Josephine gave her son,Shane 700 shares of Creative Marketing Inc.,common stock on May 26,2015.Josephine originally paid $9,000 for the stock on April 15,2015.At the date of the gift,the fair market value of the stock was $8,500.If no gift tax is paid and Shane sells the stock for $5,500 on May 26,2016,he will recognize:

Question

Quizplus · Accepted Answer

Since Shane sells the stock for less than its fair market value at the date of the gift, he will recognize a capital loss. The holding period for gifted stock includes the donor's holding period, therefore it is considered a short-term holding period. The fact that Josephine already recognized the loss when she gifted the stock to Shane does not affect Shane's recognition of the loss upon sale. Therefore, option A is correct.

Josephine Gave Her Son,Shane 700 Shares of Creative Marketing Inc