My father has $40k worth of grains to sell, he wants to gift me the grains to gift to me to use towards a house downpayment. What is the best way to do this tax wise?

[mrspippi]

He could sell the grains and gift me the cash or gift me the grains and I sell for the cash. I'm not sure which way would have fewer capital gains implications.

[Delphision · Accepted solution]

Here's the deal.  He sells the grains, reports the income and pays tax.  It could possibly cost him $14,000 in income tax on the profit.  I'm not sure if capital gains would apply.  It depends on how he acquired the grains.  He could gift you what was left.  As a gift, you would not report what he gave you.

If he gifts you the grains, and you sell it.  The same tax obligation would then fall to you. You will pay tax either way on the sale.

[mrspippi]

Thank you! I'm still wondering who would be hit harder, but I think if I add this sale into my 2014 taxes, I'll have a good idea. How would I claim this? Under Farming activities (though I'm not a farmer).
Dad is a farmer, which is how he acquired these grains.
Or maybe we'll have to pay the same amount either way so whoever has the lower income should sell it?
I'll definitely ask Dad to confer with his accountant as well, I'm just trying to do some leg work on my own.

[Delphision]

Whoever has the lower income would get the most benefit, but your father may well have other deductions and benefits as a farmer that you do not.  Definitely, a talk with the accountant is in order.