In February 2011, Judy Judd gave her son Steven a Mercedes for his graduation gift. The automobile had a basis of $43,000 to Judy but was worth $63,000 at the time of the gift. Judy paid $15,000 gift taxes on the gift. The taxable gift is $50,000 after the $13,000 exclusion. Assume that Steven used the car for business purposes.
a. What is Steven's gain or loss if the automobile is sold in April 2011 for $66,000?
b. What is the gain or loss recognized if the car is sold for $44,000?
c. What is the gain or loss recognized if the fair market value at the time of the gift had been $35,000 instead of $63,000 and Steven sold the car for $66,000?
d. What is the answer to (c) if the selling price is $34,000?
e. What is the answer to (c) if the selling price is $37,000?