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Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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My eldest daughter has a stock trust fund from her grandfather.

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My eldest daughter has a stock trust fund from her grandfather. She would like to transfer part of it to her youngest sister who was born after her grandfather died. Can she do this without paying tax on the amount she transfers?

First, if and when gift tax is ever due, it is paid by the donor and not by the recipient of the gift. However, under current regulations, each taxpayer is allowed to give gifts in their lifetime of up to $1 million before any gift tax becomes due. This is part of what is called the Uniform Tax Credit Act.

In addition to the $1 million lifetime exemption, each individual is allowed to give annual gifts of up to $13,000 to any number of individuals, and those gifts do not even apply towards the lifetime exemption, nor do they need to be reported. Gifts which exceed the annual exclusion of $13,000 must be reported by the donor by filing Form 709 with the IRS to report the value of the gift. However, no tax is actually due unless that donor has already reached his $1 million lifetime limit. The amount reported then reduces that donor's remaining lifetime balance that he may give in non-taxable gifts.

So unless this gift would exceed $1 million, then there will be no tax consequences here, but if the gift exceeds a value of more than $13,000 in any one year, then your daughter would have to comply with the reporting requirements.

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Thank youCustomer

Customer: replied 8 years ago.

How is the capital gains handled? Will the donor pay when she transfers? Will the recepient pay when she sales?




If you plan to actually sell some stock and then just give the money to the other daughter, then the oldest daughter will be liable for any capital gains tax at the time the sale is made if she has a gain on the sale of the stocks.

However, if she simply transfers stock shares to her sister's name without actually selling the stock, then there is no taxable gain for anyone to pay tax on. If the stock is transferred in this manner, then the youngest daughter would eventually be liable for capital gains tax at the time she actually sells the shares.

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Thank youCustomerand let me know if you have more questions.

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