G inherited a late model Mercedes Benz from his great-aunt last year.The auto was worth $28,000 when his aunt died, and G sold the auto two months later for $30,000.The aunt had purchased the auto three months before her death for $38,000.How much gain (or loss) does G recognize on this sale?

Question

Quizplus · Accepted Answer

To calculate the gain or loss, we need to subtract the cost basis (what the aunt paid for the car) from the selling price. The cost basis is $38,000 (what the great-aunt paid), but since G inherited the car, his cost basis is the fair market value at the time of inheritance, which was $28,000. Therefore, the gain is $30,000 - $28,000 = $2,000.

G Inherited a Late Model Mercedes Benz from His Great-Aunt