In June of the current year, Susan’s mother gave her 100 shares of a listed stock. The donor’s basis for this stock, which she bought 10 years ago, was $4,000, and market value on the date of the gift was $3,000. Susan sold this stock in July of the current year for $3,500. The donor paid no gift tax. What was Susan’s reportable gain or loss in the current year on the sale of the 100 shares of stock gifted to her?

$0 No gain No Loss

Explanation:

To compute gain, a donee's basis is the same as the donor's basis, adjusted for gift tax and For computing loss, the lower of the donor's adjusted basis or the FMV of the property is used.

Therefore If the property is later transferred for more than FMV at the date of the gift but for less than the donor's basis at the date of the gift, no gain (loss) is recognized. Therefore, Susan reports neither gain nor loss.

Gain Loss

Amount realized

$3,500 $3,500

Less: basis

(4,000) (3,000)

Therefore Susan’s reportable gain or loss in the current year on the sale of the 100 shares of stock gifted to her shows No gain No loss

$0 gain/loss

Explanation:

donor's basis = $4,000

market value = $3,000

selling price = $3,500

Since Susan acquired the stocks by gift, her basis for loss will be $3,000 (fair market value), but if she made a gain when selling them, her basis for gain will be $4,000 (donor's basis).

Susan's gain = $4,000 - $3,500 = $500

Susan's loss = $3,000 - $3,500 = -$500

since they offset each other, there is no gain/loss.

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