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  • Gifting stocks to avoid capital gains tax

    I'm sure I'm not the first person to think of this, but after searching around I haven't been able to find out if this is legal, grey area, or illegal:

    In order to eliminate or at least reduce the capital gains tax, can I gift an appreciated stock to a trusted relative or friend with low(er) income, have them sell it at a reduced capital gains rate and then have them gift me the proceeds?

    I'm not sure how practical this would be in the real world if it is legal or even grey, but I was curious.

  • #2
    Believe me, you're not the first to think of it. The problem with this "technique" is that a gift is not completed if there are strings attached. So this would be a sham transaction merely to defraud the government. Tax evasion, iow - beyond grey. But it never hurts to ask! And it is fine to gift stocks to your children instead of giving them money, but the reportable value of the gift for gift tax purposes is FMV at the time of the gift, while their basis would be your basis.

    The best time to make a gift of appreciated assets is when you die. The best way is to give them to charity.
    Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3


      while their basis would be your basis.
      Click to expand...


      Is this always true?  For some reason I thought it depends on whether the basis is higher or lower than the FMV and the ultimate sale price.  I seem to vaguely remember reading something about that.   I don't know for sure, I've never had reason to look into the rules.

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      • #4





        while their basis would be your basis.
        Click to expand…


        Is this always true?  For some reason I thought it depends on whether the basis is higher or lower than the FMV and the ultimate sale price.  I seem to vaguely remember reading something about that.   I don’t know for sure, I’ve never had reason to look into the rules.
        Click to expand...


        No, it is not always true, but it is for this situation. (You have a good memory!) Those rules are confusing and I didn't want to get into them since nobody asked.
        Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5




          I’m sure I’m not the first person to think of this, but after searching around I haven’t been able to find out if this is legal, grey area, or illegal:

          In order to eliminate or at least reduce the capital gains tax, can I gift an appreciated stock to a trusted relative or friend with low(er) income, have them sell it at a reduced capital gains rate and then have them gift me the proceeds?

          I’m not sure how practical this would be in the real world if it is legal or even grey, but I was curious.
          Click to expand...


          first post and already working on tax evasion lol. welcome!

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          • #6
            Okay, I just thought of this same exact strategy for highly appreciated stocks, but wanted to see if there was any reason I could not do this. I could not find anything about it using a google search. But here is the exact topic in the WCI forums from three years ago! So the answer is no, I cannot do this.

            But I can gift the kids stock instead of cash when they need funds. And donate the shares to charities.

            Thanks again for this excellent resource!

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