PFIN 2nd Edition by Lawrence Gitman ,Michael Joehnk,Randall Billingsley

Exercise 5

Becky has accumulated substantial wealth and plans to gift some of her wealth to her son Bob. She is considering two assets: a beach house, which cost $150,000 20 years ago and now has a fair market value of $500,000; and stock in Big Corporation, which cost her $400,000 5 years ago and now has a fair market value of $500,000. Prepare a memo advising Becky which property to give to Bob. In your memo, consider two scenarios: one where Bob sells the property and one where he does not.