In 2015, Linda gave her son, Jonathan 425 shares of School Products Inc., common stock. Linda paid $8,350 for the stock in 2009. At the date of the gift, the FMV of the stock was $5,800. Assuming that there is no gift tax paid, if Jonathan sells the stock for $5,000, he will recognize:

Question

Quizplus · Accepted Answer

Jonathan's basis for determining loss is the lower of the donor's adjusted basis ($8,350) or the fair market value at the time of the gift ($5,800). Since he sells the stock for $5,000, he recognizes a loss of $800 ($5,800 - $5,000).

In 2015, Linda Gave Her Son, Jonathan 425 Shares of School