George made a gift of stock valued at $450,000 (basis = $300,000) to his daughter Sally and was required to pay a gift tax of $30,000 on this gift.Which of the following is true regarding this gift?

Question

Quizplus · Accepted Answer

When a gift tax is paid on a gift, the recipient's basis is increased by the portion of the gift tax attributable to the appreciation in the value of the gift. The formula is: Basis = Donor's basis + (Gift tax paid * (Appreciation / Value of gift)). Here, Sally's basis = $300,000 + ($30,000 * ($150,000 / $450,000)) = $310,000.

George Made a Gift of Stock Valued at $450,000 (Basis