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Old 08-01-2011, 09:48 AM
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Join Date: Aug 2011
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Tax Question

I am a 21 year old college student (dependent).
My parents invested my college savings in stocks. They have about 30,000 dollars left in shares of Apple (I am a senior at a public university)
They are in the 33% tax bracket.
Edit: I am in California Edit: I do not have a job (doing unpaid internship overseas)
Questions: What happens if they transfer the 28,000 dollars worth of stock into a brokerage account under my own name.
Effectively gifting the shares to me. They have a joint account so I should be safe under 28,000 dollars from gift tax.
The stock gained 7000 dollars so was bought with 21,000 dollars.
If I get the stock, will I have to pay kiddie tax on the 7000 if I do not sell the stock?
Will it benefit me if I keep the stock until I graduate, and get a job to be taxed at my own lower rate?
Thanks in advance!



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Old 08-01-2011, 01:12 PM
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Join Date: Oct 2010
Posts: 5,233
“Questions: What happens if they transfer the 28,000 dollars worth of stock into a brokerage account under my own name.”--->Since the stock is not in any type of IRA, or 401k, or any other type of retirement program, your parents may be able to transfer the stock to your name as a gift. The amount of a gift you receive is not considered income. The gift may seem as good as a paycheck (or better!) but you are not required to pay income tax on the gift. You are not required to pay gift tax, either. If there is a gift tax, it must be paid by the donor (your parents who gave the gift). However, UNLESS yur parents made a huge gift exceeding $1.13,000 million before or at a time now, they are NOT subject to their gift taxes either due to unified tac credit that is applied against the gift tax. Your parents MUST file Form 709, as the amount of the gift, $28,000, exceeds $26,000, annual gift tax exemptions ; $28,000>$26,000 for your parents($13,000 for your mother+$13,000 for your father). The annual gift tax exclusion amount is set at $13,000($26,000 for a couple) to a person. Any amount of money below $13,000($26,000 for a couple) for that person in that year would not be a taxable gift.
“Effectively gifting the shares to me. They have a joint account so I should be safe under 28,000 dollars from gift tax.”--->As said above; you are NOT subject to gift tax and I guess Neither are your parents UNLESS they made a huge gift exceeding $1.13,000( I assume that they have only one donee) million before.
“The stock gained 7000 dollars so was bought with 21,000 dollars.”---> Your parents are NOT subject to capital gain tax as they do NOT dispose of th estock but gave it to you as a gift.
“If I get the stock, will I have to pay kiddie tax on the 7000 if I do not sell the stock?”---->No, not on $7,000; as you, a donee, are a dependent, full-time students under 24 as long as you have unearned or investment income of more than $1,900 for 2010 and after, ( The unearned income of a kid includes income produced by property given as a gift to the kid, including gifts given by parents or any other person and gifts made under the Uniform Gifts to Minors Act (UGMA) or under the Uniform Transfer to Minors Act (UTMA), whether or not that income is distributed to the child.), then you are subject to kiddie tax. The Kiddie Tax can only apply if you have unearned income,i.e., interest or dividends, capital gains that exceeds the threshold, which is $1,900 for 2010 and after. If the unearned income doesn't exceed the threshold, then it will be taxed at your low rates.
“Will it benefit me if I keep the stock until I graduate, and get a job to be taxed at my own lower rate?”---->As said above, as long as you have unearned income exceeding $1,900 generated from the shares of stock and you are a dependent, full time student under age of 24, you are subject to Kiddie tax as long as you keep the shares of stock. So, unless unearned income exceeds $1,900, you are NOT subject to kiddie tax and you ‘d be able to enjoy your lower tax bracket.



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