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Instead of the traditional cash gift, I want to give my gift in terms of something that could increase in value over the long term. Before doing that I wanted to ask the below questions:

  • Do I have to pay tax & include those investments in my tax form or is it the responsibility of the gift receiver?
  • Do I need to explicitly buy new units that can be transferred to the other person or can I use some part of my existing units?
  • Is it possible to add the gift units to the other person's Traditional or Roth IRA directly?
  • Will the amount of the gift be equal to the market value when it was bought or when I actually transfer it to the other person?
  • Can I use this as a deduction on the next year's tax form?
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I am not an accountant, however, I believe the following to be true:

  • You would normally pay the tax, although either person can pay it. ref: irs.gov The way I understand it, you only owe tax if your COST BASIS is greater than the current tax free allowable amount (which is $13,000 in 2011 per person you are gifting to). For appreciated property, you only owe tax on the cost basis of the property. The receiver will end up paying taxes on the appreciation later. This is a good way to shift money to people in a lower income tax bracket.
  • You can transfer your existing shares.
  • You can transfer them to any account including a retirement account. However, this would be considered part of their IRA contribution for that year.
  • The cost basis for the receiver will be the same cost basis that you have. That will transfer to the person you are giving the gift to. ref: irs.gov However, if there is a loss or federal gift tax is paid it can affect your cost basis. There are complicated rules.
  • No, gifts are not normally deductible, whether they are cash or not. Donations to 501(c)3 type organizations are deductible. ref: irs.gov
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  • If I wish to gift stock to another, that stock cannot be deposited to their retirement account. Retirement accounts can receive stock from other retirement accounts, but new deposits must be cash.
    – JTP - Apologise to Monica ♦
    Dec 31, 2011 at 21:53

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