Eric, age 80, has accumulated about $6 million in net assets. Among his assets are the following marketable securities held as investments. $$\begin{array} { l c c }
& \text { Basis } & \text { FMV } \
\text { Cardinal Corporation stock } & \$ 200,000 & \$ 250,000 \
\text { Crane Corporation stock } & 300,000 & 250,000 \
\text { Hawk Corporation stock } & 50,000 & 250,000
\end{array}$$ 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 at 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. $$\begin{array} { l c c } 
& \text { Basis } & \text { FMV } \
\text { Cardinal Corporation stock } & \$ 200,000 & \$ 250,000 \
\text { Crane Corporation stock } & 300,000 & 250,000 \
\text { Hawk Corporation stock } & 50,000 & 250,000
\end{array}$$ 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 at tax considerations and using only the assets described above, Eric's best choice is to:

Quizplus · Accepted Answer

Donating the Hawk stock (with a basis of $50,000 and a FMV of $250,000) by gift to the church allows Eric to avoid capital gains tax on the $200,000 appreciation, and the church, being a tax-exempt entity, can sell the stock without incurring any tax. Selling the Crane stock, which has decreased in value, allows Eric to realize a capital loss, which can offset other capital gains or, to a limited extent, ordinary income.

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