Like the title says, from the filing process and tax questions to tax policy and reform, you can search and share All Things Tax here. This is the place to find answers to all your general questions that don't fall under the other categories. And just a reminder: questions about software or online filing should be posted in DIY Products.
12-18-2017 01:48 PM
I'm interested in taking advantage of the Colorado First Time Home Buyer Savings Account - https://leg.colorado.gov/sites/default/files/documents/2016a/bills/2016A_1467_signed.pdf
I'm interested in funding the account with highly appreciated shares and was wondering how to value the contribution? According to the bill I've linked to I can contribute $28k. (but is this $28k my original basis or the current market price?)
THE MAXIMUM CONTRIBUTION TO A FIRST-TIME HOME BUYER SAVINGSACCOUNTFORATAXABLEYEARISFOURTEENTIIOUSANDDOLLARS FORAN INDIVIDUAL AND TWENTY -EIGHTTIIOUSAND DOLLARS FOR ACCOUNT HOLDERS WHO FILE A JOINT RETURN;
Since the savings account is established through filling a tax document (and the financial institution doesn't have to be aware that this is what the account is for) I assume I can use a standard brokerage account that accepts stock transfers.
As an argument that the contribution should be in my original basis I'd point out that a gift of stock has capital gains impact on the recipient with respect to the original basis.
As an argument that the contribution should be at the current market price I'd consider that gifts of stock have gift tax implications based on current value.
So what are your thoughts? Can I contribute $28k valuing the shares at the original purchase price, or valuing hem at the current market price.
Thanks for your thoughts,
01-26-2018 05:47 PM
Welcome to the Community! Thanks for asking a great question.
My understanding about this particular savings account since it is a Colorado income tax subtraction for the interest and gains otherwise owed when cashing out the investments to pay for "eligible expenses" on a first home, that the contribution must be first paid in after tax dollars. Therefore, I don't believe you can use appreciated securities to fund this account. One option, since the market is so great, is to cash out the securities (up to the $28,000 limit per year for MFJ) if you held them longer than one year if you were interested in using this account to start a new fund a future first home purchase, and hold onto the rest of the securities above the $28,000 value when cashed out.
Thanks for the question!