In the current year,Andrew received a gift of property from his uncle.At the time of the gift,the property had a FMV of $115,000 and an adjusted basis to his uncle of $70,000.After deducting the annual exclusion,the amount of the gift was $100,000.Andrew's uncle paid a gift tax on the property of $24,000.What is the amount of Andrew's basis in the property?
A)$70,000
B)$80,800
C)$94,000
D)$115,000

Question

Quizplus · Accepted Answer

Andrew's basis in the property will be equal to his uncle's adjusted basis or the FMV of the property at the time of the gift, whichever is less. In this case, the FMV of the property was $115,000, but since Andrew's uncle paid gift tax on the property, the amount of the gift for calculating Andrew's basis will be reduced by the gift tax paid, which is $24,000. Therefore, the amount of the gift for basis calculation will be $100,000 - $24,000 = $76,000. Since the adjusted basis to Andrew's uncle was $70,000, which is less than the gift amount for basis calculation, Andrew's basis will be $70,000. However, if Andrew decides to sell the property in the future and realizes a gain, he may be able to add back the gift tax paid by his uncle (proportionate to the gain) to his basis, resulting in a higher basis.

In the Current Year,Andrew Received a Gift of Property from His