Ida Sells Some Stock to Mae for $20,000 at a Time

question 58

Essay

Ida sells some stock to Mae for $20,000 at a time when the stock is valued at $50,000. Later in the year, she gives Mae $16,000 in cash.
a)What is the amount of Ida's taxable gifts?
b)How would your answer to Part (a)change if Ida gave the cash to Jonathan instead of to Mae?

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Definitions:

Bondholders

Investors who own bonds issued by corporations or governments, entitled to receive interest payments and the principal amount upon maturity.

Creditors

Individuals or institutions that lend money or extend credit to others, expecting repayment in the future with possible interest.

Money Market Instruments

Short-term debt securities issued by financial institutions, companies, and governments.

Securities

Financial instruments that represent an ownership position in a publicly-traded corporation (stock), a creditor relationship with a governmental body or a corporation (bond), or rights to ownership as represented by an option.