To provide for his 10-year-old daughter's future education, Dr. Porter transferred a stone sculpture which had a
Question:
To provide for his 10-year-old daughter's future education, Dr. Porter transferred a stone sculpture which had a fair market value of $50,000 to her. The lawyer who arranged to transfer title to the sculpture advised him that to affect a legal transfer, there needed to be a sale to his daughter for $1 of her own money. Dr. Porter had inherited the sculpture on the death of his mother when the fair market value of the sculpture was $20,000. In about 8 years, when his daughter begins university, she will sell the sculpture.
Required:
Provide Dr. Porter with an analysis of the income tax consequences that he must report in 2021, as well as any tax consequences to the affected family members, as a result of the above activities. Provide reasons for all included items and justifications for all excluded amounts.
