1. C

Because of the "Double Basis Rule" (where FMV is less than the adjusted basis on the date of the gift), Laura will not have any taxable gains or losses on the sale of the collection if she receives between $15,000 and $20,000 for the sale.

2.
B

New Basis = Original Cost + [(Appreciation / FMV) x Gift tax]
$27,500 = $20,000 + [($60,000 / $80,000) x $10,000]

3.
B Under the "Death Bed Gifting Rule," gifted property received back in one year, or less, by the donor does not receive a "step up" to FMV. Instead, the basis reverts back to the original donor's adjusted basis.

4.
D

Because Pete and Pat owned the account as "community property," Pat receives a full "step up" to FMV on both halves of the account at the death of the first spouse.

5.
D

All of the actions listed above (except legal fees incurred), will be considered capital improvements and increase his original basis. Legal fees incurred for defending or perfecting titles are considered additional items to basis.

Introduction

Related Articles
  1. Taxes

    What Are Gift Taxes?

    If you're not sure what gift taxes are, read on and we'll explain.
  2. Insights

    Gift-Giving Etiquette

    Here's a look at how much you should spend and what you should give this holiday season.
  3. Retirement

    4 Thoughtful Retirement Gift Ideas for Men

    This"best gifts list" of the most thoughtful retirement gifts for men includes items appropriate as gifts from co-workers, friends or family members.
  4. Insights

    Will Your Gift Card Gift Go Unused?

    An unbelievable amount of money gets wasted in the form of non-redemption: nearly $5 billion a year. These tips will ensure that your gift card gift doesn't go to waste.
  5. Managing Wealth

    Know Your Stock Cost Basis

    Understanding equity cost basis is critical for tracking the gains or losses of an investment.
  6. Insights

    Why Retailers Love Gift Cards

    Gift cards have many benefits for retailers compared to cash sales. We'll look at a few of them.
  7. Investing

    How Safe Are Discounted Gift Card Websites?

    Could you buy a gift card online and find out it's worthless? Here's how to protect yourself (and whether you need to).
  8. Taxes

    10 Sources of Nontaxable Income

    Taxes are often a deterrent from investing and saving. These financial practices will bring you no tax grief.
  9. Taxes

    Keep Gifts Simple and Meaningful This Season

    Sometimes simple gift ideas are the best.
Frequently Asked Questions
  1. What are the primary differences between a closed end investment and an open end investment?

    Learn what the primary differences are between open-end investments and closed-end investments, and the implications for ...
  2. Why is Ireland sometimes referred to as a tax haven?

    Learn why Ireland is a desirable location for corporations, how low the country's tax rate is and what taxation and economic ...
  3. What is the history of binary options?

    Discover the history of binary options trading, which is now one of the fastest growing investment market vehicles available ...
  4. How did Richard Branson make his fortune?

    Learn how Virgin Group tycoon Richard Branson earned his billions. Follow his journey from Virgin Records to the corporate ...
Trading Center