During the current year, Stan sells a tract of land for $ 800 comma 000. The property was received as a gift from Maxine on March 10, 1995, when the property had a $ 310 comma 000 FMV. The taxable gift was $ 300 comma 000 because the annual exclusion was $ 10 comma 000 in 1995. Maxine purchased the property on April 12, 1980, for $ 110 comma 000. At the time of the gift, Maxine paid a gift tax of $ 12 comma 000. In order to sell the property, Stan paid a sales commission of $ 16 comma 000.

Question

August Vang

Business

7 December, 10:11

During the current year, Stan sells a tract of land for $ 800 comma 000. The property was received as a gift from Maxine on March 10, 1995, when the property had a $ 310 comma 000 FMV. The taxable gift was $ 300 comma 000 because the annual exclusion was $ 10 comma 000 in 1995. Maxine purchased the property on April 12, 1980, for $ 110 comma 000. At the time of the gift, Maxine paid a gift tax of $ 12 comma 000. In order to sell the property, Stan paid a sales commission of $ 16 comma 000.

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Answers (1)

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Wendy Conrad · Answer 1

A. $8,000

B. $674,000

Explanation:

Amount realized: $ 800,000 - $16,000

= $784,000

$784,000 - $110,000 = $674,000

$674,000 - $8000 = $666,000

Therefore:

Gift tax base * (FMV at time of gift - donor's basis) / amount of the gift)

=$12,000 * ($300,000 - $100,000) / $300,000)

=$12,000 * ($200,000) / $300,000

=$400,000,000/$300,000

=$ 8000

b.

Amount realized $784,000 - $110,000 = $674,000

My answer to Part a change, if at all, if the FMV of the gift property was $85,000 as of the date of the gift is because $85,000 - 100,000 <0 meaning $15,000<0