Problem 6-52 (LO. 3, 4) Brittany Callihan sold stock (basis of $184,000) to her son, Ridge, for $160,000, the fair market value. a. What are the tax consequences to Brittany? Brittany will have a $ that is b. What are the tax consequences to Ridge if he later sells the stock for $190,000? What are the tax consequences to Ridge if he later sells the stock for $152,000? What are the tax consequences to Ridge if he later sells the stock for $174,000? c. Complete the letter to Brittany in which you inform her of the tax consequences if she sells the stock to Ridge for $160,000. Explain how a sales transaction could be structured that would produce better tax consequences for her. Maloney, Young, Nellen, & Persellin, CPAS 5191 Natorp Boulevard Mason, OH 45040 June 21, 2020 Ms. Brittany Callihan 32 Country Lane Lawrence, KS 66045 Dear Ms. Callihan: As you requested in your note, I am providing you with the tax consequences of the proposed sale of stock to your son Ridge. Although you would have a potential of $ , you be able to recognize this on your tax return. The tax law disallows the recognition of between certain related parties. If you do sell the stock to Ridge, his tax basis for calculating gain or loss on a subsequent sale by him would be However, if he should sell it at a gain, he could use your to his gain. Therefore, from a planning perspective, you should sell the stock to If you would like to discuss this further, please let me know. Sincerely, Ellen Allen, CPA
Problem 6-52 (LO. 3, 4) Brittany Callihan sold stock (basis of $184,000) to her son, Ridge, for $160,000, the fair market value. a. What are the tax consequences to Brittany? Brittany will have a $ that is b. What are the tax consequences to Ridge if he later sells the stock for $190,000? What are the tax consequences to Ridge if he later sells the stock for $152,000? What are the tax consequences to Ridge if he later sells the stock for $174,000? c. Complete the letter to Brittany in which you inform her of the tax consequences if she sells the stock to Ridge for $160,000. Explain how a sales transaction could be structured that would produce better tax consequences for her. Maloney, Young, Nellen, & Persellin, CPAS 5191 Natorp Boulevard Mason, OH 45040 June 21, 2020 Ms. Brittany Callihan 32 Country Lane Lawrence, KS 66045 Dear Ms. Callihan: As you requested in your note, I am providing you with the tax consequences of the proposed sale of stock to your son Ridge. Although you would have a potential of $ , you be able to recognize this on your tax return. The tax law disallows the recognition of between certain related parties. If you do sell the stock to Ridge, his tax basis for calculating gain or loss on a subsequent sale by him would be However, if he should sell it at a gain, he could use your to his gain. Therefore, from a planning perspective, you should sell the stock to If you would like to discuss this further, please let me know. Sincerely, Ellen Allen, CPA
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter5: Business Deductions
Section: Chapter Questions
Problem 14P
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Transcribed Image Text:Problem 6-52 (LO. 3, 4)
Brittany Callihan sold stock (basis of $184,000) to her son, Ridge, for $160,000, the fair market value.
a. What are the tax consequences to Brittany?
Brittany will have a $
that is
b. What are the tax consequences to Ridge if he later sells the stock for $190,000?
What are the tax consequences to Ridge if he later sells the stock for $152,000?
What are the tax consequences to Ridge if he later sells the stock for $174,000?
c. Complete the letter to Brittany in which you inform her of the tax consequences if she sells the stock to Ridge for $160,000. Explain how
a sales transaction could be structured that would produce better tax consequences for her.
Maloney, Young, Nellen, & Persellin, CPAS
5191 Natorp Boulevard
Mason, OH 45040
June 21, 2020
Ms. Brittany Callihan
32 Country Lane
Lawrence, KS 66045
Dear Ms. Callihan:
As you requested in your note, I am providing you with the tax consequences of the proposed sale of stock to your son Ridge.
Although you would have a potential
of $
, you
be able to recognize
this
on your tax return. The tax law disallows the recognition of
between certain
related parties.
If you do sell the stock to Ridge, his tax basis for calculating gain or loss on a subsequent sale by him would be
. However, if he should sell it at a gain, he could use your
to
his
gain.
Therefore, from a planning perspective, you should sell the stock to
If you would like to discuss this further, please let me know.
Sincerely,
Ellen Allen, CPA
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