Five years ago, Jason received a gift of 1,000 shares of stock. FMV on the gift date was $75 per share; donors had purchased four years earlier at $47 per share. He sold the stock this week for $110 per share. What was Jason's per-share basis in the stock when it was sold?

Five years ago, Jason received a gift of 1,000 shares of stock. FMV on the gift date was $75 per share; donors had purchased four years earlier at $47 per share. He sold the stock this week for $110 per share. What was Jason's per-share basis in the stock when it was sold?

• A. $122
• B. $75
• C. $47
• D. $110

Answer: (C)

For gifts, the recipient’s basis to determine gain is the donor’s basis (carryover basis). The fair market value at the date of the gift only affects loss calculations if the sale price falls below that FMV; otherwise it doesn’t change the basis used for gain. In this case, the donor originally bought the stock for $47 per share. The FMV at the gift date was $75, which is higher than the donor’s basis, so the basis used for any future gain remains the donor’s basis of $47 per share. When sold for $110 per share, Jason would have a gain of $110 − $47 = $63 per share, but the basis itself is still $47.

For gifts, the recipient’s basis to determine gain is the donor’s basis (carryover basis). The fair market value at the date of the gift only affects loss calculations if the sale price falls below that FMV; otherwise it doesn’t change the basis used for gain.

In this case, the donor originally bought the stock for $47 per share. The FMV at the gift date was $75, which is higher than the donor’s basis, so the basis used for any future gain remains the donor’s basis of $47 per share. When sold for $110 per share, Jason would have a gain of $110 − $47 = $63 per share, but the basis itself is still $47.