34. The basis for loss for Susan is the fair market value on January 8, 2008, which is less
than the basis to the donor. If the fair market value is used as the basis, then the holding
period also begins on the date of the gift. Therefore, Susan has a short-term capital loss of
$900 ($1,500 − $2,400).
Holding Period: Gift Property
35. a. Dennis has a $3,000 long-term capital gain. The basis was $10,000 and the holding
period starts with Alice’s holding period when the basis in the hands of the donor is used as
the basis by the recipient.
b. Dennis has a $1,500 short-term capital loss. Since the fair market value at the time of the
gift was less than the basis to Alice, $9,500 is the basis for determining losses and the
holding period then begins for Dennis at the time of the gift. The holding period then runs
from November 15, 2007, to April 19, 2008.
Taxable Income: Net Gain or Loss
36. a. Ed has a net short-term capital loss of $750 ($1,500 − $2,250) and a net long-term
capital gain of $3,000 ($5,500 − $2,500). The net capital gain is $2,250 ($3,000 − $750),
which is taxed up to a maximum rate of 15 percent.
b. There is a net amount of $750 included in Ed’s adjusted gross income. Ed has a net short-
term capital gain of $1,500 ($6,000 − $4,500) and a net long-term capital loss of $750. The
net overall capital gain is $750 ($1,500 − $750), which is taxed as ordinary income up to a
maximum rate of 35 percent.
c. Ed has a net long-term capital gain of $4,500 ($8,500 − $4,000) and a net short-term