Swapping a gift in same calendar year

Technical topics regarding tax preparation.
#1
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Client transferred a large sum of money to child's trust during 2021, but later in the year, they removed some cash and transferred in stock, all for the same amount/value.

Is this allowed? If so, I assume we just report the net cash amount and stock as current year gifts? thx
 

#2
MilesR  
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It depends on the trust. Some trusts allow asset swapping. Usually it's to swap in high basis assets for low basis assets in order to get the step-up on the outside when the grantor dies. If it is a swap then I don't think you need to report anything because it isn't a gift - it's a swap.
 

#3
Nilodop  
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Not a gift (or a sale/exchange) if grantor trust. Treated effectively as same person.
 

#4
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Nilodop wrote:Not a gift (or a sale/exchange) if grantor trust. Treated effectively as same person.


Ok, but a transfer to a IDGT is reported on a gift tax return.

Also, I learned that the IDGT allows for "swap" power.
 

#5
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Correct. The cash gift gets reported as such on a 709. And because the IDGT is a DRE an equal-value swap is not a taxable event for income or gift tax purposes.
Steve
 

#6
MilesR  
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The swap is not a gift because the transfer received full and adequate consideration - as in he transferred in stock and then received "adequate consideration" back. Just the initial gift of cash is reported. Although it needs to be properly documented that a swap occurred.
 

#7
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thank you all!
 


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