Diane gifted 100 shares of Runners Link common stock with a FMV of $8,000 to her brother,Sean.The stock originally cost Diane $11,000.Sean later sells the stock on the open market for $9,000.Sean recognizes:
A)no gain or loss.
B)a $1,000 gain.
C)a $2,000 loss.
D)a $2,000 gain.

Question

Quizplus · Accepted Answer

When a gift is made, the recipient's basis for determining gain is the donor's original cost ($11,000), and for determining loss, it's the lower of the donor's cost or the FMV at the time of the gift ($8,000). Since Sean sold the stock for $9,000, which is between the FMV and the original cost, he recognizes no gain or loss.

Diane Gifted 100 Shares of Runners Link Common Stock with a FMV