Sheila sells stock,which has a basis of $12,000,to her daughter for $7,000,the stock's fair market value.Subsequently,the daughter sells the stock to an unrelated party for $5,000.Which of the following is true for the Sheila and the Daughter?

Question

Quizplus · Accepted Answer

Sheila will have a capital loss of $5,000 ($12,000 basis - $7,000 selling price) when she sells the stock to her daughter. However, since the daughter sold the stock for only $5,000, she will have a capital loss of $2,000 ($7,000 purchase price - $5,000 selling price). The daughter's loss cannot be used to offset Sheila's gain because they are related parties.

Sheila Sells Stock,which Has a Basis of $12,000,to Her Daughter