@MeeshkaDiane wrote:
After these transactions in July 2023, Mary's basis is:
- $150k ($450k/3 at time of death)
- $175k Gifted from Joe
- $125k paid to Peter
- $50k gifted by Peter
- $500k TOTAL
That's wrong for the gifted portions. Since the FMV at the time of the gifts is more than the donor's basis, Mary's basis for the portions that she receives as gifts is the donor's basis at the time of the gift. Joe's basis for his 1/3 share is $150K. (Each sibling has the same basis for his or her original 1/3 share.) So Mary's basis for the share that is gifted by Joe is $150K, not $175K.
Peter's basis for the share that he gifts to Mary is (50/175) x $150K, which is $42,857, so that is Mary's basis for the share she receives as a gift from Peter.
