3. A receives a gift from B. B’s basis in the property was $200,000 and the...

90.2K

Verified Solution

Question

Accounting

3. A receives a gift from B. B’s basis in the propertywas $200,000 and the fair market value of the property was $500,000on the date of the gift. B held the property for 5 years andincurred $25,000 of gift tax due to the gift. A week after Areceives the property, A sells the property. What are the taxresults to A if A sells the property for $510,000? $450,000?

4. Same facts as above except B had a basis of $750,000 in theproperty. What are the results to A now?
5. Assume that B knew the tax rules applicable togifts in question 4. Why wouldn’t B sell the property, take a$200,000 loss and make a gift of cash to B of $500,000?

Answer & Explanation Solved by verified expert

4.4 Ratings (999 Votes)

3 The Gift TaxIf You Sell for Less Than Fair Market Value The recipient does not pay taxes or report income when gift property is received but the donor of the property must report it and possibly pay a gift tax subject to certain available exemptions The FMV at the time of gifting the property is to be consideredso500000 is the value of property gifted When B has gifted the property to A he wont incur any IRS dime of income tax on it To figure out the basis of property you receive as a gift you must know three amounts The adjusted cost basis to the donor just before the donor made the gift to you The fair market value FMV at the time the donor made the gift The amount of any gift tax paid If the FMV of the property at the See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member