InterDigital Inc (IDCC)

[The Count]

Transferring IDCC to your kids

You asked
Is it possible to transfer shares of IDCC stock to my children without my having to pay taxes on the gains (non ira). Can it be set up that the children pay the taxes when they sell?

Yes, if you transfer stock to someone else then they pay the tax on the gain when the stock is sold. Their basis and holding period in the stock is the same as yours. A potential issue is gift tax liablity. If you gift more than $11,000 to someone in a year (all gifts combined) you are required to file a gift tax return. There is no tax due until you your cumulative taxable gifts exceed the amount of the exemption allowed on your 706 (estate tax), which is $1.5 million now and will be $2 million in 2006. If you and your wife each make a gift you can gift $22,000 (11+11) to each individual without having a taxable gift. If your child is married then you and your wife can gift $11,000 to both the child and spouse, allowing $44,000 to be gifted without making a taxable gift.

The risk is that when you transfer the stock you lose all control, so the kid could sell the stock and spend the money foolishly. So you may want to set up a trust. You would be the trustee and the child(ren) would be the beneficiary. In that way you could control the stock, but when it is sold the tax would be paid by the trust or the beneficiary (depending on how the trust is structured).

If you hold the stock until you die then there would be no capital gains paid on the stock by anyone. The person who inherits it would get a step up in basis to the fair market value on the date of death. However if your estate is above the exemption amount at the time of death your estate would be taxed on the value of the stock at rates in the neighborhood of 50% and more.

So if you are talking about significant dollars I would advise you to speak to a CPA and an estate planning attorney to look at your complete situation before taking any action.

The predeeding advise is the opinion of an anonymous chat board poster and should not be followed. It is intended to give you ideas to discuss with qualified professionals. These are my thoughts off the top of my head and should not be relied upon as I have not researched them to confirm the accuracy.
(Sorry about that, but it makes my malpractice carrier happy.)