Insider Jeff Fleming

Investing in a Loved One's Future

For many, the best use of their money is to invest in a child's or other loved one's future. If you're considering sharing your assets, do some research first.

Dear Jeff:
I'm going to give my daughter money to help her purchase her first home this year. It requires that I sell off some investments to raise a down payment. Is there any way to deduct the capital gains I will pay on this transaction?

Jeff Says:
Perhaps a tax magician could find a way to deduct the capital gains, but I sure can't. Do you know one?

Think of capital gains as a type of income tax and income taxes are certainly not deductible. Capital gains occur when you sell property for an amount greater than your basis. Basis is a tax term that refers to your cost or what you paid for it. There are also a few adjustments such as depreciation that must be taken into consideration when determining your basis in the property. Enough terminology details.

Money & Family
Would you help a grown child purchase a house or other large investment?
Yes. The older generation should help the younger.
No. My children are responsible for themselves.
or just check the results.

I am sure you will agree that if you keep the profit, you will have to pay the tax. Why should it be deductible just because you give it away? After all, isn't it your choice as to whether or not you want to give it away? Besides, if you give the property to your daughter, she will not have to pay income tax on the money that she receives. You could give her one million dollars and she still would not have to pay income taxes on the gift. You already paid taxes on the money. That is the good news.