Under the terms of their divorce agreement executed in August of this year, Clint transferred Beta, Inc. stock to his former wife, Rosa, as a property settlement. At the time of the transfer, the stock had a basis to Clint of $55,000 and a fair market value of $68,000. Rosa subsequently sold the stock for $75,000. What is the tax consequence of first the stock transfer and then the stock sale to Rosa?

Question

Quizplus · Accepted Answer

The stock transfer has no tax consequences because it is a property settlement. Rosa's basis in the stock is $55,000, the carryover basis from Clint. Thus, her gain on the sale is $20,000 ($75,000 - $55,000).

Under the Terms of Their Divorce Agreement Executed in August