Ted and Alice Were in the Process of Negotiating a Divorce

Essay

Ted and Alice were in the process of negotiating a divorce agreement.They own bonds with a basis of $600,000 and a fair market value of $600,000. They also own common stock with a basis of $800,000 and a fair market value of $600,000. Alice is trying to decide whether to bargain to receive the bonds or the stock.Whichever of the assets she receives, she will sell it to start a new business and to purchase a house. She knows that Ted would prefer to receive the stock, and that he intends to sell them. She knows that Ted has substantial investments that he inherited.
a. Why do you suppose that Ted prefers to receive the stock?
b. If Ted is bargaining to receive the stock, what additional consideration should Alice receive?