Can I transfer appreciated stock to a minor child with no income, sell it, then pay taxes at their rate?

I have appreciated company stock that I have held over one year. I purchased it with the intention of using it for my childrens (age15 and 16) college education. I would like to gift it to them, then they could sell it. Since capital gains tax goes to 0% in 2008 for low income people, and at best they will have part time jobs, I could save the capital gains tax on the gain, allowing them more for college. This will lower their chance of grant money, but I think we make too much anyway (combined $130,000).





Could I do this to avoid paying capital gains? The stock is in my name, can my wife and I each gift $12,500 per year (or do I need to transfer some to her first)? Would she have to wait to gift it? Do the kids need to hold it an additional year to get long term capital gains?|||The gift amount is $12,000. You can gift it to them, and you would be gifting it to them at current market value, but their basis would be your original cost basis. The only thing is, since the stock is not in your wife's name at all, she can't gift it, because she doesn't own any of it. I also don't know about adding her name to the stock to make it joint, and then gifting it to your kids, as the IRS may say it's just a sham transaction done to avoid taxes, and disallow it.





Also, unearned income for a childer under age 18 that exceeds an annual inflation-adjusted amount generally is taxed at the parents highest marginal rate. This is done to lessen the effectiveness of intra-family transfers of income-producing property that would shift income from the parents' high marginal tax rate to the child's generally lower tax bracket. The age used to be under age prior to 2006, but was increased to 18 as part of Tax Increase Prevention and Reconciliation Act of 2005.





For 2006 the amount that could be shielded was $1,700 ($850 standard deduction for a child without earned income, and $850 used to calculate the net unearned income reported on the "kiddie tax" return.)





Looks like you're possibly out of luck on getting it taxed at your kids' rates since they are under 18.|||You could try - but you should probably get a lawyer/accountant to look it over to make sure you've got your ducks in a row.





Give me some money while you are at it.|||been a while and congress certainly has changed the law. But used to be you and your wife could "transfer" a total of $10,000 each year to each child Without triggering the "gift tax" clause of the estate tax section.