On February 9, 2011, Ed Earlson purchased a rare gem as an investment. On August 26, 2011, he exchanged it for another rare gem in a nontaxable exchange. On February 10, 2012, he sold it for cash. Any gain or loss on the sale is a long-term capital gain or loss.

Question

Quizplus · Accepted Answer

the holding period for property received in an exchange includes the holding period of the property exchanged if the property received has the same basis in whole or in part as the property exchanged
 the basis of the acquired gem is the same as the basis of the gem exchanged
 the refore, the gain or loss is long-term because the total holding period exceeded 12 months.

On February 9, 2011, Ed Earlson Purchased a Rare Gem