Padraic purchased 50 shares of stock as an investment for the purchase price of $2,500 in 2013.In 2016 when the fair market value of the stock was $2,500,Padraic gave the stock to his sister,Fiona.If no gift tax is paid and Fiona sells the stock for $2,750 she will recognize:

Question

Quizplus · Accepted Answer

When Padraic gave the stock to his sister, Fiona, it was considered a gift. The gift tax is paid by the donor, not the recipient. As there is no mention of gift tax being paid in the question, we can assume that Padraic did not pay any gift tax on the transfer.

Fiona's cost basis for the stock is the same as Padraic's, which is $2,500. When she sells the stock for $2,750, she will recognize a gain of $250 ($2,750 - $2,500). Therefore, the correct choice is C) $250 gain.

Padraic Purchased 50 Shares of Stock as an Investment for the Purchase