Roby and James have been married for nine years. Roby sells Plum, Inc. stock that she has owned for four years to James for its fair market value of $180,000. Her adjusted basis is $200,000.
a. Calculate Roby's recognized gain or recognized loss.
b. Calculate James's adjusted basis for the stock.
c. How would the tax consequences in (a) and (b) differ if Roby had made a gift of the stock to James? Which form of the transaction would you recommend?