The value of the land is included in calculating basis regardless of whether there is a building on it. It could make a difference to the basis calculation if, for example, the property was worth less at the time you received the half interest than it was at the time your aunt purchased it because the modular home was worth less than the home that stood on the property when she purchased it.
The calculation of basis of gifted property depends in part on whether the property was worth more or less at the time you received it than it was at the time it was purchased.
See IRS Publication 551 for more information about calculating the basis of an asset. There is a section on property received as a gift.
To figure the basis of property you receive as a gift, you must know:
- its adjusted basis to the donor just before it was given to you
- its Fair Market Value at the time it was given to you, and
- any gift tax paid on it.
Your original basis in property is adjusted (increased or decreased) by certain events.
If you make improvements to the property, increase your basis.
If you take deductions for depreciation or casualty losses, reduce your basis.
If the FMV of the property is equal to or greater than the donor's adjusted basis, which is typically the case with real property, your basis is the donor's adjusted basis at the time you received the gift. In this situation, it would be what the donor paid for it . Increase your basis by all or part of any gift tax paid, depending on the date of the gift.
Example.
In 2022, you received a gift of property from your mother that had an FMV of $50,000. Her adjusted basis was $20,000. The amount of the gift for gift tax purposes was $34,000 ($50,000 minus the $16,000 annual exclusion). She paid a gift tax of $6,880. Your basis, $26,054, is figured as follows:
Fair market value $50,000
Minus: Adjusted basis 20,000
Net increase in value $30,000
Gift tax paid $6,880
Multiplied by ($30,000 ÷ $34,000) 0.88
Gift tax due to net increase in value $6,054
Adjusted basis of property to your mother 20,000
Your basis in the property $26,054
See also this TurboTax tips article about tracking your cost basis.
@roger571
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
