# Gift to US child



## greenish8 (9 mo ago)

Long time reader, first time poster. Hope it's ok, in where I live it's hard for me to find someone knows about US tax rules...


I lived in the US for work for about a few years in my early 30s. I have since left the country, haven't been back since then, and am not a tax resident anymore, but a foreigner for tax purpose (no green card, no citizenship).
I now live in Asia, Taiwan in my mid 50s. 

During my time in the US I had invested my salary in US companies stock in a US brokerage account, maybe about $50K USD. Overtime it has grown to almost $350K USD now (well at least before the stock market crash this year ..)

My daughter is now immigrated to the US with green card, working, and I'm starting to plan for my estate. And I'd like to find the cheapest way to pass the securities in the brokerage account to my daughter.

I did some research: it seems like since I am a non-us citizen, I only have $60K USD lifetime exemption for US situated asset for estate tax purpose. And my US companies stock in the US brokerage is considered US situated. Thus if I do nothing and have those securities passed to my daughter after I die, the steup-up cost basis will not help me much for the amount exceeding $60K. 

It seems like the smarter way is to gift those stock to my daughter before I die, since from https://www[dot]bnymellonwealth[dot]com/assets/pdfs-strategy/thought_-how-the-us-gift-tax-applies-to-foreign-nationals[dot]pdf, my stock is NOT considered gift-taxable if I give them to my daughter when I am alive. 


My questions:
1. If I gift the stock to my daughter when I'm alive, I won't be taxed at all, is this understanding correct?

2. But later if my daughter wants to sell the stock, she will be taxed at capital gain of $300K = $350K (current value)-$50K (my original basis) = $300K is it correct?

3. If I want to minimize the capital gain tax later when my daughter sells them, can I sell right now and buy them back? Since as a foreigner, I'm aware that I'm not taxed for capital gain, so if I sell them right now, and buy them back, my daughter will havecost basis to be $350K, intead of $50K from 20 years ago. So later if she sells, then the capital gain will be caculated using the new basis $350K?

4. Is there anything "illegal" or frowned upon for avoiding capital gain tax this way? Feels like IRS will not be happy about this. But I can't find a rule saying this is not allowed.

5. If I do this, my daughter will just need to file 3520 as informational return.. is that right? And if I spread this over 3 years of time, so that each year is under 100K, then my daughter doesn't even need to file 3520? Any other form that she needs to file other than 3520?

6. Silly question, how do I "gift" stock to my daughter? Just simply transfer securities to her brokerage account? 


Thank you so much for reading, sincerely need some pointers!


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## tomwins (Dec 27, 2014)

greenish8 said:


> During my time in the US I had invested my salary in US companies stock in a US brokerage account, maybe about $50K USD. Overtime it has grown to almost $350K USD now (well at least before the stock market crash this year ..)
> 
> My daughter is now immigrated to the US with green card, working, and I'm starting to plan for my estate. And I'd like to find the cheapest way to pass the securities in the brokerage account to my daughter.


You might add your daughter as a co-owner to the account. Look at this link for more information on it:
Creating Joint Ownership: Avoiding the Tax Traps and Other Pitfalls

My mother did this for her house and I would assume you might be able to do it for a brokerage account. The other option is to open another account with you daughter as joint owners and then transfer the assets into the account.

From the link:
*W*_*HEN DOES THE GIFT TAX APPLY?* _
_Treas. Reg. § 25.2511-1(h)(4) spells it out clearly: With bank accounts and most brokerage accounts that call for the registration of securities in “street name,” Dad will not have made a reportable gift if he simply adds Junior’s name as a joint owner. Reportable gift transfers occur only if Junior starts to draw funds from those accounts for his personal use (Revenue Ruling 69-148). But with other assets, including a business or even a personal residence, if Dad makes Junior a joint owner, a gift will be deemed to have occurred immediately, and a gift return will probably have to be filed for the year the joint tenancy was created (Treas. Reg. § 25.2511-1(h)(5)). _


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## 255 (Sep 8, 2018)

@greenish8 -- Discounting all your previous thoughts -- the simplest and most tax efficient way to transfer the account to your daughter is to list her as a beneficiary to the account (check with your brokerage firm, if you need a new beneficiary designation form.) Assuming she would still be a U.S. person, for tax purposes, on your death, then your daughter would receive a "stepped-up basis" for the entirety of the account (at least under current law.) So if your account is $350K, on your death, her basis would be $350K -- so if she liquidated the account immediately, her capital gains would be zero. It doesn't matter that you are a foreigner, again assuming she remains a U.S. person for tax purposes, when you ultimately pass. Cheers, 255


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