Why might gifting appreciated stock to my low-income adult child backfire?
When you gift appreciated stock, the recipient takes your original cost basis and your holding period, so your built-in gain transfers to them. If they're in a low bracket, they might sell and pay 0% long-term capital gains, which is often the whole point. But beware the kiddie tax if the recipient is a dependent child or full-time student under age 24: their unearned income above a threshold can be taxed at the parents' rates, wiping out the benefit. It can also affect financial aid and any means-tested benefits. And if you're gifting to help them but they need the cash sooner than long-term treatment allows, a sale within a year triggers higher short-term rates. Confirm the recipient's bracket and age status first.
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