Gift Tax Questions More

[S T]

All of a sudden I am receiving all of these Gift Tax Questions -

Here is the new question:

I have appreciated Stock - Per Share Basis $ 10 - FMV $ 90 - T/P states they would have to pay LT capital gain tax on $80 gain

Note" T/P is in te 35% tax bracket - and Adjult Child/Children could be in the 25% Tax Bracket

If T/p transfers to Adult Child - what is Adult Child's cost basis when they sell, basis at $10 or $ 90 (No Kiddie Tax Issues)
What is reported on Gift Tax Return as the Gift Given?

After reviewing some info - I believe the basis to donee (Child) would be $ 10 per share, but I have a question on what the amount reported on Gift Tax Return would be? Is it $ 10 or $ 90 FMV at time of transfer

T/p also asks the question regarding their personal residence which could or could not be appreciated - Basis would be cost plus improvements - correct?

This taxpayer is looking at the current $5Mil Lifetime Gifting Allowance which ends 2011

Thanks for any direction on this issue

Sandy

[MilTaxEA]

Gift tax return reports the FMV. Their basis will be the donor's basis plus any gift tax *paid*.

[S T]

With that being said, if I am understanding, then there are built in gains to the donee on the Gift for appreciated property?

What about Real Estate - given the current declining values - is that also considered "appreciated property"

Thanks,

Sandy

[Gary2]

What about Real Estate - given the current declining values - is that also considered "appreciated property"

It would depend on the actual numbers. If necessary, have the client spend the few hundred on a professional appraisal (not a real estate agent's evaluation).

The obvious strategy with appreciated assets is to transfer them in a way that will benefit from the step up in basis. With taxpayer in the 35% bracket, they ought to be working with an estate planner. To be honest, I don't know what situations would make it beneficial to put these assets into a living trust, but I wouldn't be surprised if that's an approach worth considering.