Ask Question
4 April, 08:01

Melvin receives stock as a gift from his uncle. No gift tax is paid. The adjusted basis of the stock is $19,000 and the fair market value is $25,000. Melvin trades the stock for bonds with a fair market value of $22,000 and $3,000 cash. What is his recognized gain and the basis for the bonds?

+4
Answers (1)
  1. 4 April, 10:37
    0
    Recognized gain = $6000

    Basis of the bond = $22,000

    Explanation:

    Given the following;

    Adjusted basis of stock = $19,000

    After trading the stock for bond;

    Market value of bond = $22,000

    Cash received = $3000

    Recognized gain = valuation after trading stock for bond - Adjusted basis of stock

    Therefore,

    Recognized gain = ($22,000+$3000) - $19,000 = $6000

    Basis of a bond is simply the market value or quoted price of the bond.

    Here, the market value of the bond received by trading his stock is $22,000

    Therefore, the basis of the bond is $22,000
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Melvin receives stock as a gift from his uncle. No gift tax is paid. The adjusted basis of the stock is $19,000 and the fair market value ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers