When the Annual Exclusion Was $14,000, Arlene Makes a Gift

question 100

Multiple Choice

When the annual exclusion was $14,000, Arlene makes a gift of stock (basis of $814,000; fair market value of $414,000) to her mother, Elizabeth. As a result of the transfer, Arlene paid a gift tax of $60,000. Elizabeth's income
Tax basis in the stock is:

• A) $414,000 basis for gain and loss.
• B) $444,000 basis for gain and loss.
• C) $814,000 basis for gain and loss.
• D) $814,000 basis for gain and $414,000 basis for loss.
• E) None of the above.

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Definitions:

Market Value

The existing rate for buying or selling a commodity or service in a trading environment.

Shares Outstanding

The total number of shares of a corporation that have been issued and are currently owned by shareholders.

Reverse Stock Splits

Reverse stock splits consolidate the number of existing shares of a company into fewer, proportionally more valuable shares.

Shares Outstanding

The total number of a company's shares currently held by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.