Under the Terms of Their Divorce Agreement Executed in August

question 119

Multiple Choice

Under the terms of their divorce agreement executed in August of this year, Clint transferred Beta, Inc. stock to his former wife, Rosa, as a property settlement. At the time of the transfer, the stock had a basis to Clint of $55,000 and a fair market value of $68,000. Rosa subsequently sold the stock for $75,000. What is the tax consequence of first the stock transfer and then the stock sale to Rosa?

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Definitions:

Uncovered Interest Rate Parity

A condition in which the difference in interest rates between two countries equals the expected change in exchange rates between their currencies, without hedging.

Spot Rate

The current price in the marketplace at which a given asset, such as a currency, commodity, or security, can be bought or sold for immediate delivery.

Nominal Risk-free Return

The return on an investment without adjusting for inflation, representing the interest rate on a risk-free security.

Initial Cost

The expenditure incurred at the beginning of a project or investment, including capital investment and operational expenses when applicable.