Kathleen received land as a gift from her grandfather. At the time of the gift, the land had a FMV of $85,000 and an adjusted basis of $110,000 to Kathleen's grandfather. One year later, Kathleen sold the land for $80,000. What was her gain or (loss) on this transaction?

Question

Quizplus · Accepted Answer

Kathleen's basis in the land is the same as her grandfather's adjusted basis of $110,000 because it was a gift. She sold it for $80,000, resulting in a loss of $30,000 ($80,000 - $110,000). However, for tax purposes, the loss is limited to the difference between the FMV at the time of the gift and the sale price, which is $5,000 ($80,000 - $85,000).

Kathleen Received Land as a Gift from Her Grandfather