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 $0 and Jason's adjusted basis for the land is $25,000 ($20,000 cost + $5,000 disallowed loss of Marge).

Question

Quizplus · Accepted Answer

Marge's recognized loss is actually $5,000 ($20,000 appraised value - $25,000 adjusted basis). Since she sold the land to her adult son for the appraised value, there is no gain or loss recognized on the sale. Therefore, Jason's adjusted basis for the land would be the same as the appraised value, which is $20,000.

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