Which one of the following losses may be recognized?
A)Decline in the value of P's computer before he converted it from personal to exclusively business use
B)Sale of property by M to his son for an amount less than either M's basis in the property or its fair market value at the time of sale
C)$2,000 by K, if L's adjusted basis in jewelry was $35,000, its fair market value in 2008 was $30,000 when she gave it to her friend K, and K held it for investment and sold it this year for $28,000
D)$7,000 by K, if L's adjusted basis in jewelry was $35,000, its fair market value in 2008 was $30,000 when she gave it to her friend K, and K held it for investment and sold it this year for $28,000

Question

Quizplus · Accepted Answer

The correct answer is C because K can recognize a loss of $2,000, which is the difference between the fair market value at the time of the gift ($30,000) and the sale price ($28,000). Losses on sales of property to relatives (choice B) or due to personal use (choice A) are generally not deductible. Choice D is incorrect because the recognized loss is based on the decrease in value from the time of the gift, not the original basis of the giver.

Which One of the Following Losses May Be Recognized