I didn't file gift tax return. Now what?

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  • #4782
    starfish11040
    Participant

    In 2017 I moved $35000 of stock from my brokerage account to my son’s brokerage account. I realize that I did not file the gift tax return. What is my best course of action now?

    • This topic was modified 1 year, 10 months ago by starfish11040.
    #4785
    kaneohe
    Participant

    perhaps better late than never…………can you split the gift w/ a
    spouse? https://www.forbes.com/sites/bobcarlson/2018/10/23/the-gift-tax-return-trap-and-how-to-avoid-it/#2deaafee6bfa

    #4786
    dienerte
    Participant

    Not responding to the original question, but it makes me think of a question related to a gift of stock. As a gift, what is the recipients tax basis in relation to any future sale of the stock?

    #4787
    kaneohe
    Participant
    #4789
    starfish11040
    Participant

    That brings up the question of the cost basis when my son sold the stocks (there were two stocks). That link to the IRS is confusing so I’ll just give you the numbers.
    stock1: My cost basis was 20, the FMV per share at transfer was 18, he sold at 17.
    stock2: My cost basis was 12, the FMV per share at transfer was 10, he sold at 13.
    Is his cost basis the FMV or was my cost basis supposed to be carried over to him?

    thanks

    #4790
    kaneohe
    Participant

    simplified version of IRS link:
    I) If the FMV of the property at the time of the gift is less than the donor’s adjusted basis, your adjusted basis depends on whether you have a gain or loss when you dispose of the property.

    A)Your basis for figuring a gain is the same as the donor’s adjusted basis, …………..
    B)Your basis for figuring a loss is the FMV of the property when you received the gift,…………………….
    C) Note: If you use the donor’s adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and get a gain, you have neither a gain nor loss on the sale or disposition of the property.

    II)
    If the FMV is equal to or greater than the donor’s adjusted basis, your basis is the donor’s adjusted basis at the time you received the gift.

    Translate simplified version to decision chart:
    I) if FMV < donor basis :
    A)Gain on both FMV/donor basis: use donor basis
    B)Loss on both FMV/donor basis: use FMV basis
    C)Gain on 1 basis/loss on other basis: no gain or loss

    II) If FMV >= donor basis, use donor basis

    In your cases, FMV < donor basis so you use I). In one case you have loss using both basis; in the other you have gain using both basis
    so you use IB and IA.

    #4791
    starfish11040
    Participant

    kanehoe,
    thanks for your input.
    Just one point of confusion for me.
    For the example stock2: My cost basis was 12, the FMV per share at transfer was 10, he sold at 13, your interpretation is that he basis is the donor’s basis because there is a gain using both basis. OK, got it.
    But let me make one small change:
    stock2: My cost basis was 12, the FMV per share at transfer was 10, he sold at 10.01. Now there is a loss using the donor’s basis but a gain using the FMV basis. Seems that the it would be to the government’s advantage to tax a gain on the FMV basis rather than to permit a tax loss based on the donor basis. I say that be cause if someone has a stock with a huge capital loss on paper they could transfer that tax loss to someone else (if the price goes up slightly after the transfer and is then sold). The recipient might be in a much higher tax bracket, making the tax loss more valuable. Seems like the government would frown on that.

    #4794
    kaneohe
    Participant

    “But let me make one small change:
    stock2: My cost basis was 12, the FMV per share at transfer was 10, he sold at 10.01. Now there is a loss using the donor’s basis but a gain using the FMV basis”

    Now you are in I C) with a loss using one basis and a gain using the other. The IRS guidance from the link and chart is that there is no gain
    or loss.

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