Eric, age 80, has accumulated about $6 million in net assets. Among his assets are the following marketable securities held as investments. Eric would like to donate (either by lifetime or testamentary transfer) $250,000 in value to his church. In addition, to consummate a land deal, he needs $250,000 in cash. Looking solely to tax: considerations and using only the assets described above, Eric's best choice is to:

Question

Eric, age 80, has accumulated about $6 million in net assets. Among his assets are the following marketable securities held as investments.  Eric would like to donate (either by lifetime or testamentary transfer) $250,000 in value to his church. In addition, to consummate a land deal, he needs $250,000 in cash. Looking solely to tax: considerations and using only the assets described above, Eric's best choice is to:

Quizplus · Accepted Answer

In order to determine the best choice for Eric, we need to consider the tax implications of the different options.

Option A: If Eric were to donate the Crane stock to the church as a gift, he would need to pay capital gains tax on the appreciation in value of the stock. Additionally, if he were to sell the Hawk stock immediately, he would also need to pay capital gains tax on the appreciation in value of that stock. This option is not favorable from a tax perspective.

Option B: Donating the Hawk stock to the church upon Eric's death would result in a step-up in basis for the stock, meaning that any appreciation in value would not be subject to capital gains tax. However, selling the Cardinal stock now would still result in capital gains tax.

Option C: Donating the Hawk stock to the church as a gift would also result in a step-up in basis for the stock, since Eric will not be selling it before his death. Additionally, selling the Crane stock now would also result in capital gains tax. This option is the most tax-efficient.

Option D: Donating the Cardinal stock to the church as a gift would result in capital gains tax on the appreciation in value of the stock. Selling the Hawk stock now would also result in capital gains tax. This option is not favorable from a tax perspective.

Therefore, the best choice for Eric is to donate the Hawk stock to the church as a gift and sell the Crane stock now.

Eric, Age 80, Has Accumulated About $6 Million in Net