I am planning to gift my India Shares in Stock Market to my brother, which has an overall value of 400,000 USD. According to Form 709 I can do a 14,000$ per year gift tax and file. My question is, can I gift my entire Stocks to my brother, without any tax implications. I am a US Tax Resident and my brother is India Tax Resident.

This will be my only Gift to him with overall transactions for the next 5 years.

  • Is that allowed ?
  • I read that maximum gift allowed is $5,430,000 exclusion which I don't understand. Is this amount for my entire life ?
  • Does it mean, I can proceed with the gifting. I will be filing Form 709 but would like to know this term ?

If anyone has done any share gifting, or selling, please let me know.

  • 2
    If your personal wealth is such that you can afford to gift US$400K of stock shares to your brother, then surely you have enough tax advisors and lawyers to answer your questions. – Dilip Sarwate May 22 '16 at 23:18
  • You marked it as "non-resident", yet your question implies that you're a US tax resident, so which is it? – littleadv May 22 '16 at 23:22
  • Can you edit and put your Tax Status in United States [from your question it is not clear if you are tax resident in US]. Can you also confirm your brothers tax status ... is he tax resident in US or he is just Tax resident in India. – Dheer May 23 '16 at 4:34

Here's an excerpt from the Charles Schwab website which I think will help evaluate your position:

The simple answer to your question is no, the value of a gift of stock for gift tax liability is NOT the donor's cost basis, but rather the fair market value of the stock at the time the gift is given. So let's say you purchased 100 shares of XYZ stock at $50 a share. Your cost basis is $5,000. Now the stock is $80 a share and you give it as a gift. The value of your gift for gift tax purposes is $8,000.

In 2015, you can give up to $14,000 to an unlimited number of individuals each year without paying a gift tax or even reporting the gifts. If you give over that amount to any individual, however, you must report the gift on your tax return, but you don't have to pay taxes until you give away more than the current lifetime limit of $5,430,000—for the amount above and beyond $14,000 per person per year. So in the example above, there would be no gift tax liability. However, if the stock happened to be $150 a share, the value of the gift would be $15,000. You'd then have to report it and $1,000 would be applied toward your $5,430,000 lifetime exclusion.

You will need to pay a gift tax on the current value of the stock. I'm not familiar with the tax laws in India, but if your brother was in the US, he wouldn't pay taxes on that gift until he sells the stock.

The recipient doesn’t have to worry about gift taxes. It's when the recipient decides to sell the stock that the issue of valuation comes up—for income taxes. And this is where things can get a bit more complicated.

In general, when valuing a gift of stock for capital gains tax liability, it's the donor's cost basis and holding period that rules. As an example, let's say you receive a gift of stock from your grandfather. He bought it for $10 a share and it's worth $15 a share on the day you receive it. If you then sell the stock, whether for a gain or a loss, your cost basis will be the same as your grandfather’s: $10 per share. Sell it at $25 and you'll pay tax (at the short- or long-term rate, depending on how long he owned the stock) on a gain of $15 a share; sell it at $8 and your capital loss will be $2 a share.

Ultimately, with a gift this large that also crosses international borders, you really should hire a professional who is experienced with these types of transactions. Their fees/commission will be completely offset by the savings in risk and paperwork.


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