[jeff]

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Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[Qlad]

@insiyah…that is exactly how the question is written…i wrote the answer explanation just as is too….but i feel they used the gain as is without considering that it was in between the basis and fmv…..

If at the time of a gift the FMV of the gift is greater than the donor's basis, then when the donee subsequently sells the gift, the donee uses the donor's basis (“rollover cost basis”) to determine gain or loss. In this example the date-of-gift FMV was $26 per share and the donor's basis was $16 per share. So, when the donee sells the gift, the donee's basis will be the donor's $16 per share basis (“rollover cost basis”). As such, the gain will be $6 per share: $22 selling price per share minus $16 rollover cost basis per share. Because the donee sold 200 shares, the total gain recognized will be $1,200: $6 gain per share times 200 shares sold.

FAR 72,71,81 🙂
AUD 64,71, 72, 75 🙂 I'm done !!!
REG 73, 74, 74, 84 🙂
BEC 76 🙂

[OCDisME]

@Qlad The reason there is a $1,200 gain is because we use the donor's rollover cost basis for gifts; EXCEPT for when the FMV at the date of gift is LOWER than the donor's basis. In your example, the FMV is greater than the donor's basis, therefore you just use the donor's rollover cost basis as the donee's basis when calculating the gain on the sale.

When the FMV at date of gift is lower than the donor's rollover cost basis is when you have to look at the selling price and determine if it falls below the (lower) FMV, in between the (lower) FMV and the donor's basis, or above the donor's basis.

If the selling price is below the (lower) FMV, then you have a loss and you use the (lower) FMV at the time of the gift to determine the amount of the loss.

If the selling price is between, then no gain or loss recognized.

If the selling price is greater than the donor's rollover cost basis, then you have a gain and use the cost basis.

I hope this makes sense.

Becker Online - IL Candidate

FAR: 85
AUD: 85
BEC: 78
REG: 90

[OCDisME]

@Qlad The reason there is a $1,200 gain is because we use the donor's rollover cost basis for gifts; EXCEPT for when the FMV at the date of gift is LOWER than the donor's basis. In your example, the FMV is greater than the donor's basis, therefore you just use the donor's rollover cost basis as the donee's basis when calculating the gain on the sale.

When the FMV at date of gift is lower than the donor's rollover cost basis is when you have to look at the selling price and determine if it falls below the (lower) FMV, in between the (lower) FMV and the donor's basis, or above the donor's basis.

If the selling price is below the (lower) FMV, then you have a loss and you use the (lower) FMV at the time of the gift to determine the amount of the loss.

If the selling price is between, then no gain or loss recognized.

If the selling price is greater than the donor's rollover cost basis, then you have a gain and use the cost basis.

I hope this makes sense.

Becker Online - IL Candidate

FAR: 85
AUD: 85
BEC: 78
REG: 90

[Qlad]

@svwCPA72….by ur explanation i understand that when they do not say which gain …we use the realized gain?

FAR 72,71,81 🙂
AUD 64,71, 72, 75 🙂 I'm done !!!
REG 73, 74, 74, 84 🙂
BEC 76 🙂

[Qlad]

@svwCPA72….by ur explanation i understand that when they do not say which gain …we use the realized gain?

FAR 72,71,81 🙂
AUD 64,71, 72, 75 🙂 I'm done !!!
REG 73, 74, 74, 84 🙂
BEC 76 🙂

[svwCPA72]

@ Qlad I believe so. I think I might have my gain/loss backwards.

realized = real

recognized = recorded

So in this case, the recognized (record) gain would be the gain that is on the tax return. So the gain I was talking about would be recognized and not realized. However there would be a realized gain for the gifter but he wouldn't put it on the tax return. Am I thinking of that correctly?

BEC: 80(8/10) expired, 77(10/14)!!!
FAR: 79(11/10) expired, 80(8/14)!!!
REG: 66(7/11), 70(1/12), 70(4/12), 73(10/13), 79(5/14)!!
AUD: 43(8/11), 64(10/11), 65(2/12), 69(7/12) 64(10/12), 73(5/13), 64(7/13), 84(11/13)!!! Thank you Another71 for your help!

Becker, Ninja Notes, Audio, Flashcard and Wiley test bank
Yaeger and Wiley book for Audit

I AM DONE!!!!

[svwCPA72]

@ Qlad I believe so. I think I might have my gain/loss backwards.

realized = real

recognized = recorded

So in this case, the recognized (record) gain would be the gain that is on the tax return. So the gain I was talking about would be recognized and not realized. However there would be a realized gain for the gifter but he wouldn't put it on the tax return. Am I thinking of that correctly?

BEC: 80(8/10) expired, 77(10/14)!!!
FAR: 79(11/10) expired, 80(8/14)!!!
REG: 66(7/11), 70(1/12), 70(4/12), 73(10/13), 79(5/14)!!
AUD: 43(8/11), 64(10/11), 65(2/12), 69(7/12) 64(10/12), 73(5/13), 64(7/13), 84(11/13)!!! Thank you Another71 for your help!

Becker, Ninja Notes, Audio, Flashcard and Wiley test bank
Yaeger and Wiley book for Audit

I AM DONE!!!!

[Qlad]

@ocdisme…'

I got your point and know i am missing a rule…i have done these kind of questions so many times…but can't seem to remember the rules…pls show me short way to memorize it…if u used any….i can't get it at all…thank u so much

FAR 72,71,81 🙂
AUD 64,71, 72, 75 🙂 I'm done !!!
REG 73, 74, 74, 84 🙂
BEC 76 🙂

[Qlad]

@ocdisme…'

I got your point and know i am missing a rule…i have done these kind of questions so many times…but can't seem to remember the rules…pls show me short way to memorize it…if u used any….i can't get it at all…thank u so much

FAR 72,71,81 🙂
AUD 64,71, 72, 75 🙂 I'm done !!!
REG 73, 74, 74, 84 🙂
BEC 76 🙂

[OCDisME]

@Qlad, I wish I had something quick to give you for this one…but I don't have anything other than memorize it. I'd say this is a good rule to know because the gift basis rule also applies to related party transactions (when the buying relative resells the security, the basis for gain/loss is the same as the gift rules).

Becker Online - IL Candidate

FAR: 85
AUD: 85
BEC: 78
REG: 90

[OCDisME]

@Qlad, I wish I had something quick to give you for this one…but I don't have anything other than memorize it. I'd say this is a good rule to know because the gift basis rule also applies to related party transactions (when the buying relative resells the security, the basis for gain/loss is the same as the gift rules).

Becker Online - IL Candidate

FAR: 85
AUD: 85
BEC: 78
REG: 90

[gottapassb4b4]

Well tomorrow is the big day! Thanks to everyone in here who has helped out and good luck to everyone when you take the exam!

I'll be right back to studying for BEC this weekend after I have a midterm later this week, it never ends….

[gottapassb4b4]

Well tomorrow is the big day! Thanks to everyone in here who has helped out and good luck to everyone when you take the exam!

I'll be right back to studying for BEC this weekend after I have a midterm later this week, it never ends….

[Qlad]

@gottapass…all the best…..nail it down….do respond on how it went…

FAR 72,71,81 🙂
AUD 64,71, 72, 75 🙂 I'm done !!!
REG 73, 74, 74, 84 🙂
BEC 76 🙂

[Qlad]

@gottapass…all the best…..nail it down….do respond on how it went…

FAR 72,71,81 🙂
AUD 64,71, 72, 75 🙂 I'm done !!!
REG 73, 74, 74, 84 🙂
BEC 76 🙂

[Author]

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