Question

2. On January 15 of the current year, Joyce, age 24, receives stock worth $28,000 as a gift from her parents. Her parents jointly purchased the stock six years ago for $12,000. During the year, Joyce receives $2,100 dividend income on the stock. In December, she sells the stock for $39,000. In a Word Document, respond to the following questions using 2016 tax regulations: a) Assuming this is Joyce's only income for the year, and her parents are in the 33 percent marginal tax bracket, how much income tax does the family save as a result of this gift? Show your calculations

Answer 1

Answer:

Stock purchased six years ago by parents for $12,000

Fair value of stock at the time of gift on January 15, this year = $28,000

Joyce sells the stock in December this year for $39,000

Since shares are sold for a gain, donor's cost basis and purchase date have to be used as Joyce's cost basis and purchase/acquisition date to characterize realized capital gain.

For calculation of taxable gain donor's cost basis and purchase date have to be used.

Dividend is taxable either way, there is no tax savings.

As such income tax the family saves as a result of this gift = $0