1031 Exchange and Gifted Property - Part One

(Listen Here 5:35 min)

Have you received property as a gift? 

Is the property valuable?

Do you think you might sell the property in the future a big profit? 

You may be wondering How is Gain Calculated When You Sell Property That You Received As a Gift:  AND HOW TO SAVE MONEY IN TAXES…

When you sell a property (such as a capital asset like land), the difference between the sale price and the seller’s basis in your property (which is usually its previous cost), is either a capital gain or a capital loss.

A capital gain occurs when your property sells for more than your basis. A capital loss occurs if your property sells for less than your basis.

            Sale Price
     -     Basis
___________________
           Gain (or loss)

What is Your Basis: 

When you are “gifted” a property, you take the property with a “carry over basis”.  That means that your basis is the same as the basis of the person who gave it to you. 

Another way of saying this is your “carry-over” basis (as the recipient or donee of the gifted property) is the same basis as your donor’s; the basis is simply “shifted over” when the gift is made to you.  [IRC Section 102 – Gifts and Inheritances of property are not included in the gross income of the donee at the time of the gift if donor was acting out of love, affection, admiration, respect, etc.]

About the Author:

Jeff Peterson (AKA: "Professor 1031") is a Qualified Intermediary and Serves as an Adjunct-Professor for the William Mitchell College of Law (Where He Teaches About Federal Income Tax). Jeff Works With People From All Over the USA to Save Money on Federal Capital Gains Taxes.

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