Question

Teresa purchased a ring for 100 in 1965. In 2015 Teresa gave the ring to her granddaughter, Lindsey. At the time of the gift the ring was appraised at 850. In 2017 Lindsey sold the ring for 1,200. What is the amount and character of Lindsey ' s gain from thus sale

Answer 1

A gift is Money or House, Shares, Jewelery etc. that is received without any consideration, or simply an asset received without making a payment against it and is a capital asset for the Recipient. It can be in the form of cash, movable property or immovable property.

If the asset is held for 24 months or less then that Asset is treated as Short Term Capital Asset. You, as an investor will make either Short Term Capital Gain (STCG) or Short Term Capital Loss (STCL) on that investment.

If asset is held for more than 24 months then that Asset is treated as Long Term Capital Asset. You will make either Long Term Capital Gain (LTCG) or Long Term Capital Loss

In this Case:

The asset (ring) given by Teresa to her granddaughter lindsey is held by her more than 2 years. So, this is the case of long term capital gain.

Calculation Of Long term capital gain:

Capital gain= Sale Price – Indexed cost of acquisition

Indexed cost of acquisition= Indexation in 1965/Indexation in 2017*cost of the asset = 100/1125*1200 = 107

Therefore, Capital gain =1200-107=1093