Basis question and

[PIGLEE]

Just trying to see if my thinking is correct. This is the first time I have done a return where a Form 709 was filed.

Mother transferred home to children in 2009. In 2009 a From 709 was filed, showing value at that time of 173,000, and a basis of 195,000 (if was the only gift made during her life). In 2012 home was sold for 191,000, with closing costs of 5,300.

I know the sales price, but am I able to use the 195,000 as a basis? This seems to simple, am I missing something?

[ddoshan]

Just winging it a little here but wouldn't the basis of the home be what mom paid for it originally. In a gift situation isn't the basis the lesser of adjusted basis and or the FMV at the time of the gift. Then, I believe, it also depends on whether or not the property is sold at a gain or loss.

[Roland Slugg]

The basis for figuring gain is the donor's basis, but the basis for figuring loss is the asset's FMV at the date of the gift ... if less. (Code §1015(a)) If you use the basis for computing gain and get a loss, and use the basis for computing loss and get a gain, there is neither gain nor loss on the sale. (Regs §1.1015-1(a)(2)) Based on the numbers furnished in the OP, this appears to be the case. If the house remained the residence of the mother/donor, or one of her children/donees, then the loss would not be deductible anyway.

If the house was rental property, though, in the hands of the donees, then there would be depreciation for about three years ... probably in the range of around $15k, depending on how much basis was allocated to the land ... so there might be a gain after all. If this is the case, all the gain would be Unrecaptured §1250 Gain.

[PIGLEE]

Rowland, thank you, that is great information, just what I was looking for. It appears that you copied that from a publication, do you remember what publication that is from? I like to back up my decisions with a reference.

Thanks again

Jan

[Roland Slugg]

No, Jan, I didn't copy that information form any publication. I have many odd facts stashed away in the deep crevices of my old brain, and that happens to be one of them. I always thought it was interesting that when there is an asset with one basis for figuring gain and one for figuring loss, that it was possible to use the gain basis and get a loss and use the loss basis and get a gain. I did, however, look up the Code/Regs references in a tax handbook I keep nearby.

Among the other odd things I have memorized and tucked away is something your screen name always reminds me of whenever I see it:

Piglet sidled up to Pooh from behind.
"Pooh!" he whispered.
"Yes, Piglet?"
"Nothing," said Piglet, taking Pooh's paw.
"I just wanted to be sure of you."

From one of A. A. Milne's Winnie the Pooh stories ... "The House of Pooh Corner," I believe.