Shontelle received a gift of income-producing property with an adjusted basis of $49,000 to the donor and fair market value of $35,000 on the date of gift.Gift tax of $6,000 was paid by the donor.Shontelle subsequently sold the property for $31,000.What is the recognized gain or loss?
A)$0.
B)($4,000).
C)($10,000).
D)($18,000).
E)None of the above.

Question

Quizplus · Accepted Answer

Since the fair market value of the property at the time of gift was less than the adjusted basis, Shontelle's basis in the property is $49,000, which is known as a "carryover basis." When she later sells the property for $31,000, she has a recognized loss of $18,000. However, because this was a gift, Shontelle is not allowed to take a loss greater than the donor's basis in the property ($49,000). Therefore, the recognized loss is limited to $4,000 ($49,000 - $31,000), resulting in a recognized loss of ($4,000).

Shontelle Received a Gift of Income-Producing Property with an Adjusted