Tax consequences for you:
- You will not have any dividend income from the stock after you give it to your son. (Any dividends that you receive before you gift the stock are taxable income to you.)
- You will not have any capital gain or loss on the stock.
- If the total value of your gifts to your son does not exceed $15,000 in any one year, there are no gift tax consequences.
Tax consequences for your son:
- Any dividends that the stock pays after you gift it to your son will be taxable income to him.
- If he sells the stock, he will have taxable gain or loss based on the price that you paid for the stock when you originally bought it. It will be long-term or short-term, depending on the date that you purchased it. In other words, he pays tax on any increase in value that occurred while you owned the stock, as well as on any increase in value that occurs when he owns it. (If you acquired the stock in some way other than buying it on the open market, it gets more complicated.)
- It's not clear whether your son might be subject to kiddie tax. If so, any dividends or capital gains from the stock will be unearned income to him, and could therefore be subject to kiddie tax.
