PFIN 3rd Edition by Lawrence Gitman,Michael Joehnk,Randall Billingsley

Exercise 4

Althea has accumulated substantial wealth and plans to gift some of her wealth to her son Jamal. She is considering two assets: a beach house, which cost $150,000 20 years ago and now has a fair market value of $500,000; and stock in Rich Corporation, which cost her $400,000 5 years ago and now has a fair market value of $500,000. Prepare a memo advising Althea which property to give to Jamal. In your memo, consider two scenarios: one where Jamal sells the property and one where he does not.