Question

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

(1) Sally reports the gift on form 709 at its current fair market value.

(2) John’s basis in the property is the same as Sally’s adjusted basis at the time of the gift.

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

(4) 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, which ever is less.

Answer 1

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

statement d) sally must report gain on her form 1040 equal to the difference between the value and adjusted basis of the property, or total depreciation she claimed, whichever is less." is not correct because in case of gift, gift tax provisions are applicable and all statements in a,b & c are correct except d.