During the current year, Stan sells a tract of land for $800,000. The property w

Question

During the current year, Stan sells a tract of land for
$800,000. The property was received as a gift from Maxine on March 10, 1995, when the
property had a $310,000 FMV. The taxable gift was $300,000 because the annual exclusion
was $10,000 in 1995. Maxine purchased the property on April 12, 1980, for $110,000. At the time of the gift, Maxine paid a gift tax of $12,000. In order to sell the property, Stan paid a sales commission of $16,000.

a. What is Stan’s realized gain on the sale?
b. How would your answer to Part a change, if at all, if the FMV of the gift property was
$85,000 as of the date of the gift?

Explanation / Answer

The sale price of the property is            $800000 The fair market value of the property      $310000 the adjusted price of the property           $300000 gift tax paid                                            $12000 the value of the property                         $312000 the gain on sale of the property=$800000-$312000=$488000 b.If fair market value is less than donor's estimated basis, your basis depends on whether you have a gain or loss when you dispose of the prperty. Your basis of figuring gain in the same as the donors adjusted basis plur or minus any required adjustments to baise which you held the property. here the fair market value   of the proerty is 85000 as on the date of the gift. but take the adjustment value as 300000 and add gift tax to adjust the price. the gain on sale of the property is the same that is 800000-312000=488000

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