-of-stock
I think your idea of gifting him stock to pay less tax, then using it for purchasing a home, could be interpreted as tax evasion.

Thanks, that answered a lot of my questions. Either way I'm going to end up gifting him at some point since if he quits working to retire with me, he will need extra money to live on. I'm not sure how it would be magically tax evasion because he used some of the money to buy a home with me anymore than a parent gifting money to their kid who then uses the money to buy a home that the parents live in which happens all the time.

 

[gerntz]

I'm a little confused about gifting as in some ways it seems like a major tax loophole but maybe only because of how I would like to apply it. The stocks/mutual funds in question are in a taxable account.

My understanding is that
1. I can gift stock to anyone I choose.
2. The only tax consequence to me is that I need to declare the gift and it counts towards my lifetime gifting limit (which I'll never reach)
3. The receiver has no immediate tax consequence and it doesn't need to get reported on their side (thus wouldn't count against say ACA subsidies).
4. On sale of stock, my cost basis, etc is treated as their cost basis.. thus it would all be LTCG even if they immediately sold it because its stock I bought in 2009.

So does that mean since my BF and I are not married, I could just gift him stock every year so he could fill up his 15% tax bracket with LTCG too and thus even though we are not married basically get the same tax treatment? Seems like a loophole or I'm missing something?

Since we are using the money to buy a joint asset (ie. a bigger home), gifting him money to put into that home to me makes sense as long as I'm obviously not doing anything wrong.

P.S for those freaked out I'd gift him the money, we've been happily unmarried for 9 years, even if he ran away with it tomorrow, he deserves it, putting up with me during menapause, he's basically a saint.

Up to $14K per year per person, it doesn't count against your estate tax exemption. So only the amount over $14K per year that it takes to fill up his 15% tax bracket counts against the lifetime limit.

 

[bingybear]

Up to $14K per year per person, it doesn't count against your estate tax exemption. So only the amount over $14K per year that it takes to fill up his 15% tax bracket counts against the lifetime limit.

15k per recipient per year (2018 update) from an individual.

 

[target2019]

Thanks, that answered a lot of my questions. Either way I'm going to end up gifting him at some point since if he quits working to retire with me, he will need extra money to live on. I'm not sure how it would be magically tax evasion because he used some of the money to buy a home with me anymore than a parent gifting money to their kid who then uses the money to buy a home that the parents live in which happens all the time.

Things happen all the time, that is correct. It does not mean that this is immune from audit. There is nothing magical about taxes. There is tax law, and interpretation by taxpayers and tax preparers when they fill out forms.

This is not comparable to my giving child cash to buy a home. When I gift cash, there is no associated capital gain.

I'm not a tax professional. It just seems to me that someone could look at this and say you will be avoiding tax on stock you own now, and gaining complete benefit of the stock when you and BF buy this house. I don't know tax law or tax precedent, and can't advise you on whether it's a good idea. Just throwing a caution flag for your potential benefit.

 

[COcheesehead]

Under an audit I could see you being considered “common law married” and thus assets are considered owned together.

 

[karen1972]

Thanks Folks. I'll definitely be talking to a tax guy. I had to consult when we bought our current home as I was worried about some tax implications at that point. Someone needs to write a primer on tax implications for unmarried couples since there are tons out there.

btw, most states don't have common law anymore.

 

[COcheesehead]

Thanks Folks. I'll definitely be talking to a tax guy. I had to consult when we bought our current home as I was worried about some tax implications at that point. Someone needs to write a primer on tax implications for unmarried couples since there are tons out there.

btw, most states don't have common law anymore.

Putative still might apply.

 

[gcgang]

...So does that mean since my BF and I are not married, I could just gift him stock every year so he could fill up his 15% tax bracket with LTCG too and thus even though we are not married basically get the same tax treatment? Seems like a loophole or I'm missing something?

Since we are using the money to buy a joint asset (ie. a bigger home), gifting him money to put into that home to me makes sense as long as I'm obviously not doing anything wrong.

The tax code is full of "loopholes" and "gray" areas. Smart people figure out how to take advantage of them. Good for you for figuring this out. Go for it!