In 1973, Fran received a birthday gift of stock worth $75,000 from her aunt. The aunt had owned the stock (adjusted basis $50,000) for 10 years and paid gift tax of $27,000 on the transfer. Fran's basis in the stock is $75,000-the lesser of $77,000 ($50,000 + $27,000) or $75,000.

Question

Quizplus · Accepted Answer

Fran's basis in the stock is determined by the lesser of the donor's adjusted basis or the amount of the gift tax paid, so her basis is $50,000 + $27,000 = $77,000, but since the gift is only worth $75,000, her basis is $75,000. Therefore, the statement is true.

In 1973, Fran Received a Birthday Gift of Stock Worth