Durwin receives a house as a gift from his father. His father’s basis in the hou

Question

Durwin receives a house as a gift from his father. His father’s basis in the house and the land is $90,000. On the date of the gift, the land and house have a fair market value of $40,000 and $80,000, respectively. No gift tax is paid by Durwin’s father at the time of the gift.
a) To determine gain on sale of the gifted property, what is Durwin’s basis in the land?

b) To determine gain on sale of the gifted property, what is Durwin’s basis in the house?

c) Will the basis of the land and house be the same as in parts (a) and (b) for purposes of determining a loss on their sale?

Please answer parts a, b, and c and provide a good explanation!

Explanation / Answer

0A ) Durwin basis inthe land wll be $ 90000. For this type of property, you go back to the giver’s or donor’s basis. That provides the starting point for your income tax basis. To the donor’s basis, you add improvements since the date of the gift, and subtract depreciation taken. You may, in some instances, add part of any gift tax paid onto the basis.

B ) $ 90000.The rules as to basis in the case of a gift do not allow for a stepped-up calculation and they depend upon whether the basis is being calculated for purposes of gain or loss. For determining gain, the basis is the same as it would have been in the hands of the donor and is called a "carryover" basis.

C ) yes .the basis of the land and house be the same as in a & B = $ 90000

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