Tax Facts

7506 / Can a shareholder reduce his taxable income by assigning or making a gift of future dividends to another individual?

Updated: October 20, 2026 at 03:03 PM
No. Without the transfer of the underlying stock, a gift or gratuitous assignment of future dividends will not shift the taxability of the dividends away from the owner of the stock.1



The bona fide sale of future dividends for good and sufficient consideration will result in the dividends being taxed to the purchaser and not the shareholder; but this will accelerate rather than reduce the shareholder's tax since the net sales proceeds must be reported by the shareholder-seller as ordinary income in the year of the sale.2






1.   See Van Brunt v. Comm., 11 BTA 406 (1928); Lucas v. Earl, 281 U.S. 111 (1930).

2.   Estate of Stranahan v. Comm., 472 F.2d 867 (6th Cir. 1973).

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