Doug receives a duplex as a gift from his uncle. The uncle\'s basis for the dupl

Question

Doug receives a duplex as a gift from his uncle. The uncle's basis for the duplex and land is $90,000. At the time of the gift, the land and building have FMVs of $40,000 and $80,000, respectively. No gift tax is paid by Doug's uncle at the time of the gift. a. To determine gain, what is Doug's basis for the land? (Show your calculations) b. To determine gain, what is Doug's basis for the building? (Show your calculations) c. Will the basis of the land and building be the same as in Parts a. and b. for purposes of determining loss?

Explanation / Answer

If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift. Increase your basis by all or part of any gift tax paid, depending on the date of the gift. The donors basis for the land is $90,000 * $40,000 / ($40,000+$80,000) = $30,000 The donors basis for the building is $90,000 * $80,000 / ($40,000+$80,000) = $60,000 a.To determine the gain - Doug's basis for the land is $30,000 b.To determine the gain - Doug's basis for the building is $60,000 c. - Yes - because FMV of the property was greater than the donor's adjusted basis

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