Angelina gave a parcel of realty to Julie valued at $193,750 (Angelina purchased the property five...
Angelina gave a parcel of realty to Julie valued at $193,750
(Angelina purchased the property five years ago for $81,500).
Required:
- Compute the amount of the taxable gift on the transfer, if any
- Suppose several years later Julie sold the property for $200,950. What is the amount of her gain or loss, if any, on the sale?
Homework Answers
Answer (a):
For 2018, the annual exclusion which applies to each instance of gift is $15,000.
The taxable gift is = $193,750 - $15,000 = $178,750
However the liability of gift tax would depend on whether Angelina has balance in unified credit left. Unless Angelina has used her entire unified credit, there would not be any gift tax.
Answer (b):
Donors adjusted basis = $81,500
FMV at the time of gift = $193,750
The FMV at the time of gift is higher than the adjusted basis of donor and the sale value is higher than the FMV.
Julie's basis on the gift would be donor's adjusted basis plus part of the gift tax paid, if any, on it that is due to the net increase in value of the gift.
If no gift tax is paid,
Her gain = $200,950 - $81,500 = $119,450
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