From: Dixon, CA

Dear TaxMama,

I receive annual gifts from my grandmother ($11,000) to help me pay for school.  She gives these gifts to me in the form of transfers of Mutual Funds.

I just received a capital gains tax statement saying that I made capital gains on my stocks, even though I have cashed stocks in at a per stock price below the market value of the stocks at time of transfer.

To me, this seems to be a loss, but they are basing the average cost basis on the price which my Grandmother bought the stocks.

I understand this, but I was wondering if the fact that they were a gift excludes me from capital gains responsibility if the total value I cash in remains below $11,000?

Thanks.

Jessica

 

 

 

Dear Jessica

You are SOOOOO lucky.

Not everyone has such a generous grandmother.

But yes, you DO have to pay taxes on the capital gains based on your grandmother's basis/cost.

Besides, your tax rate is probably quite low. If you don't have much in the way of income, your capital  gains tax rate is probably no more than 10%. Your grandmother's would probably be more like 25% with Federal and State.

So, even with the taxes due, you get away with hardly anything. Don't gripe. It's wonderfully generous.

Best wishes,
Eva Rosenberg, MBA, EA