Tom gave his son, David, a birthday present of Big M stock with a fair market value of $50,000. Tom paid gift tax of $11,700 as Tom had previously given David earlier this year a cash gift equal to the annual gift tax exclusion amount. Tom’s adjusted basis in the stock on the date of the gift was $20,000. Three months later, David sold the stock for $75,000. What was David’s basis on the date of sale of the stock?

  1. $20,000
  2. $27,020
  3. $31,700
  4. $50,000