@Anonymous_ wrote:
Depreciation is not gifted; the adjusted basis is used for the depreciable basis going forward with respect to the donee.
Anything to support that?
Regulation §1.1015-1 says "the basis of the property for the purpose of determining gain is the same as it would be in the hands of the donor or the last preceding owner by whom it was not acquired by gift"
To me, the Basis for determining gain for the donor would not be $35,000; it would be $50,000 Unadjusted Basis with $15,000 of depreciation. So the recipient would receive the "same".
I can't find it now, but I thought I read something something else that semi-supported that the depreciation does go along with the gift (maybe something pre-MACRS or a related circumstance; it is was not directly applicable, but did semi-support it).
And logically, in my opinion it should. For example, a taxpayer buys a $10,000 widget (§1245 property) and uses 100% bonus depreciation. Then 366 days later, he sells it. All gain would be recaptured at ordinary rates. If the depreciation is not gifted, he could then gift it to his son (who would receive the holding period, and assuming this is not a step-transaction where the son gives the money back to the dad) then the son would only pay long-term capital gain rates. To me, that seems illogical (tax laws are generally logical, although there are exceptions and loopholes).
