Janet Received Stock Worth $4,000 at the Time It Was

question 142

Essay

Janet received stock worth $4,000 at the time it was gifted to her by her father. The father had acquired the stock several years earlier for $2,200. The father paid no gift tax on the transfer to Janet. Janet sells the stock for $6,600 two months after receiving it. What is the nature and amount of Janet's gain or loss?

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Definitions:

Opportunity Cost

Waiving prospective gains from various alternatives by settling on one option.

Foregone Alternative

The option or course of action that is given up when another is chosen; closely related to the concept of opportunity cost.

Opportunity Cost

The charge of rejecting the following prime opportunity in the process of decision-making.

Sunk Costs

Sunk costs are expenditures that have already been incurred and cannot be recovered, and should not affect future investment decisions or operations.