Question

maya gifted 5,000 shares of z corporation, a public company, that originally cost $15, to her spouse. at the time of the gift the fair market value (fmv) of the shares was $25 each. the shares paid dividends of $1,000. what amount must maya include in her income, assuming no elections are filed? multiple choice $0, the transfer is at cost $0 taxable capital gains, but the taxable dividend of $1,380 is attributed back to maya taxable capital gain of $25,000 and no attribution on the dividend taxable capital gain of $25,000 and a taxable dividend of $1,380 due attribution on the dividend

Answer 1

Maya must report the $1,000 of dividends as income, but she does not report any capital gains since she has not sold the shares; she gifted them to her spouse.

Step-by-step explanation:

The student asked about the amount that Maya must include in her income due to gifting shares and receiving dividends. In this situation, Maya would not include capital gains in her income because she is not the one selling the shares; she has gifted them to her spouse. For U.S. tax purposes, the transfer of assets between spouses is generally considered a non-taxable event. However, the dividends paid by the shares, totaling $1,000, are income that Maya must report. This is because even though she gifted the shares, she is still considered the owner for tax purposes in relation to the dividends unless a specific election is filed to treat the spouse as the recipient for tax purposes.