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

Since Kathleen sold the land for less than its adjusted basis at the time of the gift, she has a loss. The loss is calculated by subtracting the sale price of $80,000 from the adjusted basis of $110,000, which equals ($30,000). However, the loss is limited to the FMV of the land at the time of the gift, which was $85,000. Therefore, Kathleen's loss on this transaction is limited to ($85,000 - $80,000) = ($5,000).

Kathleen Received Land as a Gift from Her Grandfather