A $50K stock gift with $25,000 in unrealized gains could trigger tax liabilities for a grandson’s college tuition, complicating financial planning.
A grandmother plans to gift $50K in appreciated stock to cover her grandson’s college costs but faces a $25,000 tax liability on unrealized gains. The scenario highlights potential tax traps for intergenerational financial transfers.
Student loan debt averages $52,138 per household, with 47% of bachelor’s degree borrowers owing over $25,000. Family contributions can reduce borrowing but may carry tax implications if assets have appreciated significantly.
One solution involves selling the stock directly and paying tuition to avoid passing tax burdens. Long-term capital gains taxes may apply, but grossing up proceeds could cover the liability.