Justins 24-year-old son, Carlos, is a full-time student. In April 2018, Justin gave Carlos 450 shares of

Question:

Justin’s 24-year-old son, Carlos, is a full-time student. In April 2018, Justin gave Carlos 450 shares of Striker Oil stock. Justin purchased the stock 8 months earlier at $18 per share. On the gift date, the stock was worth $31 per share. After the gift, Striker Oil declared and paid a $200 dividend to Carlos. Then three months later, Carlos sold his 450 shares for $38 per share. Justin and Carlos are in the 37 and 12 percent marginal tax brackets, respectively.
a. How much must Carlos and Justin include in gross income in 2018?
b. What family tax savings were achieved through this gift?
c. How would your answer to (b) change if Carlos held the stock for 5 months before selling for $38 per share?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...

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