Indiv Ch 3

Question 1

Rebate received for item purchased is reported how on a return?

Answer 1

The rebate is not income, but instead reduces the basis in the item purchased

Question 2

When calculating stock splits, how is the new basis per share calculated?

Answer 2

Orig # of shares x Orig cost basis / new # of shares

Question 3

How to calculated adj basis in gifted property?

Answer 3

Gift Tax Paid x [(FMV at time of gift - Donor’s basis) / (Amount of gift - annual exclusion)]