Question

Carol received a dining room table as a gift from her friend, Jan. Jan's adjusted basis was $3,200, and the fair market value on the date of the gift was $2,500. Carol decided she did not need the table and sold it to a neighbor six months later for $2,000. Her recognized loss is $0.

A) True

B) False

Answer 1

Carol's recognized loss on the sale of a gifted dining room table is $0 because losses on personal use property are generally not deductible for tax purposes.

Step-by-step explanation:

Carol's recognized loss on the sale of the gifted table is indeed $0. This is true because when determining a loss on property received as a gift, the basis for loss is the giver's adjusted basis at the time of the gift, which is $3,200 in this case. Since Carol sold the table for $2,000, which is less than Jan's adjusted basis, a loss could be recognized.

However, for tax purposes, losses on personal use property like furniture are generally not deductible, so Carol's recognized loss would be $0.