Question: Marlo and Merlins son, Alex, needs $20,000 to start a business. They have $30,000 in securities that they can use to give him the capital

Marlo and Merlin€™s son, Alex, needs $20,000 to start a business. They have $30,000 in securities that they can use to give him the capital he needs. Pertinent information regarding the securities is given below:

Marlo and Merlin are in the 28% marginal tax rate bracket; Alex is in the 15% marginal tax rate bracket. Neither Marlo, Merlin, nor Alex has any other capital asset transactions during the year. Alex€™s basis in any of the securities gifted to him will be the lesser of his parents€™ basis or the fair market value of the security. Discuss the tax effects of alternate methods of transferring $20,000 to Alex, and devise an optimal plan for making thetransfer.

Fair Market Value $10,000 $10,000 $10,000 Purchase Date 2/10/08 2/14/05 3/19/04 Basis Security A Security B Security C S 7,000 $ 5,000 $14,000

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