Bud received 200 shares of georgia corp stock from his uncle as a gift on july 20,2014 when the stock had a $45000 FMV . his uncle paid $30000 for the stock on april 12 2000. the taxable gift was $45000,because his uncle maid another gift to bud for $20000 in january and used the anual exclusion. the uncle paid a gift tax of $1500
without considering the transaction below, bud AGI is $45000in 2015. no other transaction involving capital asset occur during the year. analyze each transaction below independent of the others and determine buds AGI in each case
1. he sells the stock on october 12 , 2015 for $48000
2. He sells the stock on october 12, 2015 for $28000
3. he sells the stock on december 16, 2015 for $420
- 1) Bud’s gain is $16,500. His AGI is $61,500.
- 2) Bud’s loss is $3,500. His AGI is $48,500
- 3) Bud’s gain is $10,500. His AGI is $45,500.
Here we have provided that
his uncle paid $30000 for the stock on april 12 2000. the uncle paid a gift tax of $1500 so the basis of gifted stock is the lower of fair market value on the date of the gift or the gifter’s cost basis plus any gift taxes paid. In this case, cost basis is lower.
here in this case it eill be as follow
=$30,000 + 1,500 gift taxes paid gives Bud a basis of $31,500.
Since FMV was more than the owner’s cost basis, Bud’s basis will be the carryover cost basis plus gift taxes regardless of there is a gain or loss on sale of the stock.
A) he sells the stock on october 12 , 2015 for $48000
Gain= = selling price – basis
= $48,000 selling price – $31,500 basis
= $16,500
AGI is $45000in 2015
AGI = $16,500 gain + 45,000 = $61,500
B) He sells the stock on october 12, 2015 for $28000
Loss= selling price – basis
= $28,000 selling price – $31,500 basis
= $3,500
Deductible loss is $3,000 since you can capital loss deductions are limited to $3,000 a year.
AGI = 45,000 – 3,000 loss = 42,000
C) 3. he sells the stock on december 16, 2015 for $42000
Gain= selling price – basis
= 42,000 selling price – $31,500 basis
= $10,500
AGI is $45000in 2015
AGI = 45,000 +10,500 gain = 55,500
