[Anonymous]

If the FMV is lower than basis at the date of the gift and the recipient sells for less than FMV, can you add the gift tax paid? I think not, but wanted to check

[gms361]

I don't think you could do that because the formula to figure out how much gift tax you add is based on appreciation of the property. If FMV is lower than basis, there is no appreciation.

AUD - 83
FAR - 78
BEC - 76
REG - 86 PTL!!!!!

Used CPAExcel & Wiley testbank (awesome by the way)

[Yvonne570]

Here things get a little tricky. If you sell for a gain, you take over the donor's basis in the stock he so generously gave to you. In this case, your holding period includes the donor's duration of ownership for purposes of qualifying for long-term capital gain treatment. You would use the donor's acquisition date as the date you acquired the shares. Of course, your friendly donor may have no record of either the cost basis or the acquisition date. If this is true, you'll need to do some investigative work to uncover that information, plus account for any capital changes before figuring your gain.

When you sell for a loss, your basis is the lower of: (1) the donor's basis or (2) the fair market value on the date the stock was given to you. If the fair market-value rule applies, your holding period begins on the date you received the shares rather than on the earlier date the donor acquired them.

If you sell for a price between the fair market value on the date of the gift and the higher donor's basis figure, the deal is a wash as far as the IRS is concerned. You have no taxable gain or loss.

For example, say you received stock worth $20 per share on the date of gift. The donor's cost basis was $30 per share. If you sell for more than $30, you have a capital gain equal to the difference between the sale price and $30. If you sell for less than $20, you have a capital loss equal to the difference between the sale price and $20. If you sell for between $20 and $30, it's a wash. In filling out Schedule D when the wash rule applies, simply enter the same amounts for your basis and the sale price.

One last thing. In the relatively unlikely event that your donor paid gift tax when he presented you with the shares in question, you may get to adjust your basis upward. The increase is equal to the gift tax attributable to any stock price appreciation occurring before the gift. It takes some mathematical gyrations to determine the exact amount of gift tax caused by the appreciation.

AUD - Passed:)
FAR - Passed:)
REG - Retake TBD
BEC - Missed by 3 points Retake TBD

[Author]

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