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I have a joint brokerage account with non spouse. What happens if I move stock to this account from my personal account and this stock has a $10,000 loss? Will my joint account co-owner be able to claim $5000 loss if we sell the stock? Does IRS allow it?

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The standard treatment of joint accounts (assuming joint tenants with rights of survivorship, specifically) is that the funds and associated income, gains, and losses are owned by the original contributor unless withdrawn by the co-owner. That would mean you as the contributor would take the loss in its entirety if you sold the stock within the joint account.

If your co-owner moved the stock to their own individual brokerage account and then sold the stock, it would be a gift to your co-owner (triggered by the transfer) and any subsequent gains or losses would be reported by that individual.

However, gifting shares at a loss creates "dual-basis" property, which will have a different tax treatment depending on the sale price of the property.

For example, you buy shares for $20,000, the price falls to $15,000, and you gift the shares worth $15,000 to a friend. The shares now have different cost bases for capital gains and losses because they were gifted at a loss: $20,000 for gain purposes and $15,000 for loss purposes. This means there's a gain if the shares are sold for more than $20,000, a loss if the shares are sold for less than $15,000, and no gain/loss if the shares are sold for $15,000-$20,000.

This effectively results in a $5,000 window ($15,000-$20,000) where you could have taken a loss, but your friend can't.

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    There's also the question of reporting and matching - who gets 1099s, how to handle nominee reporting
    – littleadv
    Commented Jul 6 at 22:29
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    Are you sure that you can gift losses? That sounds like a model to save taxes open to a lot of shenanigans...
    – DonQuiKong
    Commented Jul 7 at 5:05
  • Found my answers. Yes, you can gift losses, but this would not be beneficial to anyone. So, in a nutshell, the answer is NO. Commented Jul 7 at 5:38
  • @DonQuiKong you're 100% right, I completely forgot about dual-basis stock created when gifting loss shares. I edited my answer to reflect that.
    – Stan H
    Commented Jul 7 at 17:17

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