Reading 17: Excerpts from Invest....ivate Investors－LOS d benefits, assets, Investment, potential

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CFA Institute Area 3-5, 7, 12, 14-18: Portfolio Management
Session 4: Private Wealth Management
Reading 17: Excerpts from Investment Management for Taxable Private Investors
LOS d: Explain the potential tax benefits of using highly appreciated assets to make charitable bequests.

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When an investor makes a gift of appreciated securities:

A) the recipient must pay the capital gains taxes.

B) the investor must pay the capital gains taxes.

C) no capital gains taxes are assessed.

D) the tax rate is based upon the gifting rate.

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Answer and Explanation

When an investor makes a gift of appreciated securities, no capital gains taxes are assessed.

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When an investor makes a gift of appreciated securities, the investor is:

A) able to take a deduction in the amount of the cost basis of the securities given as the gift.

B) able to take a deduction in the amount of the capital gain.

C) not able to take a deduction.

D) able to take a deduction in the amount of the current fair market value of the gift.

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Answer and Explanation

When an investor makes a gift of appreciated securities, the investor is able to take a deduction in the amount of the current fair market value of the gift.

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When an investor makes a gift of appreciated securities, they are:

A) able to take a deduction in an amount designed to exactly offset the capital gains tax.

B) not able to avoid capital gains taxes, but can take a deduction equal to the current fair market value of the gift.

C) able to avoid capital gains taxes, but are not able to take a deduction for the gift.

D) able to avoid capital gains taxes, and can take a deduction equal to the current fair market value of the gift.

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Answer and Explanation

When an investor makes a gift of appreciated securities, they are able to avoid capital gains taxes on the appreciation, and can take a deduction equal to the current fair market value of the gift.