Barak received a gift of income producing property with an adjusted basis of $50,000 to the donor and fair market value of $40,000 at the date of the gift. Barak later sold the property for $43,000. What is Barak’s recognized gain or loss on the sale?
$3,000 gain
$7,000 loss
$3,000 loss
0
None of the above
SOLUTION:-
As per Guidelines, We need to first compare Selling Price with Adjusted basis which owner had in the property
that is Compare 43000 with 50000
Now since we have a loss,
we need to again compare it with FMV, which was then Adjusted basis at time of Gift
comparing 43000 with 40000
we have a gain
Simply saying
Loss will only be recognised if in given condition it falls below FMV
and Gain will only be recognised if it reaches above Adjusted Basis
As per IRS under such conditions Barak will not record any gain or loss on sale transaction and
NII Gain or Loss will be rcognised
So, her the answer is D = 0
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