Tax Experts
Reducing Capital Gains to Avoid AMT
By Kevin McCormally, Editorial Director, Kiplinger.com
April 3, 2008
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Q: If I gift stock to my college age son, I know it will be taxed at our rate, but would this help us avoid getting hit with AMT? He has very little income. -- Joan S.
Kevin's Answer
Great question . . . and one I've never heard before.
Working through the forms, I think you're on to something: If the only reason the parents would be in the AMT tax system is due to capital gains, which would push them into or through the AMT exemption phase-out zone, then it looks like shifting the gain to a child -- by gifting the stock and having him or her sell it so the profit shows up on the child's return, not the parents -- would prevent the parents from being pushed into the AMT.
The kiddie tax would demand that the profit be taxed at the parents' 15% capital gains rate, as you note, but I believe it would short circuit the AMT.
Need more help understanding the AMT? Here's an overview of more tax-planning strategies to avoid the AMT. Also, see AMT tax rules for 2007 returns.
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