Gift Giving Strategies

Type of Property

Appropriate to gift?

(from the donor's perspective)

Long-term capital gain property
(likely to appreciate in value)

Yes, future growth out of estate, but value of gift based on FMV

Short-term capital gain property
(likely to appreciate in value)

Yes, future growth out of estate, value of gift based on donor’s basis

Short- or long-term capital loss property

No, owner should take the loss and gift cash

Life insurance on donor⁽¹⁾ (term)

Yes, because of lower gift value – death benefit removed from estate if death > 3 yrs. from gift date

Life insurance on donor⁽¹⁾ (cash value)

Yes, but may have large gift value – death benefit removed from estate if death > 3 yrs. from gift date

Fully-depreciated property

Yes, because of low gift basis

Depreciable property

No, hold until fully depreciated

Non-statutory options

Yes, but bargain element is included in donor’s income upon exercise

Statutory options

No, they cannot be transferred

Cash

Yes

Encumbered property
(Debt assumed by donee)

Possibly, only the net gift value (i.e., the (Debt assumed by donee)

Encumbered property
(Debt retained by donor)

Possibly, but the entire FMV may be subject to gift tax

Community property

Possibly, gift is considered made ½ by each spouse, but depends on the type of property gifted

JTWROS (spousal)

Possibly, gift is considered made ½ by each spouse, but depends on the type of property gifted