Under the Terms of Their Divorce Agreement Executed in October

question 14

Multiple Choice

Under the terms of their divorce agreement executed in October 2012, Keith transferred Corporation M stock to his former wife, Karen, as a property settlement. At the time of the transfer, the stock had a basis to Keith of $20,000 and a fair market value of $50,000. What is the tax consequence of this transaction to Keith, and what is Karen's basis in the Corporation M stock?

• A) Keith has a gain of $30,000; Karen's basis is $20,000.
• B) Keith has a gain of $30,000; Karen's basis is $50,000.
• C) Keith has no gain or loss; Karen's basis is $20,000.
• D) Keith has no gain or loss; Karen's basis is $50,000.

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Definitions:

Temporal Bone

A bone of the skull located at the side and base of the skull, housing structures of the ear and supporting facial muscles.

Endolymph

Endolymph is a fluid within the inner ear that plays a crucial role in hearing and balance by stimulating sensory cells when sound vibrations are received.

Aqueous Humor

A transparent, watery fluid found in the anterior and posterior chambers of the eye, providing nutrients and maintaining intraocular pressure.

Optic Nerve

A paired nerve that transmits visual information from the retina to the brain, playing a critical role in the sense of sight.