Question

In addition to other gifts, Megan made a gift of stock to Jeri in 1976. Megan had purchased the stock in 1974 for $7,500. At the time of the gift, the stock was worth $20,000. If Megan paid $850 of gift tax on the transaction in 1976, what is Jeri's gain basis for the stock?

a. $7,500
b. $8,350
c. $9,017
d. $20,000
e. None of the above

Answer 1

Jeri's gain basis for the stock is $19,150.

Step-by-step explanation:

To calculate Jeri's gain basis for the stock, we need to subtract the gift tax paid by Megan from the value of the stock at the time of the gift. Megan purchased the stock for $7,500 in 1974 and gifted it to Jeri in 1976 when it was worth $20,000. The gift tax paid by Megan was $850. Therefore, Jeri's gain basis for the stock is $20,000 - $850 = $19,150.