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?

Question

Quizplus · Accepted Answer

Andrew's basis in the property is the donor's adjusted basis ($70,000) plus the portion of the gift tax attributable to the property's appreciation. The appreciation is $45,000 ($115,000 FMV - $70,000 basis). The gift tax attributable to the appreciation is $24,000 * ($45,000 / $100,000) = $10,800. Therefore, Andrew's basis is $70,000 + $10,800 = $80,800.

In the Current Year, Andrew Received a Gift of Property