Hannah has 100 shares of stock with a basis to her of $100 per share. The fair v

Question

Hannah has 100 shares of stock with a basis to her of $100 per share. The fair value of the stock is now $80 per share. She would like to use the stock to help with her grandchild’s current college expenses, but she is concerned about increasing her own income taxes with a sale. She is also concerned about the taxes her grandchild would pay if Hannah gifted the cash or stock. She comes to you for advice. This would be the first gift Hannah has made for the year. Hannah is in the 24% tax bracket. Her grandchild is in the 10% tax bracket. Which statement below is true?

a. Hannah should sell the stock and gift the proceeds to her grandchild. The grandchild will not have to pay any taxes on the gift of cash.

b. Hannah should sell the stock and gift the proceeds to her grandchild. The grandchild will pay income taxes on the gift at the grandchild’s lower tax bracket.

c. Hannah should gift the stock to her grandchild and let the grandchild sell the stock. The grandchild will not have to pay any taxes on the gift of stock.

d. Hannah should gift the stock to her grandchild and let the grandchild sell the stock. The grandchild will pay taxes on the gain at the grandchild’s lower tax bracket.

Explanation / Answer

d. Hannah should gift the stock to her grandchild and let the grandchild sell the stock. The grandchild will pay taxes on the gain at the grandchild’s lower tax bracket.

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.