Question

On June 4, 2002, Fred bought stock at a cost of $8,000. On January 30, 2019, he gave the stock to his son, George. At the time of the gift, the fair market value of the stock was $6,500. On May 1, 2019, George sold the stock.

State whether there is a short-term or long-term capital gain or loss, and the amount of the gain or loss, if the stock was sold at $6,000.

Answer 1

GAIN OR LOSS On SALE OF STOCK

Cost of Stock = $ 8000 [ cost of previous owner is treated as assessee's cost in case of Gift]

Fair market value on 2019 =$ 6500

Assesseble value on sale cost or fair market value whichever is higher

here cost is higher

so result of sale

sale value - indexed cost of accusition [ incase of long term asset]

Or sales value - cost/ fair value whichever is higher [ short term asset]

here assessee hold asset only for 3 months, so it is a short term capital asset.

Ie $ 6000-$ 8000 = [ $2000]

short trem capital Loss of $ 2000.