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Test Your Tax Knowledge:
 

PART 1
Individuals

Sorry, your answer was incorrect.

The correct answer is "A. $12,000".

ANALYSIS:

If the FMV of property received as a gift is less than the donor's adjusted basis, your basis for gain on its sale or other disposition is the same as the donor's adjusted basis plus or minus any required adjustment to basis during the period you held the property.

Your basis for loss on its sale or other disposition is its fair market value at the time you received the gift plus or minus any required adjustment to basis during the period you held the property.

In this transaction, the property sold for $20,000 and resulted in a gain. Therefore, his basis for gain would be the donor's adjusted basis of $12,000.

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