Series 7 Exam Question 134: Answer and Explanation

Question: 134

Melissa purchased 1,000 shares of JKL common stock at a price of $14 per share. On her granddaughter's 18th birthday, she gives her the securities as a gift. At that point, the market price of JKL is $24 per share. For tax purposes, what is her granddaughter's cost per share?

• A. $0
• B. $14.00
• C. $19.00
• D. $24.00

Correct Answer: B

Explanation:

B. In the case of gifted securities, if the price of the securities increased since the initial purchase, the donee (receiver of the gift) assumes the initial purchase price as a cost basis.