Paul sold TLC stock valued at $22,000 to his son, Sam, for $12,000. Paul’s basis
ID: 2602758 • Letter: P
Question
Paul sold TLC stock valued at $22,000 to his son, Sam, for $12,000. Paul’s basis in the stock is $17,000. Which of the following is correct? * Paul reports a gift of $22,000 on Form 709 and a capital loss of $10,000 ($12,000 – $22,000) on Form 1040. Sam’s basis in the stock is $12,000. No reporting is required because the transfer was between immediate family members. Paul is not required to report the $10,000 gift ($22,000 – $12,000) and is not allowed to deduct the $5,000 loss ($12,000 – $17,000 basis). If Sam sells the stock, his basis for gain is $17,000 and his basis for loss is $12,000. Paul reports a gift of $22,000. Sam’s basis in the stock is $12,000. Paul sold TLC stock valued at $22,000 to his son, Sam, for $12,000. Paul’s basis in the stock is $17,000. Which of the following is correct? * Paul reports a gift of $22,000 on Form 709 and a capital loss of $10,000 ($12,000 – $22,000) on Form 1040. Sam’s basis in the stock is $12,000. No reporting is required because the transfer was between immediate family members. Paul is not required to report the $10,000 gift ($22,000 – $12,000) and is not allowed to deduct the $5,000 loss ($12,000 – $17,000 basis). If Sam sells the stock, his basis for gain is $17,000 and his basis for loss is $12,000. Paul reports a gift of $22,000. Sam’s basis in the stock is $12,000.Explanation / Answer
Answer :- Option c). Paul is not required to report the $10,000 gift ($22,000 – $12,000) and is not allowed to deduct the $5,000 loss ($12,000 – $17,000 basis). If Sam sells the stock, his basis for the gain is $17,000 and his basis for the loss is $12,000.
Conclusion :- Option c).