early in december 2012 fred and megan review their financial and tax situation with 702296

Early in December 2012, Fred and Megan review their financial and tax situation with their son, Sam, and daughter in law, Dana, who live with them. Fred and Megan are in the 28% tax bracket in 2012. Both Sam and Dana are age 21. Sam, a student at a nearby university, owns some publicly traded stock that he inherited from his grandmother. A current sale of the stock would result in approximately $8,000 of gross income ($19,000 amount realized − $11,000 adjusted basis). At this point, Fred and Megan provide about 55% of Sam and Dana’s support. Although neither is now employed, Sam has earned $960 and Dana has earned $900. The problem: Should the stock be sold, and would the sale prohibit Fred and Megan from claiming Sam and Dana as dependents? Would the stock sale in 2012 result in a tax liability for Sam and Dana?