The taxpayer owns stock with an adjusted basis of $15,000 and a fair market value of $8,000. If the stock or cash is going to be given to her niece, it is preferable for the taxpayer to sell the stock and give the $8,000 of cash to her niece. The same preference would exist if the recipient were a qualified charitable organization.

Question

Quizplus · Accepted Answer

Selling the stock for its fair market value of $8,000 would generate a $7,000 capital loss, which can be used to offset other capital gains, up to $3,000 of ordinary income, and carried forward to future tax years. Donating the cash or the stock to a qualified charitable organization would also result in a charitable contribution deduction, but selling the stock and donating the cash would allow the taxpayer to maximize both the capital loss and the charitable contribution deduction.

The Taxpayer Owns Stock with an Adjusted Basis of $15,000