Melvin receives stock as a gift from his uncle.No gift tax is paid.The adjusted basis of the stock is $30,000 and the fair market value is $38,000.Melvin trades the stock for bonds with a fair market value of $35,000 and $3,000 cash.What is his recognized gain and the basis for the bonds?

Question

Quizplus · Accepted Answer

Amount realized ($35,000 + $3,000)$38,000
Adjusted basis (30,000)
Realized gain $ 8,000
Recognized gain $ 8,000
The property received by gift has a carryover basis of $30,000.Stocks and bonds do not qualify as like-kind property.Therefore,the realized gain of $8,000 is recognized.The bonds have a basis of $35,000,the fair market value.

Melvin Receives Stock as a Gift from His Uncle