Dustin owns all of the stock of Gold Corporation which includes both common and preferred shares. The preferred stock is noncumulative, has no redemption date, and possesses no liquidation preference. In 1995, Dustin makes a gift to his adult children of all of the common stock. He dies in 2016 still owning the preferred stock. The value of the Gold stock on the relevant dates is: $$\begin{array} { l r r }
& 1995 & 2016 \
\text { Preferred } & \$ 400,000 & \$ 500,000 \
\text { Common } & 3,000,000 & 5,000,000
\end{array}$$ One of the tax consequences of this estate freeze is:

Question

Dustin owns all of the stock of Gold Corporation which includes both common and preferred shares. The preferred stock is noncumulative, has no redemption date, and possesses no liquidation preference. In 1995, Dustin makes a gift to his adult children of all of the common stock. He dies in 2016 still owning the preferred stock. The value of the Gold stock on the relevant dates is: $$\begin{array} { l r r } 
& 1995 & 2016 \
\text { Preferred } & \$ 400,000 & \$ 500,000 \
\text { Common } & 3,000,000 & 5,000,000
\end{array}$$ One of the tax consequences of this estate freeze is:

Quizplus · Accepted Answer

Dustin made a gift of $3,400,000 in 1995, which is the value of the common stock he transferred to his children. The preferred stock, which he retained, does not affect the gift value of the common stock.