Gifting stock from a Traditional IRA
At age 72, can one gift stock from an IRA (below annual exclusion amount) to a grandchild’s custodial account?
At age 72, can one gift stock from an IRA (below annual exclusion amount) to a grandchild’s custodial account?
Permalink Submitted by Alan - IRA critic on Tue, 2022-07-26 14:23
Not without distributing the stock from the IRA as a taxable distribution. The distribution would count toward the RMD if the RMD had not been completed. It would probably be easier to sell the stock in the IRA, contribute cash to the UTMA and re purchase the shares in the UTMA.
Permalink Submitted by Chris Cotter on Tue, 2022-07-26 14:49
Thank you. Would selling the stock in the IRA and contributing cash constitute as a distribution as well?
Permalink Submitted by Alan - IRA critic on Tue, 2022-07-26 14:58
Selling in the IRA is not a distribution and has no tax impact. Distributing the cash out of the IRA will be a taxable distribution reported on a 1099R, and will count toward your first RMD for the year you reach 72. Gifting the cash to the UTMA account and then repurchasing the shares (or any shares) is not taxable, and also non taxable for gift tax purposes if the gift is under the annual exclusion limit. Basis for any shares purchased will be the purchase price of the shares. Regardless of whether the IRA distribution is in shares of stock or cash, it will be taxable. If you have heard of a QCD to reduce taxation of RMDs, a QCD must be made to a charity. A gift to an UTMA cannot be treated as a QCD.
Permalink Submitted by Chris Cotter on Tue, 2022-07-26 15:21
Understood. Thank you for the very thorough explanation.