Portfolio Management Flashcards

A client inherits stock that the decedent bought for $40,000; it was worth $150,000 at death. The client sells it two months later for $155,000. What is the gain and its character?

Answer: $5,000 long-term

Inherited property gets a stepped-up basis to fair market value under §1014 and is automatically treated as long-term.

A parent gifts appreciated stock to a child. What basis does the child generally take for computing gain?

Answer: The donor's carryover basis

Under §1015, gifted property generally takes the donor's carryover basis for gain purposes.

A client donates publicly traded stock held three years to a public charity. What is the general deduction rule?

Answer: Deduct fair market value, limited to 30% of AGI, with no capital gains tax on the appreciation

Long-term appreciated capital gain property given to a public charity is deductible at FMV, generally limited to 30% of AGI, with excess carried forward five years.

Which strategy lets a taxpayer age 70½ or older satisfy charitable goals from an IRA without the distribution being included in income?

Answer: Qualified charitable distribution

A qualified charitable distribution transfers IRA funds directly to charity, excluded from income and counting toward RMDs once applicable.

Under SECURE 2.0, at what age must most individuals born in 1955 begin required minimum distributions?

Answer: 73

Individuals born 1951–1959 must begin RMDs at age 73, rising to 75 for those born in 1960 or later.

After the Tax Cuts and Jobs Act, which assets qualify for a Section 1031 like-kind exchange?

Answer: Real property held for business or investment

Since 2018, §1031 deferral is limited to real property held for productive use in a business or for investment.

An employee holds employer stock with a $50,000 basis in a 401(k), now worth $400,000, and takes a qualifying lump-sum distribution of the shares. How is the $350,000 of net unrealized appreciation taxed when the shares are later sold?

Answer: As long-term capital gain when sold

With an NUA strategy, only basis is taxed as ordinary income at distribution, and the NUA is long-term capital gain on sale.