[kward01]

If my parents want to give me stock that I am going to need to cash in, what is the best way to save money? Should they cash in or I? Which tax is cheaper?
Kathy Ward

[ebaines]

Depends on whether your parents claim you as a child dependent (meaning you are a dependent under age 19, or under age 24 and a full time student) and whether the stock has appreciated in value from the time your parents acquired it.

If the stock has lost value (today's fair market value is below their cost basis) then if they give it to you and you sell it neither of you can take advantage of a write-off on the lost value - so in this case it's better for your parents to sell it rather than you.

If the stock has gained value, then if they give it to you your cost basis is set equal to what their cost basis was. If you are child dependent the "kiddie tax" provisions basically make it so that the tax you would owe on the sale is the same as the tax your parents would owe if they had sold it themselves - so in this case it doesn't matter who sells the stock. But If you are not a dependent of your parents, then you would pay capital gains tax at a rate based on your own adjusted gross income - and hence whether its better for you or your parents to sell the stock depends on your respective capital gains tax rates (which is either 0% or 15%, depending on AGI).