Question

Roberto has received various gifts over the years and has decided to dispose of the following assets he received as gifts:

What is the recognized gain or loss from the following transactions, assuming that no gift tax was paid when the gifts were made.

If an answer is zero, select "neither a gain nor a loss" and enter "0" as the amount.

a. In 1981, he received land worth $32,000. The donor's adjusted basis was $35,000. Roberto sells the land for $95,000 in 2018.

(neither a gain or a loss/ a gain/ a loss) of $__________ is recognized.

b. In 1986, he received stock in Gold Company. The donor's adjusted basis was $19,000. The fair market value on the date of the gift was $34,000. Roberto sells the stock for $40,000 in 2018.

(neither a gain or a loss/ a gain/ a loss) of $__________ is recognized.

c. In 1992, he received land worth $15,000. The donor's adjusted basis was $20,000. Roberto sells the land for $9,000 in 2018.

(neither a gain or a loss/ a gain/ a loss) of $__________ is recognized.

d. In 2013, he received stock worth $30,000. The donor's adjusted basis was $42,000. Roberto sells the stock for $38,000 in 2018.

(neither a gain or a loss/ a gain/ a loss) of $__________ is recognized.

Answer 1

Solution:

(a) : Computation of Recognition of Gain/(Loss) -

Recognition of Gain/(Loss) = Amount realized - Adjusted basis

  = $ 95,000 - $ 35,000

= $60,000

Therefore Recognized Gain = $60,000 .

Gain of $ 60,000 is recognized .

(b) : Computation of Recognition of Gain/(Loss) -

Recognition of Gain/(Loss) = Amount realized - Adjusted basis

= $40,000 - $19,000

= $ 21,000

Therefore Recognized Gain = $21,000

Gain of $ 21,000 is recognized .

(c) : Computation of Recognition of Gain/(Loss) -

Recognition of Gain/(Loss) = Amount realized - Adjusted basis

= $ 9,000 - $15,000

= $6,000

Therefore Recognized Loss = $6,000

Loss of $ 6,000 is recognized .

(d) : Computation of Recognition of Gain/(Loss) -

The Proceeds of $38,000 are in between the Gain basis of $42,000 and loss basis of $30,000 .

Therefore, Neither Gain nor Loss is recognized .