Question

Gisela gave Ellen stock worth $50,000 this year. Gisela purchased the stock for $60,000 four years ago. Calculate Ellen’s basis for the stock if she sells it

for $65,000.

for $45,000.

for $55,000.

Answer 1

As the Fair market value at the date of gift is lower than the donar's basis, donee's basis depends on the price at which donee sells the stock.

As Ellen sold the stock for $65,000, Ellen basis is Fair market value at gift date.

Basis = $60,000

As Ellen sold the stock for $45,000, which is between Gisela basis and the fair market value, Ellen basis is the sale price.

Basis = $45,000

As Ellen sold the stock for $55,000, Ellen basis is equal to the Gisela basis.

Basis = $50,000