As part of their divorce agreement, Harry transfers to Mary, his former spouse, GM stock with a market value of $30,000. Harry had $20,000 invested in the stock. How does this transfer affect Harry, and what is Mary's basis in the stock?
To understand how this transfer affects Harry and Mary and determine Mary's basis in the stock, we need to consider the concept of basis in investments.
Basis is essentially the value used to determine the gain or loss when the investment is sold or transferred. Generally, for investments received as a gift or as part of a divorce settlement, the recipient's basis is the same as the transferor's basis at the time of the transfer.
In this scenario, Harry is transferring GM stock to Mary as part of their divorce agreement. The stock has a market value of $30,000, and Harry initially invested $20,000 in it.
For Harry, this transfer may have tax implications but doesn't necessarily generate any taxable income or capital gains. Since he is transferring the stock as part of a divorce agreement, it may be considered a non-taxable event. However, it's advisable to consult a tax professional for specific tax advice based on the jurisdiction and individual circumstances.
As for Mary's basis in the stock, her basis would be the same as Harry's basis at the time of the transfer, which is $20,000. This means that if Mary later decides to sell the GM stock, her taxable gain or loss would be calculated by subtracting her basis ($20,000) from the selling price.
To summarize:
1. The transfer of GM stock doesn't affect Harry's taxes directly, but specific tax rules may apply based on the jurisdiction.
2. Mary's basis in the stock is $20,000, the same as Harry's basis at the time of the transfer.