When Lindsey sold the necklace gifted by her grandmother, what type of gain did she realize?

When Lindsey sold the necklace that was gifted by her grandmother, she realized a long-term capital gain. This is because inherited or gifted property typically carries the fair market value at the time of the gift as its basis, which is then used to determine the gain or loss upon sale.

If Lindsey sold the necklace for more than the fair market value at the time she received it, the gain would be classified as long-term capital gain, irrespective of how long she held the necklace before selling it. For tax purposes, long-term capital gains are derived from assets held for more than one year and benefit from a lower tax rate compared to ordinary income or short-term capital gains, which apply to assets held for one year or less.

This distinction is crucial in tax calculations and impacts the overall tax liability, making it essential to recognize when an asset qualifies for long-term capital gain treatment. In this case, since the necklace was a gift, it is subject to the rules governing gains on gifts, enabling Lindsey to achieve a potentially favorable tax position upon the sale of the necklace.