Five years ago, Jamal purchased 10,000 shares of stock at $10 perrnshare in a pharmaceutical company. Today, the stock is worth $200,000 and is paying a dividend of $8,000 per year. Jamal expects that the stock will continue to appreciate at a rate of 12% per year, including the dividend. He wants to establish a college education fund for his two daughters, ages 19 and 14. Which of the following statements is/are true?

1. If Jamal gives 2,500 shares of stock to his 19-year old daughter, all dividends from the 2,500 shares in excess of her standard deduction will be taxed in her income tax bracket.
2. If Jamal gives 2,500 shares of stock to his 14-year old daughter and she sells it for a $3,000 gain, she will pay no tax at her marginal rate
3. Two years from now, if Jamal's older daughter sells her 2,500 shares of stock at a gain of $3,500; she will have only $1,100 of income taxed at her rate
4. All dividend income earned by his 14 - year old daughter in excess of $2,200, will be taxed at the income tax rate for estates and trusts

a). 4 only.
b). 1 and 4.
c). 2 and 4.
d). 1, 2, and 3.

Answer rating: 100% (QA)

b 1 and 4 the 14 year old daughter pays tax on dividend amount in excess of 2200 and the 19 y... View the full answer