Basis valuation for gifted real estate

Asked over 4 years ago - Boston, MA

If A gifts a house to B(father to son) how is the new(B's) basis calculated. Is it the FMV minus A's adjusted basis? I've been told that a $1.00 consideration for the transfer will make B's basis $1.00! Must the gift be recorded as a $1.00 consideration(as I've been told) or is there a way to record it strictly as a gift so the FMV can be used.Please help.Thanks

Attorney answers (2)

  1. James S. Tupitza

    Contributor Level 18

    Answered . I think you may have the similar question which I just answered. This one is simple. Basis has nothing to do with what is on the deed when a gift in involved. The new base is the same as your adjusted basis, ie: Your purchase price + capital improvements - accumulated depreciation.


    The response given is not intended to create, nor does it create an ongoing duty to respond to questions. The response does not form an attorney-client relationship, nor is it intended to be anything other than the educated opinion of the author. It should not be relied upon as legal advice. The response given is based upon the limited facts provided by the person asking the question. To the extent additional or different facts exist, the response might possibly change. Attorney is licensed to practice law only in the Commonwealth of Pennsylvania. Responses are based solely on Pennsylvania law unless stated otherwise.

  2. Jeffrey L Crown

    Pro

    Contributor Level 12

    Answered . Under Section 1015 of the Internal Revenue Code, the basis of an asset received by gift is the donor's basis in the asset or the basis in the hands of the last preceding owner from whom the asset was not acquired by gift. Basis is increased (but not above the fair market value of the gift) by any gift tax actually paid.

    However, for purposes of computing loss in the donee's hands, the basis is the lesser of the donor's basis or the fair market value at the time of the gift.


    i hope that this makes sense to you.

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