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55dad
Returning Member

Gifting of Exercised ISO Stock Options

I exercised ISO stock options (all granted 8 or more years ago). 1 year later I gifted some of these shares to my adult son. So he gets my basis (exercise price) and my status (long term).   And the only tax event to him is the impact of any gains  or losses(they will all be long term) if he sells some or all of the shares.  And there is no 'tax event' to me as long as I stay within gifting limits.

Here is the question: Suppose that same son decides that he wants to "return" some of our gift to him? (is decision, right?)  What, if any, are the tax consequences to him and/or to us if he gifts unsold shares to us later the same year? 

Am I correct in thinking that, alternatively, he could always gift us cash?  Up to him how he "funds" that gift.

 

 

 

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2 Replies
Anonymous
Not applicable

Gifting of Exercised ISO Stock Options

what's the reason he's making the "gift" ?  and there may be tax consequences because of the tax rules for the basis of gifts - both when you gifted it to him and now when he's "gifting" it back.  

 

If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your adjusted basis depends on whether you have a gain or loss when you dispose of the property.

Your basis for figuring a gain is the same as the donor's adjusted basis, plus or minus any required adjustments to basis while you held the property.
Your basis for figuring a loss is the FMV of the property when you received the gift, plus or minus any required adjustments to basis while you held the property.

 

55dad
Returning Member

Gifting of Exercised ISO Stock Options

The purpose of the original gift was to help him have the resources to pay off large student loans.  He has now made the decision to take on  higher percentage of that debt himself so wants to 'return vale' to us.  Either by gifting shares or simply by selling shares and then, after paying taxes due based on the gain, gift cash to us.

Seems like a sale of the stock and a gift from him of cash should be ok.  Is this thinking correct?

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