Nigel received a Land Rover from his mother as a gift. His mom had purchased the Land Rover two years earlier for $65,000, but its fair market value at the date that she made the gift to him was only $50,000. No gift tax was paid by his mom at the time of the gift.
If Nigel sells the Land Rover for $70,000, what, if any, gain or loss will he recognize on the sale?
A) No gain or loss
B) ($5,000) loss
C) $20,000 gain
D) $5,000 gain
When a person gifts something in value more than the prescribed limit under the rules provided by the internal revenue service (IRS) is liable to pay tax on it. The person who gift has to mention it on his annual return when filing the annual return.
Answer and Explanation:
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fromChapter 8 / Lesson 5
Learn the definition of business combination in accounting and understand its different requirements. Discover the steps involved in business combination.