In 2008,Valerie made a gift of stock (basis of $112,000; fair market value of $412,000)to her grandson,Ryan.As a result of the transfer,Valerie paid a gift tax of $20,000.Ryan's income tax basis in the stock is:

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The income tax basis for the donee is the donor's income tax basis plus any gift tax attributable to the appreciation on the stock of $300,000 ($412,000 - $112,000).The gift tax adjustment is determined as follows.
 11ea7f05_2ec8_ffc0_92e1_adcec46a6bf8_TB4123_00 Thus,the basis for gain is $127,000 ($112,000 + $15,000).The basis for loss is the same,since the fair market value on the date of the gift is not less than the basis for gain.

In 2008,Valerie Made a Gift of Stock (Basis of $112,000;