4. David purchased stock in Zoll Corporation in 1985 for $6,000. On April 16

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gerapu

Business Finance

Question Description

4.   David purchased stock in Zoll Corporation in 1985 for $6,000.  On April 16, 2013 he gifted the stock to his daughter Susan; at the time of the gift, the Zoll stock was valued at $250,000.  Susan sold the stock the next month for $ 252,000.  What is Susan's gain or loss and what is the character of the gain or loss?

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Explanation & Answer

The basis of Donor will be taken for the purpose of tax as the fair value of stock at the time of giving gift i.e. $250,000 is more than the donor’s basis i.e. $ 6,000. Therefore the capital gain for Susan will be $ 252,000 less $ 6,000 = $ 246,000. This treatment is as per Code 550 of U.S. Tax Code.


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