1_more_opai

1.

a. if the value of the stock on gifting is EQUAL TO or HIGHER than your basis, then your daughter gets your basis. ie. you paid 10 dollars per share and it is now valued at 20 dollars, she keeps your basis of 10. when she sells it later, she pays taxes on gain in excess of the 10.

b. if the value of the stock on gifting is LESS than your basis, then she will get the value on gifting as basis for gain and use your original basis for the purposes of a reportable loss. this is unlikely to occur since she is so young and you will be controlling the shares.

- if you have a loss on this stock, it is usually best to sell it and take the loss then have HER portfolio purchase it again. this is sorta a wash sale that captures the loss for your reporting purposes, but since it is the two of you (father and daughter) the wash sale rule will not apply. it is VERY difficult to capture a loss in a gifting situation where the recipient is not going to sell the shares immediately.

2. no, there is no real tax benefit to you. of course, she may pay less in taxes on income derived from the shares (especially preferred shares) than you would because of your different income rates. once she exceeds the kiddie tax, then the taxes on her are the same as they would be for you.

Note: remember, gift tax rules apply here. so, while you are only gifting "small" amounts, if you exceed the $12K per year ($24K if your wife participates), you will need to pay gift tax on the amounts given to your daughter. IF you paid gift taxes on the shares transferred, then those taxes get rolled up into her cost basis.

well, to a certain degree, ethics are in the eye of the beholder. technically (if i understand your question), it may be inappropriate to funnel HER money through your account to purchase shares that you gift back to her. however, what is the purpose of her savings? i assume it is to take care of her between now and some point in the future.

you could TECHNICALLY avoid this by taking $100 from her savings and paying for her birthday party, or taking her to dinner, or in some other way spending it on her behalf. coincidentally, you could then gift her $100 out of your account and transfer the stock to her. if a trust is used for her "savings" then you may need to review my "advice" with a paid professional to ensure no breach of fiduciary responsibility on your part.

finally, you know me ... i dont care about "price" aka "costs". if you spent $10 with your broker to buy a share, that $10 gets added to the cost basis of the stock you gift to her ... or that she pays "herself" to make the purchase for "herself".

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1MO

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