Donald sells stock with an adjusted basis of $38,000 to his son, Kiefer, for its fair market value of $30,000. Kiefer sells the
stock three years later for $32,000. Kiefer will recognize a gain on the subsequent sale ofA) $0.B) $2,000.C) ($6,000).D) ($8,000).
1 answer:
Answer:
The correct option is A
Explanation:
Gain on sale of stock = Selling Price - Cost
= $32,000 - $30,000
= $2,000
Previously disallowed loss = Market Value - Basis
= $30,000 - $38,000
= ($8,000)
Taxable Gain = Previously disallowed loss - Gain on sale of stock
= ($8,000) - $2,000
= ($6,000)
The previously disallowed loss could not decrease the gain below 0. Therefore, the Kiefer will recognize the gain at $0.
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