Diane gifted 100 shares of Runners Link common stock with a FMV of $8,000 to her brother,Sean.The stock originally cost Diane $11,000.Sean later sells the stock on the open market for $9,000.Sean recognizes:
A)no gain or loss.
B)a $2,000 loss.
C)a $2,000 gain.
D)a $1,000 gain.

Question

Quizplus · Accepted Answer

When a gift is made, the recipient's basis for determining gain is the donor's original cost ($11,000), and for determining loss, it's the lower of the donor's cost or the FMV at the time of the gift ($8,000). Since Sean sold the stock for $9,000, which is between the original cost and the FMV at the time of the gift, he recognizes no gain or loss.

Diane Gifted 100 Shares of Runners Link Common Stock with a FMV