Joycelyn gave a diamond necklace to her granddaughter Emma. Joycelyn had purchased the necklace in 1980 for $20,000. The FMV of the necklace at the time of the gift was $50,000. After deducting the annual exclusion, the amount of the gift was $35,000. Gift taxes of $10,000 were paid. What is Emma's adjusted basis in the necklace?

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Emma's adjusted basis in the necklace is $28,571. This is calculated as follows:FMV of the necklace at the time of the gift: $50,000Less: Annual exclusion: $15,000Amount of the gift: $35,000Less: Gift taxes paid: $10,000Emma's adjusted basis in the necklace: $28,571

Joycelyn Gave a Diamond Necklace to Her Granddaughter Emma