Under the Terms of Their Divorce Agreement Executed in August

question 1607

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:

Net Worth

The total value of an individual's or organization's assets minus liabilities, representing the financial health or wealth at a particular point in time.

Bankruptcy

A legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts.

Tippee

An individual who receives confidential information from an insider (the tipper), potentially violating insider trading laws if used for trading.

Confidential Information

Sensitive information not accessible to the general public, protected under legal or contractual obligations to prevent unauthorized disclosure.