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In 2013, Terri purchased 260 shares of Flowers R Us stock at a cost of $9,600...

In 2013, Terri purchased 260 shares of Flowers R Us stock at a cost of $9,600 as an investment. In 2018, when the fair market value was $11,400, Terri gave the stock to her daughter, Michele. Assuming no gift tax was paid, if Michele sells the stock for $13,800, she will recognize: Multiple Choice no gain or loss. $1,800 gain. $2,400 gain. $4,200 gain.

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Answer #1

Assets received as a gift retain the net book value on the donar's books plus any gift taxes paid due to the appreciation in the value of the gift.

Michele basis = Carryover basis

= $9,600

Gain = $13,800 - $9,600

= $4,200

The answer is $4,200 gain.

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