Capital Gains and Losses
Questions and comments about tax rules for buying and selling stocks, mutual funds, real estate and other assets.
Cap gains on a partially gifted property
Posted by: 47Percent, October 15, 2017 10:52AM

A couple (A) purchased a property for 180K; after a few years of rental depreciation the cost basis was at $160K. Then 20% was gifted to another couple (B) when Fair Market Value (assessed) was $250K. An amount of $50K in gift tax exclusion was taken.

Then if the entire property was sold for $300K, with A and B receiving $240K and $60K respectively, what would be the reportable Capgains for couple A and couple B.

Thanks..

Re: Cap gains on a partially gifted property
Posted by: 47Percent, November 24, 2017 02:49AM

Trying again.. to see someone could answer this..

Re: Cap gains on a partially gifted property
Posted by: MadDog, November 24, 2017 02:34PM
General answer:

1. The done takes a carryover basis from the donor, which would be $40,000 for a 1/5 fractional interest
2. Sale causes donor to report gain of $240,000 - $128,000 = $112,000, and done to report gain of $60,000 - $32,000 = $28,000
3. Each reports some unrecaptured 1250 gain as their respective basis is adjusted by depreciation, so there is a possible 25% rate for the donor ($16,000) and the done ($4,000).

Exception:

I assume that there is no possibility that a sale had been negotiated prior to the transfer of ownership. That is, no risk of a Court Holding Company type argument to throw the sale back to the donor alone.



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