Problem
Mr. Blair completed the following transactions in 2019.
1. He gave his wife 100 common shares of Green Airline Ltd., a public company which had cost him $10 per share several years ago. At the time of the gift, the fair market value of the shares was $30 per share. The shares pay an annual dividend of $1 per share. His wife plans to reinvest the dividends in more shares of the company. If and when she sells the shares, she will reinvest the proceeds in shares of other corporations.
2. In order to provide for his 15-year-old daughter's future education, he transferred a painting which had a fair market value of $70,000 to her. The lawyer who arranged to transfer title to the painting advised him to sell it to his daughter for $1 of her own money to affect a legal transfer. Mr. Blair had inherited the painting on the death of his father when the fair market value of the painting was $40,000. In about three years, when his daughter begins university, she will sell the painting.
3. He personally loaned $100,000 to his wife on a demand promissory note without interest, in order to help her purchase some land adjacent to her retailing business which she operated as a sole proprietorship. The land was used as a parking lot for the customers and employees of the business and was responsible for increasing the income of the business by about 8%. However, early in 2019, the land was expropriated by the city for $150,000 and it was not replaced. The note was repaid from the proceeds of the sale of the land.
Task
Discuss all of the possible income tax implications of these transactions through to the ultimate disposition by the recipient of the property involved.