Diane receives a gift of stock from Sue on July 2, 2014, when the stock was trading for $20,000. Sue paid $4,000 for the stock several years ago. Sue pays a gift tax of $500 on the transfer. Diane's basis in the stock is:

Question

Quizplus · Accepted Answer

Diane's basis in the stock is the donor's basis plus any gift tax paid by the donor. In this case, Sue's basis in the stock was $4,000 and she paid $500 in gift tax. Therefore, Diane's basis in the stock is $4,000 + $500 = $4,400.

Diane Receives a Gift of Stock from Sue on July