In 2011,Harold purchased a classic car that he planned to restore for $12,000.However,Harold is too busy to work on the car and he gives it to his daughter Julia in 2015.At this time,the fair market value of the car has declined to $10,000.Harold paid no gift tax on the transaction.Julia completes some of the restoration herself with out-of-pocket costs of $5,000.She later sells the car for $30,000.What is Julia's recognized gain or loss on the sale of the car?

Question

Quizplus · Accepted Answer

Julia's basis in the car is $10,000 (the fair market value when she received it from her father). She spent $5,000 on restoration, so her total basis is $15,000. When she sells the car for $30,000, she has a recognized gain of $15,000 ($30,000 - $15,000).

In 2011,Harold Purchased a Classic Car That He Planned to Restore