In 2012,Terri purchased 260 shares of Flowers R Us stock at a cost of $9,600 as an investment.In 2017,when the fair market value was $11,400,Terri gave the stock to her daughter,Michele.Assuming no gift tax was paid,if Michele sells the stock for $13,800,she will recognize:

Question

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Michele will recognize a gain of $4,200, which is the difference between the selling price ($13,800) and Terri's original cost basis ($9,600). In a gift transfer, the recipient assumes the donor's cost basis if the fair market value at the time of the gift is more than the donor's cost basis.

In 2012,Terri Purchased 260 Shares of Flowers R Us Stock