On April 5, 2017, Ryan received land and a building from Thom as a gift. Thom\'s

Question

On April 5, 2017, Ryan received land and a building from Thom as a gift. Thom's adjusted basis and the fair market value at the date of the gift are as follows:

Asset Adjusted Basis FMV Land $40,000 $35,000 Building 110,000 90,000 Thom paid gift tax of $8,000 on the transfer. When required, round any division to four decimal places. Round final answers to the nearest dollar. a. Determine Ryan's adjusted basis for the land and building. Ryan's basis for gain: Ryan's adjusted basis for the land is $ Ryan's adjusted basis for the building is Ryan's basis for loss: Ryan's adjusted basis for the land is Ryan's adjusted basis for the building is $ 93,340 b. Assume instead that the fair market value of the land was $53,000 and that of the building was $120,000. Determine Ryan's adjusted basis for the land and building. Ryan's total basis for the assets received from Thom is $ Ryan's adjusted basis for the land is $ Ryan's adjusted basis for the building is 53,000

Explanation / Answer

a Answer:-

Ryan's total basis for the assets received from thom is:-

$40,000 + $110,000 + [$125,000/($125000 + $13000) × $8000]

= 150,000 + [$125000 /$138,000 × $8000]

= $150,000 + $7246

= $157,246

The basis is allocated to the land and building as follows :-

Land = ($35,000 / $125000) × $157,246 = $44,028

Building = ($90,000 / $125,000) × $157,246 = $113,218

Answer :-

Since the land and building has declined in value, none of the gift tax paid by Thom is considered in calculating the Ryan's adjusted basis.

Ryan's basis for gain is :-

Land = $ 40000

Building =$ 110,000

Ryan's basis of loss which is lower of thom adjusted basis or the FMV at the date of gift is:

Land = $53000

Building = $120000

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