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3. AMOUNT REALIZED donated stock. Mr. Holloway, who is aware of the tax advantages of giving stock to the church subject to the $15,000 loan, just as was done with PROBLEM 123 George W. Holloway would like your advice as to the income tax consequences of several gifts he is contemplating making to: (A) his son, Norman; and (B) the United Presbyterian Church of Sommerville. A. Mr. Holloway is considering making a gift to his son of: (1) 1,500 shares of Parker Plumbing, Inc. stock, which cost him $20 per share, and are now worth $30 per share, but which are pledged to secure a loan of $15,000, which Mr. Holloway recently obtained from Parkside Bank; and (2) Mr. Holloway's lakeside vacation cottage which has a cost basis to him of $50,000, is worth $80,000 and is subject to a mortgage of $65,000. As things have tentatively been worked out, Norman is to take the stock subject to the $15,000 loan and assume George's obligation of $65,000 on the cottage when the cottage is conveyed to him. Mr. Holloway would like your advice as to: (1) his realization of any gain as a result of the gifts to Norman; and (2) Norman's basis in the gifts. B. Mr. Holloway has promised to give $30,000 to the building fund of the United Presbyterian Church of Sommerville. If he gave Norman 1,500 shares of Parker Plumbing, as described above, he would still have an additional 1,500 shares of Parker Plumbing with a cost basis of $20 per share, and a fair market value of $30 per share. This block of Parker Plumbing, like the stock given to Norman, is subject to a loan of $15,000 made to Mr. Holloway by Bank One. Bank One is quite accommodating and is willing to allow the church to take the stock subject to the loan, to allow it to assume the loan, or to allow Mr. Holloway to substitute different collateral for the away appreciated property, is considering transferring the 1,500 shares of Norman. 249 favorable result? What are the tax consequences of Mr. Holloway's proposed gift? Why should Congress allow a gift to a non-exempt donee to produce a more to the charity and the same deduction for Mr. Holloway, but a more advantageous resolution of his income tax problems than would be the case if he simply satisfied his pledge by transferring the stock subject to the loan as outlined above? What suggestions can you make to produce the same financial benefit 3. AMOUNT REALIZED donated stock. Mr. Holloway, who is aware of the tax advantages of giving stock to the church subject to the $15,000 loan, just as was done with PROBLEM 123 George W. Holloway would like your advice as to the income tax consequences of several gifts he is contemplating making to: (A) his son, Norman; and (B) the United Presbyterian Church of Sommerville. A. Mr. Holloway is considering making a gift to his son of: (1) 1,500 shares of Parker Plumbing, Inc. stock, which cost him $20 per share, and are now worth $30 per share, but which are pledged to secure a loan of $15,000, which Mr. Holloway recently obtained from Parkside Bank; and (2) Mr. Holloway's lakeside vacation cottage which has a cost basis to him of $50,000, is worth $80,000 and is subject to a mortgage of $65,000. As things have tentatively been worked out, Norman is to take the stock subject to the $15,000 loan and assume George's obligation of $65,000 on the cottage when the cottage is conveyed to him. Mr. Holloway would like your advice as to: (1) his realization of any gain as a result of the gifts to Norman; and (2) Norman's basis in the gifts. B. Mr. Holloway has promised to give $30,000 to the building fund of the United Presbyterian Church of Sommerville. If he gave Norman 1,500 shares of Parker Plumbing, as described above, he would still have an additional 1,500 shares of Parker Plumbing with a cost basis of $20 per share, and a fair market value of $30 per share. This block of Parker Plumbing, like the stock given to Norman, is subject to a loan of $15,000 made to Mr. Holloway by Bank One. Bank One is quite accommodating and is willing to allow the church to take the stock subject to the loan, to allow it to assume the loan, or to allow Mr. Holloway to substitute different collateral for the away appreciated property, is considering transferring the 1,500 shares of Norman. 249 favorable result? What are the tax consequences of Mr. Holloway's proposed gift? Why should Congress allow a gift to a non-exempt donee to produce a more to the charity and the same deduction for Mr. Holloway, but a more advantageous resolution of his income tax problems than would be the case if he simply satisfied his pledge by transferring the stock subject to the loan as outlined above? What suggestions can you make to produce the same financial benefit
