Sally Robbins gifted depreciable business equipment to her brother, John. Which of the following statements with respect to that gift is NOT correct?

a. Sally reports the gift on Form 709 at its current fair market value.

b. John's basis in the property is the same as Sally's adjusted basis at the time of the gift.

c. John must report any gain on his sale of the equipment as Section 1245 recapture (ordinary income) to the extent of the depreciation claimed by Sally, whether or not he uses the property for business purposes.

d. Sally must report gain on her Form 1040 equal to the difference between the value and adjusted basis of the property, or the total depreciation she claimed, whichever is less.

Question

Summer Park

Business

1 January, 13:13

Sally Robbins gifted depreciable business equipment to her brother, John. Which of the following statements with respect to that gift is NOT correct?

a. Sally reports the gift on Form 709 at its current fair market value.

b. John's basis in the property is the same as Sally's adjusted basis at the time of the gift.

c. John must report any gain on his sale of the equipment as Section 1245 recapture (ordinary income) to the extent of the depreciation claimed by Sally, whether or not he uses the property for business purposes.

d. Sally must report gain on her Form 1040 equal to the difference between the value and adjusted basis of the property, or the total depreciation she claimed, whichever is less.

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Answers (1)

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Isaias Greene · Answer 1

d. Sally must report gain on her Form 1040 equal to the difference between the value and adjusted basis of the property, or the total depreciation she claimed, whichever is less.

Explanation:

Sally gifts depreciable business equipment to her brother "J". Therefore, Sally should not report for any gain in Form 1040, and it is not appropriate to record this gift.

Hence, Sally must report her gain on Form 1040, which is equal to the difference between the value and adjusted basis of the property or the total depreciation she claimed whichever is less, this is not a relevant statement.