Question

Barak received a gift of income producing property with an adjusted basis of $50,000 to the...

Barak received a gift of income producing property with an adjusted basis of $50,000 to the donor and fair market value of $40,000 at the date of the gift. Barak later sold the property for $43,000. What is Barak’s recognized gain or loss on the sale?

  1. $3,000 gain

  2. $7,000 loss

  3. $3,000 loss

  4. 0

  5. None of the above

Homework Answers

Answer #1

SOLUTION:-

As per Guidelines, We need to first compare Selling Price with Adjusted basis which owner had in the property

that is Compare 43000 with 50000

Now since we have a loss,

we need to again compare it with FMV, which was then Adjusted basis at time of Gift

comparing 43000 with 40000

we have a gain

Simply saying

Loss will only be recognised if in given condition it falls below FMV

and Gain will only be recognised if it reaches above Adjusted Basis

As per IRS under such conditions Barak will not record any gain or loss on sale transaction and

NII Gain or Loss will be rcognised

So, her the answer is D = 0

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