TurboTax HelpTurboTax HelpIntuit

How do I adjust the basis for related party and gift equity in Sale of Business Property?

SOLVEDby TurboTax50Updated December 15, 2021

Note: Special rules apply to sales to a related party and gifting of equity.

No loss deduction is allowed to a taxpayer when the transactions involve a related party or a gift of equity. This requires some math when entering the sale of business or rental property.

When entering either of these transactions into the Sales of Business Property section, you’ll have to make manual adjustments to the basis to prevent the loss from showing. Keep these figures on hand as back-up for this adjustment.

Where to enter your Sale of Business Property:

  1. Under the Federal menu, select Wages & Income
  2. Scroll down to Other Business Situations and select Start/Revisit next to Sale of Business Property
  3. On the Any Other Property Sales? screen, select the appropriate boxes and then Continue
  4. On the Sales of Business or Rental Property screen, select No
  5. On the Sales of Other Business Property screen, select Yes
  6. Select the type of sale that describes your property and Continue
  7. Fill out the required info and continue through the next screens

Example: You purchased the property for $250,000. The fair market value (FMV) is now $300,000. You sold it to a related party or gifted equity with a sales price of $200,000. The program as it stands would show the loss. You must decrease the basis to equal the sales price in order to not show the loss. The new owner's basis is still $200,000, regardless of how you entered your sale in the program.

Was this helpful?

You must sign in to vote, reply, or post
TurboTax Desktop BasicTurboTax Desktop BusinessTurboTax Desktop DeluxeTurboTax Desktop Home and BusinessTurboTax Desktop PremierTurboTax Live BasicTurboTax Live DeluxeTurboTax Live Full Service BasicTurboTax Live Full Service Complex IncomeTurboTax Live Full Service Complex Self-EmployedTurboTax Live Full Service DeluxeTurboTax Live Full Service PremierTurboTax Live Full Service Self-employedTurboTax Live PremierTurboTax Live Self-employedTurboTax Mobile Apps DeluxeTurboTax Mobile Apps FreeTurboTax Mobile Apps PremierTurboTax Mobile Apps Self-employedTurboTax Online DeluxeTurboTax Online FreeTurboTax Online PremierTurboTax Online Self-employed
Dynamic AdsDynamic Ads