During the current year, Don's aunt Natalie gave him a house. At the time of the gift, the house had a FMV of $145,000 and his aunt's adjusted basis was $134,000. After deducting the annual exclusion, the amount of the gift was $130,000. His aunt paid a gift tax of $20,000 on the house. What is Don's basis in the house for purposes of determining gain?

Question

Quizplus · Accepted Answer

Don's basis in the house is the aunt's adjusted basis ($134,000) plus the portion of the gift tax attributable to the appreciation in value ($11,692), calculated as ($145,000 - $134,000) / $145,000 * $20,000. Thus, $134,000 + $11,692 = $135,692.

During the Current Year, Don's Aunt Natalie Gave Him a House