Before you sell a stock at a profit, give the shares to a low-bracket child. You and your spouse can give up to $20,000 worth of assets to each child each year, free of gift tax. If you don’t use this gift tax exclusion by year-end, you’ll lose the tax break for 2001 because you can’t make it up with larger gifts in the future.
After the gift, your child can sell the stock. The taxable gain will be the same but it likely will be taxed at 10%, not 20%. Moreover, gains on investments held longer than five years may qualify for a bargain 8% rate, if sold by a low-bracket taxpayer.