ExpertMedium1 markMultiple Choice
CPA · Question 59 · Area I: Individual Compliance and Planning
A taxpayer receives a gift of property with a basis of $10,000 and FMV of $8,000. The taxpayer sells the property later for $9,000. What is the gain or loss?
A taxpayer receives a gift of property with a basis of $10,000 and FMV of $8,000. The taxpayer sells the property later for $9,000. What is the gain or loss?
Answer options:
A.
No Gain or Loss
B.
$1,000 Gain
C.
$1,000 Loss
D.
$2,000 Gain
How to approach this question
Dual Basis Rule for Loss Property Gifts: 1. Gain Basis = Donor's Basis ($10k). 2. Loss Basis = FMV ($8k). 3. If sold between ($9k), no gain or loss.
Full Answer
A.No Gain or Loss✓ Correct
A
IRC §1015. If the sale price falls between the donor's adjusted basis and the FMV at the date of the gift, no gain or loss is recognized.
Common mistakes
Using donor's basis for everything.
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