Marge sells land to her adult son, Jason, for its $20,000 appraised value. Her adjusted basis for the land is $25,000.
Marge's recognized loss is $5,000 and Jason's adjusted basis for the land is $25,000 ($20,000 cost + $5,000 recognized gain of Marge).

Question

Quizplus · Accepted Answer

Marge's recognized loss would actually be $0 since she sold the land to her son for its appraised value, which is equal to her adjusted basis. There is no recognized gain for Marge either. Jason's adjusted basis for the land would be $20,000 (cost) since there is no recognized gain for Marge to transfer to him.

Marge Sells Land to Her Adult Son, Jason, for Its