3. Federal Taxation of Property Transactions

Question 1

Stock Received as Compensation

Answer 1

Basis is the FMV at time of transfer.

Question 2

Property given as a gift AND inheritance

Answer 2

Allocate basis based on how much was given as a gift and inheritance.
If half of the properties interest was given as a gift, that basis would be half of the carryover basis of the original holder.
If half of the property is later inherited due to death, half of the FMV of the property is allocated to the basis. Therefore the basis consists of gift and inheritance allocations

Question 3

G/L on Property Inherited

Answer 3

Always classified as a long term capital G/L.
Use the FMV at date of death OR if alternate valuation date is used, use that

Question 4

Related Party Sales

Answer 4

When stock is sold to a related party, and then that related parry sells to a third party, any loss from the initial sale is combined with the third party sale to determine the total G/L on the transaction. Gain recognized is reduced by previous disallowed loss
For related parties basis, it would be what it cost to acquire plus the disallowed loss from the original owner.

Question 5

Capital Assets under 1221

Answer 5

These include assets other than inventory, A/R or T/R, business assets, copyrights or govt publications.
Personal residences and invested stock qualifies

Question 6

Dual basis for Gifts

Answer 6

If gifted asset is sold for a gain, then the carryover basis is used.
If sold at a loss, then FMV at time of gift is used
If selling price is below the basis but above the FMV, then no G/L is used.