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

Eric's best choice would be to donate the Hawk stock to the church as a gift and sell the Crane stock now. This is because the Hawk stock has the highest cost basis, meaning that if he were to sell it, he would have to pay the least amount in capital gains taxes. By donating it to the church, he would also receive a tax deduction for the full market value of the stock.

Selling the Crane stock now would also minimize his capital gains taxes, as it has the lowest cost basis of the three securities. This would provide him with the cash he needs for the land deal.

Donating the Cardinal stock would not be the best choice, as it has a higher cost basis than the Hawk stock, meaning he would pay more in capital gains taxes if he were to sell it.

Donating the Hawk stock by death would not be the best choice, as this would not provide Eric with the cash he needs for the land deal.

The other options do not take into account tax considerations and would not minimize Eric's capital gains taxes.

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