Kobe receives a gift of rare books valued at $10,000. The books have an adjusted basis of $6,000 to the donor. Several months later, Kobe sells the books to a professional collector for $7,000. What is Kobe' gain or (loss) on the sale?

Question

Quizplus · Accepted Answer

Kobe's gain on the sale is calculated based on the difference between the selling price ($7,000) and the donor's adjusted basis ($6,000), since the selling price is more than the adjusted basis but less than the fair market value at the time of the gift. Therefore, Kobe realizes a $1,000 gain.

Kobe Receives a Gift of Rare Books Valued at $10,000