Under the Terms of Their Divorce Agreement Executed in August

question 37

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?

• A) \[\begin{array} {| l | l| }
• \hline\text { Rosa's Income } & \text { Rosa's Income } \\
• \text { From Stock Transfer } & \text { From Stock Sale } \\
• \hline \$ 0 & \$ 20,000 \text { capital gain } \\
• \hline
• \end{array}\]
• B) \[\begin{array} {| l | l| }
• \hline\text { Rosa's Income } & \text { Rosa's Income } \\
• \text { From Stock Transfer } & \text { From Stock Sale } \\
• \hline \$ 0 & \$ 7,000 \text { capital gain } \\
• \hline
• \end{array}\]
• C) \[\begin{array} {| l | l |}
• \hline\text { Rosa's Income } & \text { Rosa's Income } \\
• \text { From Stock Transfer } & \text { From Stock Sale } \\
• \hline \$ 13,000 & \$ 7,000 \text { capital gain } \\
• \hline
• \end{array}\]
• D) \[\begin{array} {| l | l |}
• \hline\text { Rosa's Income } & \text { Rosa's Income } \\
• \text { From Stock Transfer } & \text { From Stock Sale } \\
• \hline \$ 13,000 & \$ 20,000 \text { capital gain } \\
• \hline
• \end{array}\]

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Definitions:

Variable

An element, feature, or factor that is liable to vary or change; used in statistical analysis and experiments.

Output

The total amount of goods and services produced by an economy or a production process.

AFC

Average Fixed Cost (AFC) is the fixed costs of production (such as rent, salaries, machinery) divided by the quantity of output produced.

Fixed Costs

Costs that remain constant regardless of the level of production or output, such as rent, salaries, and loan repayments.