Elliot sells some stock to his sister, Nancy, for $4,000. His basis in the stock is $6,000.

Question:

Elliot sells some stock to his sister, Nancy, for $4,000. His basis in the stock is $6,000. Several years later, Nancy sells the stock for $7,000. What is the effect of the sales on Elliot and Nancy?
a. Assume that the subsequent sale by Nancy is for $5,000.
b. Assume that the subsequent sale by Nancy is for $2,000.