Noelle received dining room furniture as a gift from her friend, Jane.Jane's adjusted basis was $9,200 and the fair market value on the date of the gift was $7,000.Noelle decided she did not need the furniture and sold it to a neighbor six months later for $6,500.What is her recognized gain or loss?

Question

Quizplus · Accepted Answer

Noelle's basis for determining loss is the fair market value on the date of the gift ($7,000), since it's lower than Jane's adjusted basis. Since she sold the furniture for $6,500, less than the basis, she has no recognized gain. However, the correct calculation for loss would be $7,000 (basis) - $6,500 (selling price) = $500 loss, not recognized for tax purposes in this context, hence the answer is $0 recognized gain or loss.

Noelle Received Dining Room Furniture as a Gift from Her