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Accounting Treatment: Assets Received as a Gift and Inherited

Daniel receives 400 shares of A&M Corporation stock from his aunt on May 20, 2009, as a gift when the stock has a $60,000 FMV. His aunt purchased the stock in 2002 for $42,000. The taxable gift is $60,000 because she made earlier gifts to Daniel during 2009 and used the annual exclusion. She paid a gift tax of $9,300 on the gift of A&M stock to Daniel.

Daniel also inherited 300 shares of Longhorn Corporation preferred stock when his uncle died on November 12, 2009, when the stock's FMV was $30,000. His uncle purchased the stock in 1990 for $27,600. Determine the gain or loss on the sale of A&M and Longhorn stock on December 15, 2009, under each alternative situation below.

A: A&M stock was sold for $62,600, and Longhorn stock was sold for $30,750.
B: A&M stock was sold for $58,200, and Longhorn stock was sold for $28,650.
C: Assume the same as in Part a except his aunt purchased A&M stock for $71,000 and his uncle purchased Longhorn stock for $31,200.

Solution Preview

A&M stock:
At the date of transfer, if the adjusted basis(42,000) is lower than the FMV(60,000), the basis to determine the gain or loss is carryover basis, which is donor's basis plus the gift tax ...

Solution Summary

This solution provides step by step calculations for the basis of the stock and loss and gain.