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Old 10-13-2014, 02:12 PM
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House inherited; later gifted; cost basis

Hi, I would appreciate help with this question:

Back in 1994, my mother inherited a house from my grandmother (who had owned it since around 1930), and at such time my mother rented the house out. In 2011, my mother gifted the house to me, and I continued renting it out. In 2014, I sold the house for $75,000. Is my cost basis the value at the time my mother inherited it from my grandmother in 1994 (I'm assuming there was an Inventory with a value listed for the house from my grandmother's probate proceedings, though I live in a different state and so it may not be so easily obtained); or is the value what the county appraisal district had as a valuation in 1994; or is the value what my grandmother paid for it in 1930 (which I have no idea how to find out what that value is, but I'm sure it'd be very low)? This same scenario will apply to land when I sell it, but the selling price of the land will be much higher. Will the same response apply to it, as well? Thanks for your help!



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Old 10-14-2014, 10:24 AM
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Originally Posted by Pam Buffington View Post
#1;Back in 1994, my mother inherited a house from my grandmother (who had owned it since around 1930), and at such time my mother rented the house out. In 2011, my mother gifted the house to me, and I continued renting it out. In 2014, I sold the house for $75,000. Is my cost basis the value at the time my mother inherited it from my grandmother in 1994 (I'm assuming there was an Inventory with a value listed for the house from my grandmother's probate proceedings, though I live in a different state and so it may not be so easily obtained); or is the value what the county appraisal district had as a valuation in 1994; or is the value what my grandmother paid for it in 1930 (which I have no idea how to find out what that value is, but I'm sure it'd be very low)?



#2;This same scenario will apply to land when I sell it, but the selling price of the land will be much higher. Will the same response apply to it, as well? Thanks for your help!
As your mother gifted it to you as a gift, the basis of gifted property depends on situations; aslongas the FMV of the property at the time of the gift was equal to or greater than the donor's adjusted basis( I mean your mother’s basis is the FMV in 1994 when she inherited it from her mother), your basis in the property immediately after the gift will be the same as the donor's (your mother’s basis, 1994 FMV)adjusted basis at the time you received the gift. If the donor paid any gift tax, you should increase your basis by all or part of the gift tax paid, depending on the date of the gift. If the FMV of the property at the time of the gift( in 2011) was less than the donor's (your mother)adjusted basis, your basis for gain on its sale or other disposition is the same as the donor's adjusted basis, plus or minus any required adjustments to basis during the period you held the property. So, a different rule applies if you sell gifted property at a loss. If the FMV of the property at the time of the gift was less than the donor's adjusted basis, your basis for loss on its sale or other disposition is its FMV at the time of the gift, plus or minus any required adjustments to basis during the period you held the property. In other words, for purposes of determining losses, you use the lesser of the donor's adjusted basis or the FMV at the time of the gift as your basis. However, if you sell the gifted property at a gain, if the FMV of the pty was more than the adjusted basis of the pty, then your basis for gain is its FMV.
However, In the unusual situation where the recipient's selling price is higher than the asset's value on the date of the gift but lower than the donor's cost basis, the recipient will have neither a gain nor a loss. For instance, the donor's $500 cost basis, if the value of the shares at the time of the gift was $300 and the recipient sells the shares for $400, (1) there would be no gain because, for purposes of gain, the recipient would have a $500 carryover basis, which would be greater than the selling price, and (2) there would be no loss because the $400 selling price would be measured against a basis of $300, the lower of the asset's value at the time of the gift or the donor's cost basis.




#2; I think so aslongas you received the land as a gift too,



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Old 11-04-2014, 06:09 PM
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Originally Posted by Wnhough View Post
As your mother gifted it to you as a gift, the basis of gifted property depends on situations; aslongas the FMV of the property at the time of the gift was equal to or greater than the donor's adjusted basis( I mean your mother’s basis is the FMV in 1994 when she inherited it from her mother), your basis in the property immediately after the gift will be the same as the donor's (your mother’s basis, 1994 FMV)adjusted basis at the time you received the gift. If the donor paid any gift tax, you should increase your basis by all or part of the gift tax paid, depending on the date of the gift. If the FMV of the property at the time of the gift( in 2011) was less than the donor's (your mother)adjusted basis, your basis for gain on its sale or other disposition is the same as the donor's adjusted basis, plus or minus any required adjustments to basis during the period you held the property. So, a different rule applies if you sell gifted property at a loss. If the FMV of the property at the time of the gift was less than the donor's adjusted basis, your basis for loss on its sale or other disposition is its FMV at the time of the gift, plus or minus any required adjustments to basis during the period you held the property. In other words, for purposes of determining losses, you use the lesser of the donor's adjusted basis or the FMV at the time of the gift as your basis. However, if you sell the gifted property at a gain, if the FMV of the pty was more than the adjusted basis of the pty, then your basis for gain is its FMV.
However, In the unusual situation where the recipient's selling price is higher than the asset's value on the date of the gift but lower than the donor's cost basis, the recipient will have neither a gain nor a loss. For instance, the donor's $500 cost basis, if the value of the shares at the time of the gift was $300 and the recipient sells the shares for $400, (1) there would be no gain because, for purposes of gain, the recipient would have a $500 carryover basis, which would be greater than the selling price, and (2) there would be no loss because the $400 selling price would be measured against a basis of $300, the lower of the asset's value at the time of the gift or the donor's cost basis.




#2; I think so aslongas you received the land as a gift too,
Wnhough, thank you so much for your response. It is very much appreciated and just what I needed.



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