On March 1 of the previous year, a parent sold stock with a cost of $8,000 to her child for $6,000, its fair market value. On September 30 of the current year, the child sold the same stock for $7,000 to Smith, who is unrelated to the parent and child. What is the proper treatment for these transactions? a. Parent has a $2,000 recognized loss and child has a $1,000 recognized gain. b. Parent has a $2,000 recognized loss and child has a $0 recognized gain. c. Parent has a $0 recognized loss and child has a $1,000 recognized gain. d. Parent has a $0 recognized loss and child has a $0 recognized gain.
On March 1 of the previous year, a parent sold stock with a cost of $8,000 to her child for $6,000, its fair market value. On September 30 of the current year, the child sold the same stock for $7,000 to Smith, who is unrelated to the parent and child. What is the proper treatment for these transactions? a. Parent has a $2,000 recognized loss and child has a $1,000 recognized gain. b. Parent has a $2,000 recognized loss and child has a $0 recognized gain. c. Parent has a $0 recognized loss and child has a $1,000 recognized gain. d. Parent has a $0 recognized loss and child has a $0 recognized gain.
Chapter19: Family Tax Planning
Section: Chapter Questions
Problem 8DQ
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General Account
Transcribed Image Text:On March 1 of the previous year, a parent sold stock with a cost of
$8,000 to her child for $6,000, its fair market value. On September 30 of
the current year, the child sold the same stock for $7,000 to Smith, who
is unrelated to the parent and child. What is the proper treatment for
these transactions?
a. Parent has a $2,000 recognized loss and child has a $1,000
recognized gain.
b. Parent has a $2,000 recognized loss and child has a $0 recognized
gain.
c. Parent has a $0 recognized loss and child has a $1,000 recognized
gain.
d. Parent has a $0 recognized loss and child has a $0 recognized gain.
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