Question

Greg Gifted 10,000 of shares of stock to his daughter, Amanda, on March 19, 2018, when the fair market value of the shares was $115,000. Greg purchased the shares on September 18, 2017 for $80,000. Greg paid $110,000 of gift taxes when gifting the share to amanda and the amount of the gift was $100,000. Amanda sold the 10,000 shares on September 20, 2018 for $130,000. What is the amount and character (short term or long term) of Amandas gain or loss?

Answer 1

Capital gains or losses on property received as a gift are calculated according to the original owner's cost basis in the property. If you were to inherit the property instead—the original owner decided to wait until his death to pass it on to you—its cost basis would be "stepped up" to the date of his death. This can make a big difference.

Date of acquisition by donor (Greg) is considered as the Date of Purchase. So, kindly note that the date or year of inheritance / reeving the gift (2018) are of no importance in this calculation. Year of acquisition by previous owner (Greg) is 2017. So, the capital gains on sale of gifted property are treated as long term capital gains for Amanda.

Calculation of Long Term Capital Gain

Sale Consideration	$ 130000
Less – Cost of Shares (Previous owner Cost)	$ 80000
Long Term Capital Gain	$ 50000