Q: A taxpayer gifts a house to their child. The taxpayer's basis is $200,000. The FMV at the date of gift is $150,000. No gift tax is paid. The child sells the house later for $180,000. What is the child's recognized gain or loss?

1. Identify Dual Basis Rule: Since FMV 2. Gain Basis: $200,000 (Donor's basis). 3. Loss Basis: $150,000 (FMV at gift). 4. Analyze Sale: Sold for $180,000. 5. Compare: $180,000 is less than Gain Basis ($200k) -> No Gain. $180,000 is greater than Loss Basis ($150k) -> No Loss. 6. Result: No gain or loss recognized.

Question 1

A taxpayer gifts a house to their child. The taxpayer's basis is $200,000. The FMV at the date of gift is $150,000. No gift tax is paid. The child sells the house later for $180,000. What is the child's recognized gain or loss?

Accepted Answer

1. Identify Dual Basis Rule: Since FMV < Donor's Basis at gift, there is a dual basis.
2. Gain Basis: $200,000 (Donor's basis).
3. Loss Basis: $150,000 (FMV at gift).
4. Analyze Sale: Sold for $180,000.
5. Compare: $180,000 is less than Gain Basis ($200k) -> No Gain. $180,000 is greater than Loss Basis ($150k) -> No Loss.
6. Result: No gain or loss recognized.

Question 2

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Accepted Answer

Using the donor's basis for all calculations.

A taxpayer gifts a house to their child. The taxpayer's basis is $200,000. The FMV at the date of gift is $150,000. No gift tax is paid. The child sells the house later for $180,000. What is the child's recognized gain or loss?

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