Your client,Ted, would like your assistance in selecting one of the following assets to give to his 16-year-old daughter.

ASSET FAIR MARKET VALUE ADJUSTED BASIS Cash $12,000 $12,000 Corporate stock 12,000 6,000 10 percent of the outstanding shares of Ted’s wholly owned S corporation 12,000 8,000 Limited partnership interest 12,000 3,000 The corporate stock pays only $100 in dividend income each year but has doubled in value since Ted purchased it three years ago.The S corporation has generated a profit of $80,000 each year for the past three years and is expected to perform even better in the future.The limited partnership has generated losses for the past three years and is expected to do so for at least the next several years.

a. Discuss the advantages and disadvantages from both transfer and income tax perspectives for each asset as a potential gift.

b. Which asset do you recommend Ted choose and why?

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