Investors & landlords

After the transaction, you have basis in the property that was transferred, not just the value of the "gift" itself.

 

So, if you paid Peter $125,000 at a time when Peter's basis was $151,256 and the FMV of Peter's share was $175,000, then you would essentially take Peter's basis ($151.256) for his share, per Section 1.1015-4.