Question

Melvin receives stock as a gift from his uncle. The adjusted basis of the stock is $30,000 and the fair market value is $38,000. Melvin trades the stock for bonds with a fair market value of $35,000 and $3,000 cash. What is his recognized gain on the sale of stock and the basis for the bonds

Answer 1

Answer: None of the above

Explanation:

The options are:

a $0, $30,000.

b. $5,000, $33,000.

c. $5,000, $30,000.

d. $8,000, $33,000.

e. None of the above.

The information below can be deduced from the question:

Amount realized = $35000 + $3000 = $38000

Less: Adjusted basis = ($30000)

Realized gain = $8000

Based on the explanation above, the realized gain is $8,000 and the basis of the bond is $35,000.