Joe received a parcel of land as a gift from his sister, Lisa, in 2010. At the time of the gift, the land had a FMV of $10,000. Lisa purchased the land in 2006 for $13,000. If Joe sells the land in 2015 for $22,450, he will report a

Question

Quizplus · Accepted Answer

When a taxpayer receives a gift, the recipient’s basis is the same as the donor’s basis, adjusted for any gift tax paid by the donor. In this case, Joe’s basis in the land is $13,000, which is Lisa’s basis adjusted for any gift tax paid by Lisa. 
To calculate the gain on the sale, we subtract the basis from the sales price: 
$22,450 (sale price) – $13,000 (basis) = $9,450 (gain)
Since the land was held for more than one year, the gain is a long-term capital gain.

Joe Received a Parcel of Land as a Gift from His