Holly owns stock with an adjusted basis of $2,500 and fair market value of $9,500. Holly expects the stock to continue to appreciate. Alice, Holly's best friend, recently had surgery for cancer. Alice's physicians have told her that her life expectancy is between six months and one and a half years. One day at lunch, the two friends were discussing their tax situations (both believe they pay too much), when Alice mentioned that she had read a newspaper article about a tax planning opportunity that might be suitable for Holly. Holly would make a gift of the appreciated stock to Alice. In her will, Alice would bequeath the stock back to Holly. Because Alice is confident she will live longer than a year, the basis of the stock to Holly would be the fair market value on the date of Alice's death. Alice would "feel good" because she had helped Holly "beat the tax system." You are Holly's tax adviser. How will you respond to Alice's proposal? Would your response change if the stock were a painting that Alice could enjoy for her remaining days? Explain.
Answer to relevant QuestionsNicky receives a car from Sam as a gift. Sam paid $48,000 for the car. He had used it for business purposes and had deducted $10,000 for depreciation up to the time he gave the car to Nicky. The fair market value of the car ...Mac, an inventor, obtained a patent on a chemical process to clean old aluminum siding so that it can be easily repainted. Mac has a $50,000 tax basis in the patent. Mac does not have the capital to begin manufacturing and ...Platinum, Inc., has determined its taxable income as $215,000 before considering the results of its capital gain or loss transactions. Platinum has a short-term capital loss of $24,000, a long-term capital loss of $38,000, ...Harold, a CPA, has a new client who recently moved to town. Harold prepares the client's current-year tax return, which shows a net § 1231 gain. Harold calls the client to request copies of the returns for the preceding ...Rennie owns a video game arcade. He buys vintage video games from estates, often at much less than the retail value of the property. He usually installs the vintage video games in a special section of his video game arcade ...
Post your question