Virginia gave stock with an adjusted basis of $8,000 and an FMV of $10,000 to Carmen. No gift tax was paid on the transfer. Carmen then sold the stock for $9,000. The gain or loss Carmen will recognize on the sale is

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When a person receives a gift, the adjusted basis of the asset transfers to the recipient. In this case, Virginia had an adjusted basis of $8,000 in the stock, which transfers to Carmen upon the gift.

When Carmen sells the stock for $9,000, she will recognize a $1,000 gain because the sale price ($9,000) is greater than the adjusted basis of the asset ($8,000).

Since no gift tax was paid on the transfer, the donor (Virginia) may need to file a gift tax return to report the gift and use up some of their lifetime gift exemption. However, this does not affect the calculation of Carmen's gain on the sale.

Virginia Gave Stock with an Adjusted Basis of $8,000 and an FMV