Question

2. N received stock as a gift from her mother in 2019. Her mother purchased the stock several years ago for $30,000. The stock was worth $80,000 at the time the gift was received. N sold the stock for $100,000 in 2020. How much gain, if any, should N report on her 2020 tax return?

Answer 1

As N received stock from her mother, which comes under relative relation, so the basis of gift would be cost basis of the original buyer that is N's Mother and not fair value at the time of gift received by N.

Also the holding period will not be from the day when gift was received but the day when original buyer has purchased it, which the question defines as several years back.

So the gain here becomes long term capital gain, and its calculation is mentioned here below:

Sale Value = $100,000

Less: cost of stock = $30.000

Long Term Capital gain = $70,000

Therefore N should report $70,000 as Long term capital gain on her 2020 tax return