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Due to a family thing, I want to give some money to one of my family members. I don't have cash. I have some stocks, either I can sell my stock and give money or gift my stock worth the same amount. If I sell my stock I have to pay tax, means I have to sell more stocks. Instead I want to gift my stock and it can be sold for cash on the same day by the receiver. But my question is, the receiver is a rich person who earns more than 100K. So does he have to pay tax even if my gift value is less than 14K just because he is rich or he earns more?

Thanks.

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    "I have to give" does not sound like a gift.
    – RonJohn
    Jun 11 '21 at 14:24
  • My bad, edited. Its not that I have to do but I want to do it, because he helped me a lot in my life.
    – The Guest
    Jun 11 '21 at 14:29
  • nerdwallet.com/article/investing/gifting-stocks indicates that you can gift shares, but I think it's only possible within a brokerage. Best to ask your brokerage.
    – RonJohn
    Jun 11 '21 at 14:33
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    "Being rich" and "earning more than 100k [per year?]" are two entirely separate things, and neither implies the other.
    – chepner
    Jun 11 '21 at 14:43
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    @chepner certainly, but both could relevant here. If rich there will be other investments with capital gains tax to consider regardless of this gift, and making over 100k gives at least an idea of their current tax bracket. I don't think either are actually relevant, as this should fall into a gift tax that I don't believe affects capital gains or income, but seems like reasonable information to include in a question like this?
    – TCooper
    Jun 11 '21 at 23:19
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the receiver is a rich person who earns more than 100K. So does he have to pay tax even if my gift value is less than 14K just because he is rich or he earns more?

In the United States, gift taxes are paid by the giver, not the receiver, no matter how rich the recipient.

(That's wholly separate from any CG taxes the recipient must pay when they sell the gifted shares.)

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  • I didn't know this - A gift recipient never pays gift taxes, no matter how rich the recipient. (assuming the gift value is under legal limit only and the recipient sells it without making any gains). Thank you so much.
    – The Guest
    Jun 11 '21 at 14:48
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    @TheGuest "assuming the gift value is under ..." NO. Only the giver is impacted by the gift. The yearly (note this phrase!) IRS-ignores limit is $15K, while the lifetime tax-free limit is $11 million. You can tax free give much more than $15K by filing Form 709. It reduces the $11 million lifetime limit.
    – RonJohn
    Jun 11 '21 at 14:58
  • You may want to add that the gift giver typically will in cases over the annual exclusion limit, if they don't use the Form 709 (or hit their lifetime limit). And a recipient can pay the tax in special circumstances, see first Q in this FAQ: irs.gov/businesses/small-businesses-self-employed/… -- but thanks for the info, I was previously unaware of the Form 709
    – TCooper
    Jun 11 '21 at 23:24
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I can sell my stock and give money or gift my stock worth the same amount. If I sell my stock I have to pay tax, means I have to sell more stocks. Instead I want to gift my stock and it can be sold for cash on the same day by the receiver.

If you gift the stock they don't pay any gift tax.

But when they sell the stock they may have to any tax on the gains.

But what are the gains? That is the price they sell the stock for minus what you paid for the shares. The government doesn't want the tax on the gains to disappear, just because you are making a gift.

So if you bought the shares 5 years ago for $5,000 and they are worth $15,000 today, you can either:

  • Sell the shares today and pay taxes on the $10,000 in gains, and give them the balance.
  • Gift them the shares, and they can sell them when they want and then pay taxes on the delta. If they sell tomorrow, they will pay taxes on the $10,000 in gains.

Which way will they end up with more money? depends on the tax brackets involved. Of course option two gives them the ability to decide when to sell.

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    OP would have to tell the recipient the cost basis?
    – RonJohn
    Jun 11 '21 at 16:26
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    Yes. Otherwise they might have to assume zero. Jun 11 '21 at 16:30
  • I have gains. For privacy purpose, lets say I bought 100 each at 100 USD and now they are trading at 500 USD. So if I gift him 20 shares (10000 USD total value), he has to pay tax on 8000?
    – The Guest
    Jun 11 '21 at 17:06
  • yes they will pay taxes on all the gains. so $8,000. Jun 11 '21 at 17:57
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    Note that he will have to pay tax on the gain only when he sells the stock. He can receive the gift and hold it for as long as he likes with no tax obligation. But as soon as he sells it, he will have a taxable capital gain of the difference between what you bought it for and what he sold it for. Jun 15 '21 at 7:42

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