Question

On June 4, 2002, Fred bought stock at a cost of $8,000. On January 30, 2019, he gave the stock to his son, George. At the time of the gift, the fair market value of the stock was $6,500. On May 1, 2019, George sold the stock.

State whether there is a short-term or long-term capital gain or loss, and the amount of the gain or loss, if the stock was sold at $7,000.

Answer 1

Here is my Answer for the above question

Capital Asset typically refers to anything that you own for personal or investment.It includes all kind of property; movable, immovable,tangible, intangible,Fixed or circulating.

When anyone sell the capital Asset the difference between the purchase price and the amount sell it for is a capital gain or loss.

Property received on inheritence or through gifts from family members are Tax exempt and at the same time that is received without consideration.but when the sale of this gift one has to pay capital gain tax.

For gifted property the Date of Acquistion is date on which Donor purchased it and cost of Acquisition also previous owner purchased cost.

Type of capital gain is calculated based on holding period if it is morethan 24 months it is Long term capital gain or it is less than 24 months it is short term capital gain.

here Date of Acquisiton is june 04,2002,date os sale is may 01,2019 so holding priod is morethan 24 months , it is Long term capitatal gain

Calculation of Long term capital gain

Total Sale price (full consideration) = $ 7000

(-) Expenses related to sale = $0

(-) Indexed cost of purchase ($8000/100)*289 = $ 23120

Long term capital loss = $-16120

This loss can be carry forward and adjusted with long term capital gain up to 8 successive years.