Rita,who Has a Marginal Tax Rate of 37%,is Planning to Make

question 96

Multiple Choice

Rita,who has a marginal tax rate of 37%,is planning to make a gift to her grandson who is in the lowest tax bracket.Which of the following holdings of stock would be the most tax advantageous gift from Rita's perspective?

• A) \[\begin{array} { | l | l | l| }
• \hline & & \text { Adjusted } \\
• \text { Stock } & \text { FMV } & \text { Basis } \\
• \hline \text { A } & \$ 25,000 & \$ 12,000 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | l | l | l| }
• \hline & & \text { Adjusted } \\
• \text { Stock } & \text { FMV } & \text { Basis } \\
• \hline \text { B } & \$ 25,000 & \$ 25,000 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | l | l | l |}
• \hline & & \text { Adjusted } \\
• \text { Stock } & \text { FMV } & \text { Basis } \\
• \hline \text { A } & \$ 25,000 & \$ 32,000 \\
• \hline
• \end{array}\]
• D)For income tax purposes,Rita will be indifferent as to choice of stock to gift.

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Definitions:

Stroop Effect

A phenomenon demonstrating the difficulty in naming the color of a word when the color does not match the word's meaning.

Habit

A repetitive behavior that an individual performs regularly, often unconsciously.

Frequency

The rate at which something occurs or is repeated over a particular period of time or in a given sample.

Stop Signal Task

A psychological test used to measure an individual's ability to inhibit a response that has already been initiated.