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Enrolled Agent ReadyStudyingPart 1
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Special Enrollment Examination
Part 1SEE Part 1: Individuals✓Part 2SEE Part 2: BusinessesPart 3SEE Part 3: Representation, Practices and ProceduresRuth, 85, owns stock that cost $20,000 and is now worth $200,000. Her son will sell it soon after he receives it. To minimize his income tax on the sale, she should:
Property received by gift keeps the donor's basis ($20,000), so the son would have about $180,000 of gain on a sale. Property received from a decedent takes a basis equal to fair market value at death, eliminating the built-in gain. Selling it herself triggers the gain for Ruth. Gift tax paid adds only the part attributable to appreciation and cannot raise basis to full value. Source: IRC 1014(a), 1015(a), 1015(d); Pub. 551 (2025). Tax year: 2025 (law as of 31 Dec 2025).
Assuming a gift gives the donee a fair-market-value basis.
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