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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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If I transfer shares of common stock to my Son, will there

Resolved Question:

If I transfer shares of common stock to my Son, will there be any capital Gains involvment?
Also, what would be their starting cost figure?
Submitted: 7 years ago.
Category: Tax
Expert:  Merlo replied 7 years ago.
Hello June,

If you transfer stocks to your son, this would be considered a gift. Gifts retain the same basis as the donor's basis, so whatever you originally paid for these stocks would be the same basis that is used by your son. So when he eventually sells the stocks, his gain or loss would be figured using that basis.

As far as taxes, there would be no capital gains tax because you are not selling the stocks. However, since this is treated as a gift, you may have to file a gift tax return depending on the value of the stocks you are giving to your son.

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.

If this was helpful please press the Accept button. Positive feedback is also greatly appreciated.

Thank you June

Edited by Merlo on 10/2/2009 at 6:06 PM EST
Merlo and 2 other Tax Specialists are ready to help you
Customer: replied 7 years ago.
Thank you, XXXXX XXXXX look forward to your service in the future.
Expert:  Merlo replied 7 years ago.
Thank you June