E received 50 acres of undeveloped land as a gift from her grandmother this year.The land had cost $20,000 15 years ago, but was appraised at $50,000 on the date of the gift.E's grandmother paid gift taxes of $12,000 on this $36,000 taxable gift ($50,000 fair value - $14,000 annual gift tax exclusion).What is E's basis in the land?
A)$20,000
B)$30,000
C)$32,000
D)$36,000

Question

Quizplus · Accepted Answer

E's basis in the land is the donor's basis ($20,000) plus a portion of the gift tax attributable to the appreciation in value. The appreciation is $30,000 ($50,000 - $20,000), and the gift tax attributable to the appreciation is $12,000 * ($30,000 / $36,000) = $10,000. Therefore, E's basis is $20,000 + $10,000 = $30,000.

E Received 50 Acres of Undeveloped Land as a Gift