When you were born, your great uncle bought 500 shares of stock in Apple with the intention
Question:
When you were born, your great uncle bought 500 shares of stock in Apple with the intention of giving it to when you graduated college for you to use as a down payment on a house. Unfortunately, he has fallen ill with terminal cancer, and will likely not live to see you graduate from college in the spring. He bought the stock in Apple for $1 per share. Today it is trading for $146 per share. He knows that you are a finance major and are taking a class in estate planning. His question is this – would either of you benefit by having him transfer the stock to you now while he is alive (as a gift) or instead, should he just leave it to you in his will (and have you inherit from estate)? You uncle is single, has no debts or intention to leave anything to charity. His estate is worth $2.5 million dollars. He has never made any taxable gifts in any other years.
a. Are there any estate or gift tax advantages or disadvantages to your uncle of transferring the stock to you before versus after his death? Explain why or why not
b. You plan to sell the stock as soon as you receive it. Is there any income tax advantage to you if he gifts it to you while he alive versus receiving it from his estate after he dies? Assume the income taxes to you on any capital gains are 15%. Calculate the difference in taxes to you, if any, of receiving it as a gift versus inheritance.
Expert Answer:
A when the property is transferred as gift then the value exceeds 50000 is taxable if the sam... View the full answer
