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Holding period and gain to Rita for gift of stock from Che

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Che acquires 50 shares of Blue Corporation stock on November 1, 2006, for $43,000. On May 10, 2007, when the stock is worth $56,000, Che transfers the shares to Rita, his daughter, as a gift on her 21st birthday. No gift tax is paid by Che. On August 10, 2007, Rita sells the shares for $59,000 to get cash for her college tuition. What are Rita's holding period for the stock and the nature of her gain or loss from its sale?

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Solution Summary

The solution shows the calculation for the transaction and explains the holding period. Also explained is an exception to the standard gift rules for a special circumstance.

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Rita takes the basis and the holding period of the donor.

Amount of Gain:
Sale $59,000
Cost $43,000
Gain $16,000

Nature of Gain:
Sale ...

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