529 Plan Transfer
February 4th, 2006
Question: Is there any way i can avoid paying Capitol gains tax on my stocks if i am a minor?
I am only 17 and i decided to start investing my money so i made an account under my mom’s name to start investing. Now i have started to make some money and the taxes that my mom would have to pay do not look very good. I heard that if I transferred all my stocks from my mom’s account to a custodial account I would not have to pay any taxes on my capital gains when i sell it as long as it is under $13,000 or so as this website says http://www.finweb.com/taxes/avoid-capital-gains-tax-on-stocks.html.
If I do this will I or my mom have to pay taxes when I sell it in my custodial account, if so what is the rate for minors compared to what my mother would pay? I turn 18 in December if that matters.
They also say something about a Section 529 Plan on that website if I am saving for college using my moms account will this option help me in avoiding some taxes with out making a new custodial account?
capital* that was auto correct
Answer: If the account has your mother’s SSN assigned to it, your mother will owe the capital gains tax. She needs to report the capital gains on her tax return.
You cannot avoid capital gains tax by establishing a custodial account.
Get the account transferred to your name this year, and then you will pay any capital gains tax in 2010. If you are a dependent and your gains are more than $1,900 (in 2009, maybe a bit higher in 2010), you will owe tax at your parent’s tax rate anyway.
So in fact the tax is going to be the same (after the first $1,900 of gain) whether you or your mother owns the stock.
Establishing a 529 Plan will shelter the gains earned inside the 529 account. These gains will be tax-free if the distributions are used for qualified education expenses.
Taxi Transfer Ezeiza Via Satelital SA $ 79
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Tags: 529, 529 plan transfer, 529 plan transfer rules, 529_plan, college, ugma, utma