On July 3,2017,Cynthia receives a gift of a collection of books valued at $10,000.The books have an adjusted basis of $6,000 to the donor.They had been purchased in 2005.Several months after receiving the gift,Cynthia sells the books to a professional collector for $9,000.How is Cynthia's holding period for the books determined?

Question

Quizplus · Accepted Answer

Cynthia's holding period for the books begins in 2005, when they were purchased by the donor. The holding period is not affected by the fact that Cynthia received the books as a gift, nor does it depend on whether gift tax was paid. Since Cynthia sold the books several months after receiving them as a gift, she would have to report a short-term capital gain or loss on her tax return for the year of the sale, depending on whether the selling price was greater or less than the adjusted basis.

On July 3,2017,Cynthia Receives a Gift of a Collection of Books