Josephine gave her son,Shane 700 shares of Creative Marketing,Inc.common stock on May 26,2013.Josephine originally paid $9,000 for the stock on April 15,2013.At the date of the gift,the fair market value of the stock was $8,500.If no gift tax is paid and Shane sells the stock for $5,500 on May 26,2014,he will recognize:

Question

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Shane's basis in the stock is the same as Josephine's original cost basis of $9,000 because the fair market value at the time of the gift was less than the donor's basis and no gift tax was paid. Since Shane sold the stock for $5,500, he recognizes a short-term capital loss of $3,500 ($9,000 - $5,500) because he held the stock for less than a year.

Josephine Gave Her Son,Shane 700 Shares of Creative Marketing,Inc