How much tax is owed on the sale? (10 points)?

Question

Harry Walters gave his 31-y.o. grandson, Steve, 100 shares of ABC stock valued at $10,000 on the date of the gift. Harry paid $15,000 for the shares of stock four years ago. Steve sells the stock six months later for $12,000. Steve is in the 25% marginal tax bracket.

What is Steve's short-/long-term capital gain/loss?

htm182111 · Accepted Answer

No gain or loss in this case.

Bostonian In MO · Answer

The basis of a gifted asset is the lesser of the donor's original adjusted bases or FMV on the date of the gift.  Now that you know how to determine Steve's basis, you can figure the gain or loss.  (This assumes that no gift tax was paid by Harry.  If any gift tax was paid by Harry, you'll need to know how much to figure the basis.)

How long did Steve hold the asset?  That determines if it's short term or long term, and whether you use Steve's marginal rate or the reduced long term rate if there's a taxable gain.

Edit:  Still don't answer homework type questions.  Too many folks resort to Y!A for that.

I've got you beat by 20 odd years, and hardly need the 10 points.

Bash Limpbutt&#39;s Oozing Cyst© · Answer

Can't be answered conclusively based upon the information given.  Your teaser now is to explain at least 2 reasons why that could be the case.

Bonus teaser:  Explain how $300 could be a correct answer.

tro · Answer

Mr B is saying 'the lesser' of wouldn't that be $10000 on the date of the gift and if he sold it for $12000 at 25% tax rate, $500?

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How much tax is owed on the sale? (10 points)?

4 Answers