Chapter 13 Homework Problems
Complete each problem and show your work in a reasonably neat fashion.
Put your name on each page and staple or clip your pages together.
In Year 1, Sandy bought a diamond necklace for her own use, at a cost of $10,000. In
Year 4, when the fair market value was $12,000, Sandy and her husband gave the
necklace to her daughter, Flora. No gift tax was due. Flora sells the necklace for
$13,000 in Year 4. What is Flora’s recognized gain? What is Flora’s holding period in
Gain basis=Donor’s basis =$10,000
Loss Basis=Lower of Donor’s basis of FMV at time of gift=$10,000
Since the basis ended up being the donor’s basis, the donor’s holding period is “tacked on” and
the holding period is 3 years.
Mr. Krabs purchased 100 shares of stock for $50 per share. Ten years later, Mr. Krabs
died on February 1 and bequeathed the 100 shares of stock to a relative, Squidward,
when the stock had a market price of $100 per share. One year later, on April 1, the
stock split 2 for 1. Squidward gave 100 shares of the stock to another of Mr. Krab’s
relatives, Plankton, on June 1 that same year, when the market value of the stock was
$150 per share. Plankton sold the shares later for $170 per share. What was
Plankton’s basis in the 100 shares of stock?
The basis of inherited property is the value of the property on the date of death (since no
alternate valuation date information is provided). The basis of a gift to a done is the basis in the
hands of the donor when sold at a gain. Squidward’s basis is 100 x $100 or $10,000 since he
receives the “step up” in basis at death. After the stock split, there are 200 shares with a basis
of $50 each. Plankton gets 100 shares and the gain basis (basis in hands of donor) is
Spongebob purchased 100 shares of CAKE common stock for $15,000 on December
15, 2007, and then when he saw the price go down, an additional 100 shares on
December, 30, 2007 for $13,000. On January 3, 2008, Spongebob sold the shares
purchased on December 15 for $13,000. What amount is deductable on Spongebob’s