Question

Ralph gives his daughter, angela, stock (basis of $8,000; fair market value of $6,000). no gift tax results. if angela subsequently sells the stock for $10,000, what is her recognized gain or loss?

a. $10,000



b. $4,000



c. $0



d. $2,000



e. none of these choices are correct.

Answer 1

Answer: D. $2000

Step-by-step explanation:

Profit (gain) = selling price - cost price

Cost price = $8000

Selling price = $10000

Profit (gain) = $10000 - $8000

= $2000

Answer 2

D) $2,000

Step-by-step explanation:

Angela's basis on the stocks will be the same as her father's. Since she sold the stocks, her basis will be $8,000, so her recognized gains will = selling price - basis = $10,000 - $8,000 = $2,000

The IRS allows the donee (Angela) to use the doners (Ralph) basis when selling an asset received as a gift in order to determine the realized gain/loss.