Final answer:
Jonathan will recognize a capital loss of $800, which is calculated based on the difference between the fair market value of the stock at the time of the gift ($6,800) and the selling price ($6,000).
Step-by-step explanation:
In the scenario where Linda gave her son Jonathan 425 shares of School Products Inc., common stock, we need to determine the amount of gain or loss Jonathan would recognize upon selling the stock for $6,000, given that Linda paid $9,350 for the stock in 2013 and the fair market value of the stock was $6,800 at the date of the gift. When an individual receives a gift of stock, the original cost basis and holding period of the person who gave the gift transfers to the recipient. However, if the fair market value of the stock at the time of the gift is less than the original cost basis, as in this case, the determination of gain or loss depends on the selling price of the stock when the recipient decides to sell.
If Jonathan sells the stock for $6,000, which is less than both the adjusted cost basis ($9,350) and the fair market value at the time of the gift ($6,800), his recognized loss will be based on the selling price compared to the fair market value at the time of the gift, not the original cost basis. Therefore, Jonathan would recognize a capital loss of $800 (the difference between the FMV at the time of the gift, $6,800, and the selling price, $6,000).