Sukdev Basi Funded an Irrevocable Simple Trust in May 2008

question 42

Essay

Sukdev Basi funded an irrevocable simple trust in May 2008. The trust benefits Sukdev's son for life and grandson upon the son's death. One of the assets he transferred to the trust was Jetco stock, which had an FMV on the transfer date of $40,000. Sukdev's basis in the stock was $44,000, and he paid no gift tax on the transfer. The stock's value has dropped to $33,000, and the trustee thinks that now, October 2011, might be the time to sell the stock and take the loss deduction. For 2011, the trust will have $20,000 of income exclusive of any gain or loss. Sukdev's taxable income is approximately $15,000. What tax and nontax issues should the trustee consider concerning the possible sale of the stock?

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Definitions:

Comparative Advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than competitors, leading to potential trade benefits.

Specialize

To focus on a specific area of expertise or production, often to increase efficiency or achieve a higher level of skill in that domain.

Producers Worse Off

A situation where producers face decreased profitability or increased costs due to economic changes.

Consumers Better Off

A situation where individuals experience an improvement in their welfare or satisfaction, often through lower prices or higher quality goods and services.