The 20000 basis carries over to Alice o In 2006 Alice sells the land for 8000

The 20000 basis carries over to alice o in 2006 alice

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The $20,000 basis carries over to Alice o In 2006, Alice sells the land for $8,000 AR = 8,000 AB = 10,000 LR = 2,000 (Yes its recognized) Gift Basis o The proportion of gift tax paid by the donor on appreciation of asset can be added to basis of donee o The donee’s basis is equal to: Carryover basis + That portion of the gift tax applicable to the appreciation of the asset. Gift tax paid * (appreciation/taxable gift) o Example of gift tax: Cathy received a gift from Darren on June 15 of this year FMV on June 15 was 34,000 Darren had a basis in the asset of 29,000 Darren paid gift tax of 800 on the transfer Taxable Gift = 34,000 – 14,000 annual exclusion = $20,000 Gift tax attributable to appreciation = $800 * (5,000/20,000) = $200 Cathy’s basis in the gifted property is 29,200 Property Acquired from a Decedent o Generally, beneficiary’s basis in inherited assets will be the FMV of the asset at decedent’s date of death Exception: If the executor/administrator of estate elects alternate valuation date, basis is FMV on such date. AVD election is available only when the FMV on the AVD date is lower than the date of death. o Inherited property is always treated as long-term capital property
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