When is no gain or loss recognized during the sale of a gift?

The scenario in which no gain or loss is recognized during the sale of a gift is when the sales price falls between the donor's basis and the donee's basis. This is commonly referred to as the "holding period" that determines the basis for gain and loss calculations. When a donor gifts an asset, the recipient (donee) receives the property at the donor's basis if that basis is lower than the fair market value at the time of the gift. Conversely, if the fair market value is lower than the donor’s basis, the donee has a different basis for calculating loss.

If the sales price results in a figure that is above the donee’s basis but below the donor's basis, there will be no tax consequences, meaning neither a gain nor a loss is recorded. This situation encourages gifting as it allows individuals to transfer assets without immediate financial penalties related to capital gains.

The other options propose scenarios that do not accurately depict the tax treatment of gifted assets. They focus on sales price thresholds unrelated to the specific interplay between the donor's and donee's basis for the purposes of recognizing gains or losses upon sale of a gifted asset.