Donna sells stock in Martin Corporation to her brother, David. Donna purchased the stock four years ago for $3,000 and the current fair market value of the stock is $1,800. David paid Donna $1,800 for the stock. Which of the following statements is correct regarding the tax consequences of this transaction?

If David subsequently sells the stock to an unrelated party for $3,500, he will realize a gain of $1,700.

If David subsequently sells the stock to an unrelated party for $1,600, he will realize a loss of $1,400.

If David subsequently sells the stock to an unrelated party for $2,200, he will have no gain or loss.

If David subsequently sells the stock to an unrelated party for $3,500, he will have no gain or loss.

Income Tax Question