Question

ten years ago, tom bought 100 shares of abc stock at $150 ($15,000 basis). eight years later, abc stock was trading at $250 and he gave his brother vince 40 of his shares. two years later, tom passed away and vince inherited tom's remaining 60 shares when abc stock was trading at $350. if vince immediately disposes of all 100 shares at $400, the tax consequences are:

Answer 1

Vince's tax consequences for selling the shares will depend on his gains and his tax bracket.

Step-by-step explanation:

To determine the tax consequences of Vince selling the shares, we need to calculate the gains or losses for each transaction. First, when Tom gave Vince 40 shares, he had a cost basis of $6,000 (40 shares * $150 per share). Two years later, Vince inherited the remaining 60 shares when the stock was trading at $350 per share. This gives a cost basis of $21,000 (60 shares * $350 per share). When Vince sells all 100 shares at $400 per share, he will receive $40,000.

To calculate the gains or losses, we subtract the cost basis from the sales proceeds. For the 40 shares, the gain is $34,000 ($40,000 - $6,000) and for the 60 shares, the gain is $19,000 ($40,000 - $21,000). Therefore, the total gain is $53,000.

The tax consequences of the sale will depend on Vince's tax bracket. The gain from selling the shares will be subject to capital gains tax. The tax rate for long-term capital gains depends on the taxpayer's income.