I have a stock account under my name only...if i transfer some stock to my spouse is this taxable/gift tax? thanks

[KrisD]

The transfer would be tax-free.

The transfer would also be exempt from gift tax. It would qualify for the marital deduction.

You would also be transferring your basis of the property to your spouse, although you do have an option of making a special election to treat the transfer at Fair Market Value in the year the transfer is made.  If you make this election, naturally you would recognize the capital gain for the fair market valuation, if any, the year of the transfer.

[pkothare8083]

Hello,

Just a follow up on the previous question. When the gifted stocks are immediately sold, do we have to pay taxes to IRS? My wife received stock grants from her company and she wants to gift them to me as they are vested. We would like to sell them as soon as they are transferred , how will taxes play a role in the scenario ?

[Anonymous]

Just a follow up on the previous question.

When the gifted stocks are immediately sold, do we have to pay taxes to IRS? My wife received stock grants from her company and she wants to gift them to me as they are vested. We would like to sell them as soon as they are transferred , how will taxes play a role in the scenario ?

this is not a follow up this is a completely different question because now stock grants are involved. 

and why the gifting before they are sold? why not let her sell them and gift you the cash? 

are these non-qualifying stock options or qualifying stock options (ISO)? the tax treatment is completely different.

here's a link explaining each.

https://www.forbes.com/sites/brucebrumberg/2019/07/09/comparing-options-nonqualified-stock-options-v... 

[pkothare8083]

Hi,

Thanks for the response. I’m not sure and was also not aware about qualifying and non-qualifying stock grants. I will find out. Assuming they are qualifying, then I do not owe and taxes, right ? Also if my wife sells the stocks and then gifts me, don’t we still have to pay ordinary tax for that?

[Anonymous]

on NON-qualifying  income is added to her w-2 so effectively the fair market value on the date of exercise is her basis. so little or no capital gain or loss if sold immediately.  it makes no difference if she sells and gives you the cash or she gifts you the stock immediately and you sell immediately. again little or no capital gain or loss. your basis is her basis.  (loss can result if the broker charges a fee for selling or there is an odd lot differential and also for some other reasons)  FMV is usually the average of high and low on the date exercised. since market prices fluctuate during the day the actual sales price can be more or less than the average - more and you have a short-term capital gain less you have a short term capital loss. 

as for ISOs, she must hold them for a period of time otherwise ordinary income on disposition. talk to your HR department for more info.  possibly also alternative minimum tax.  ISOs offer the advantage of ending up with long-term capital gain which currently probably has a lower tax rate than ordinary income.  sell too soon and it's ordinary income.  read the article. 

[pkothare8083]

Thanks that helps. Just one clarification. The taxes that we owe will be on the spread and not on the whole amount, correct? So for example, we get the stocks for $45 and we sell it for 45, hypothetically we will not owe any tax. But if we sell it for 50, we will have to pay the tax $5 * number of shares which will be based on ordinary income, correct ?