In 2009, Mandy made a gift of stock (basis of $300,000 and fair market value of $350,000) to her son, Ramone.As a result of the gift, Mandy paid a gift tax of $120,000.Ramone's income tax basis for gain is:

Question

Quizplus · Accepted Answer

Ramone's income tax basis for gain is the same as Mandy's basis at the time of the gift, which was $300,000. However, because Mandy paid a gift tax of $120,000, the gift is treated as if Ramone received a gift of $470,000 ($350,000 + $120,000). Therefore, Ramone's income tax basis for gain is $470,000 minus any depreciation deductions he may have taken. The correct answer is choice C, which is closest to $470,000 after adjusting for depreciation.

In 2009, Mandy Made a Gift of Stock (Basis of $300,000