Brian, age 62, and Melissa, age 23, have been dating for about a year and a half. Brian and Melissa met when Brian was in New York at the Plumbers and Pipefitters Union convention. Melissa was a beautiful artist selling paintings at the market by Brian’s hotel. After a month-long romance, Brian asked Melissa to return to Missouri with him.

While they have no current plans to marry, they recently found out that Melissa is expecting her first child. When they found out Melissa was pregnant, Melissa moved into Brian’s house so they could prepare for the baby, whom they plan to name Kole. To prove to Melissa that he was serious about them being a family, this year Brian gave Melissa $11,180,000 in a money market account and transferred ownership of the house to her (FMV $2,000,000 and basis of $750,000). Brian also purchased a $2,000,000 life insurance policy on his life and named Melissa as the beneficiary. Premiums are $12,000 per year.

Brian was previously married and has two children from that marriage, Kati, age 38, and Karli, age 28. Both girls are happily married and have children of their own. Kati has two children, Cody, age 3, and Kali, age 13. Karli was unable to have children of her own; therefore, she adopted a little girl, Riley, age 2, from Russia last year.

Brian and his first wife, Liz, have been divorced for ten years and are not on speaking terms. After their marriage, Brian was required to pay Liz alimony in the amount of $10,000 per month. When the court order expired at the end of last year, Brian felt bad so he continues to give Liz $10,000 per month on the first of each month, totaling $120,000 this year.

Brian also made the following gifts during the current year:

• $30,000 cash to each grandchild
• $6,000 directly to Kali’s private school to pay her tuition
• $6,000 each in Amazon stock to Cody and Riley. His basis at the time of the gift was $300 and he purchased the stock five years ago

• $18,000 to Boy Scouts of America

3. If Riley sells her Amazon stock for $6,500, what is her taxable gain or loss, if any (assume Brian did not pay gift tax on this gift)? Is it short term or long term? Show your work/explain your answer.