I turned 24 this year, and my Mom and Dad are thinking of giving me stock that they have owned for over 1 year to pay for my college expenses. The basis of the stock is under $28k ($14k from each of them), so they should not have to pay any gift taxes, correct?

The current value of the stock is about $86k, and I also have earned income of approx $24k. How much tax can I expect to owe on my total income of $24k (earned) + $58k (CapGains) if I sell all the stock before 12/31?

My tax filing status is Single.

  • What is your state? – Grade 'Eh' Bacon Dec 12 '17 at 18:59
  • I live in Ohio, and while my original question was focused on Federal taxes, info on State taxes will be helpful too. – Paul Song Dec 12 '17 at 19:17
  • Have they considered selling it and using the money to pay your college expenses? – Hart CO Dec 12 '17 at 19:50
  • Yes they have, but it appears that gifting it to me and having me sell the stock will result in a lower tax bill, since I am in a lower tax bracket than they are. Gifting it will result in more money available for my education, I think. Do you have some other concerns about this way of doing things? – Paul Song Dec 12 '17 at 19:56
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    But they could deduct education expenses, which might offset the benefit to you, not certain if it'd be better, but worth investigating. Nothing wrong with your proposed approach, just wondering if it's the best option. Since you have income as well, it looks like you might benefit most. – Hart CO Dec 12 '17 at 20:11

The issue is that you have not owned it for more than a year. They can sell it, pay the 15% LTCG tax (I feel like waving a rainbow flag!), then deduct it from their $5M estate exemption. They'll have to file a form with their 2017 tax return, but will own no taxes.

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    Would that not make gifting appreciated stock a pointless exercise? The idea as I understand it is to give a gift to someone in a lower tax-bracket so that the recipient pays a lower tax than the donor on the capital gains. According to this other post "Basis, and purchase date follow the gift" money.stackexchange.com/questions/84004/… – Paul Song Dec 12 '17 at 19:14
  • @PaulSong well, looks like I was wrong... – RonJohn Dec 12 '17 at 19:17

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