ExpertHard1 markMultiple Choice
CPA · Question 63 · Area 5: Property Transactions
Uncle gives Niece stock with a Basis of ,000 and FMV of ,000. Niece sells the stock later for ,000. What is Niece's recognized gain or loss?
Uncle gives Niece stock with a Basis of ,000 and FMV of ,000. Niece sells the stock later for ,000. What is Niece's recognized gain or loss?
Answer options:
A.
,000 Gain
B.
,000 Loss
C.
No Gain or Loss
D.
,000 Loss
How to approach this question
Gift of Loss Property (Basis > FMV): Basis depends on selling price. Sell High (>Basis) -> Use Basis. Sell Low (<FMV) -> Use FMV. Sell Middle -> No G/L.
Full Answer
C.No Gain or Loss✓ Correct
When the FMV at the date of gift is less than the donor's basis, the donee has a dual basis. For gain, use donor's basis (,000). For loss, use FMV (,000). Since the sale price (,000) is between the two, no gain or loss is recognized.
Common mistakes
Always using carryover basis for gifts.
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