In 2013, Valerie made a gift of stock (basis of $114,000; fair market value of $414,000) to her grandson, Ryan. As a result of the transfer, Valerie paid a gift tax of $20,000. Ryan's income tax basis in the stock is:

Question

Quizplus · Accepted Answer

Ryan's income tax basis in the stock is $129,000 for gain or loss. This is because the basis of property received as a gift is generally the same as the donor's basis, increased by the amount of gift tax paid by the donor. In this case, Valerie's basis in the stock was $114,000, and she paid $20,000 in gift tax. Therefore, Ryan's basis in the stock is $114,000 + $20,000 = $129,000.

In 2013, Valerie Made a Gift of Stock (Basis of $114,000;