Ben sells stock (adjusted basis of $14,000)to his son,Ray,for its fair market value of $9,500.Ray gives the stock to his daughter,Trish,who subsequently sells it for $13,500.Ben's recognized loss is $0 and Trish's recognized gain is $0 ($13,500 - $9,500 - $4,000).

Question

Quizplus · Accepted Answer

Ben's recognized loss is disallowed due to the related party transaction rules, but Trish's recognized gain should be calculated based on her adjusted basis, which is Ray's purchase price of $9,500, resulting in a gain of $4,000 ($13,500 - $9,500).

Ben Sells Stock (Adjusted Basis of $14,000)to His Son,Ray,for Its