On September 30 of last year, Rex received some investment land from Holly as a gift. Holly’s basis was $50,000 and the land was valued at $40,000 at
On September 30 of last year, Rex received some investment land from Holly as a gift. Holly’s basis was $50,000 and the land was valued at $40,000 at the time of the gift. Holly acquired the land five years ago. What are the amount and character of Rex’s recognized gain (loss) if he sells the land on May 12 this year at the following prices?
\r\na. $32,000
\r\nb. $70,000
\r\nc. $45,000
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a. $8,000 short-term capital loss, computed as follows:
\r\nDescription Amount Explanation
\r\n(1) Amount Realized$32,000
\r\n(2) Adjusted Basis 40,000 Rex’s basis is the fair market value of the land at the date of the gift.
\r\nGain (Loss) Recognized ($8,000) (1) – (2)
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