Sale of a Gift

[palbert1]

My wife and I gifted a rental condo to our son who also operated it as a rental.

The market value of the condo was reported as $258,0000 with $129,000 reported on each of our separate form 709 Gift Tax Returns. The computed tax for each of our returns was $43,606. Our lifetime gift credit was reduced by that amount for each of us. 

The question is: IF OUR SON SELLS THE CONDO IN 2024 FOR $238,000, DOES HE HAVE A REPORTABLE LOSS OF $20,000 FOR HIS TAX PURPOSES?

[tagteam]

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@palbert1 wrote:

IF OUR SON SELLS THE CONDO IN 2024 FOR $238,000, DOES HE HAVE A REPORTABLE LOSS OF $20,000 FOR HIS TAX PURPOSES?

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Probably not because your son, as a result of gift, is most likely going to take your adjusted basis for tax purposes when he sells the property (that obviously includes your accumulated depreciation deductions since the condo was a rental). 

What did you report as your basis on your 709?

[palbert1]

Hello and Thank You for your response yesterday.

$70,388 was the adjusted basis with depreciation taken as reported on our Form 709.

[tagteam · Accepted solution]

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@palbert1 wrote:

$70,388 was the adjusted basis with depreciation taken as reported on our Form 709.

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Then your son would use that figure as his basis (it is a carryover due to the gift).

In effect, he steps into your shoes in terms of your adjusted basis (with the same amount of accumulated depreciation and recovery period).

[palbert1]

That's what he did.  Thank you for your help.  We really appreciate it!

Paul Albert