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Teresa purchased a necklace for $100 in 1966. in 2016 Teresa have the necklace to her...

Teresa purchased a necklace for $100 in 1966. in 2016 Teresa have the necklace to her granddaughter, Lindsey. At the time of the gift, the necklace had an appraised value of $850. in 2018, Lindsey sold the necklace for $1200. what is the amout and character of lindseys gain from the sale?   

$350 gain
$1,100 ordainary gain
$1,100 long-term capital gain


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Answer #1

Where an individual sells the asset which he has received as a gift or inheritance the seller will realized capital gain. The determination of capital gain depends on a key factor known as basis which is essentially the figure against which the selling price is measured to show whether there was a gain or loss.

Where the proprrty was received as a gift, there is ofcourse no cost to the receipient.  For determining  gain the basis is the same as it would have been in the hands of the donor.

So in this cost of necklace in the hands of Lindsey is$ 100 and sale price is $ 1200. There will be $ 1100 long term capital gain from this sale.

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