Tax Tip of the Week
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Take advantage of the stock market decline
For the week of
May 7, 2001
The decline in the stock market might not be all bad news. In fact, it might present
a great opportunity to save taxes. With the stock market recently plunging to a two-year low, this might be a good
time to make gifts to your children or grandchildren.
In general, the rules allow anyone to give away up to $10,000 per year to another individual free from gift tax.
Married couples can make joint gifts up to $20,000 per year to any individual. Gifts are valued at their fair market
value for gift tax purposes. A decline in the market allows you to give away more shares of stock free from gift
tax.
For example: Let's say you own Microsoft
stock that was trading at $80 per share a year ago. At that time, you could have given 125 shares of stock to your
grandson free from gift tax. Now let's assume today's value is $64 per share. You can give away more stock, up
to 156 shares, without incurring gift tax.
When you make a gift, your basis (cost) in the stock shifts to the recipient of your gift. Giving assets to a child
or grandchild who is in a lower income tax bracket than yours saves income taxes when he or she sells the asset.
Your gift also lowers the value of your estate for estate tax purposes.
Income taxes, gift taxes, estate taxes – a gifting program allows you to keep more money in the family rather than
paying it to Uncle Sam. If you are interested in making gifts, give us a call so we can show you the tax implications.
Click here to view previous tax tips.
"Tax Tips" are published weekly to
provide useful tax information. Return to this site every week for helpful tax-cutting suggestions, tax reminders,
and current tax information.
The information contained in this site is of a general nature and should not be acted upon in your specific situation
without further details and/or professional assistance.
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