Hello - Can someone help me understand the transferor's basis when he makes part gift/part sale on sibling real estate buyout?
Reg 1.1015-4.
(a) General rule. Where a transfer of property is in part a sale and in part a gift, the unadjusted basis of the property in the hands of the transferee is the sum of—
(1) Whichever of the following is the greater:
(i) The amount paid by the transferee for the property, or
(ii) The transferor's adjusted basis for the property at the time of the transfer + any gift tax paid by the transferor
Example 3.
If A transfers property to his son for $30,000, and such property at the time of transfer has an adjusted basis in A's hands of $60,000 (and a fair market value of $90,000), the unadjusted basis of such property in the hands of the son is $60,000.
What should A report for income tax purposes?
A $60k loss for the difference between the FMV $90 and the $30k Paid by His Son
A $30k gift for the difference between A's $60k Adjusted Basis and the $30k Paid by His Son
