Question: Your client, Ted, would like your assistance in selecting one of the following assets to give to his 16-year-old daughter. The corporate stock pays only

Your client, Ted, would like your assistance in selecting one of the following assets to give to his 16-year-old daughter.

Asset Fair market value Adjusted basis $15,000 $15,000 6,000 8,000 Cash Corporate stock 10 percent of the outstanding 15

The corporate stock pays only $100 in dividend income each year but has doubled in value since Ted purchased it three years ago. The S corporation has generated a profit of $80,000 each year for the past three years and is expected to perform even better in the future. The limited partnership has generated losses for the past three years and is expected to do so for at least the next several years.
a. Discuss the advantages and disadvantages from both transfer and income tax perspectives for each asset as a potential gift.
b. Which asset do you recommend Ted choose and why?

Asset Fair market value Adjusted basis $15,000 $15,000 6,000 8,000 Cash Corporate stock 10 percent of the outstanding 15,000 15,000 shares of Ted's wholly owned S corporation Limited partnership interest 15,000 3,000

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a The cash can be invested in income producing assets but the imposition of the kiddie tax prior to her turning 19 years of age 24 if a fulltime student will cause unearned income in excess of 2100 to ... View full answer

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