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Gain or Loss on Sale of Gifted Property

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Doug receives a duplex as a gift from his uncle. The uncle's basis for the duplex and land is $90,000. At the time of the gift, the land and building have FMVs of $40,000 and $80,000, respectively. No gift tax is paid by Doug's uncle at the time of the gift.

To determine gain, what is Doug's basis for the land?
To determine gain, what is Doug's basis for the building?
Will the basis of the land and building be the same as in Parts a and b for purposes of determining a loss?

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Solution Summary

Doug receives a duplex as a gift from his uncle. The uncle's basis for the duplex and land is $90,000. At the time of the gift, the land and building have FMVs of $40,000 and $80,000, respectively. No gift tax is paid by Doug's uncle at the time of the gift.

To determine gain, what is Doug's basis for the land?
To determine gain, what is Doug's basis for the building?
Will the basis of the land and building be the same as in Parts a and b for purposes of determining a loss?

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IRC Section 1015(a) states that "If the property was acquired by gift after December 31, 1920, the basis shall be the same as it would be in the hands of the donor or the last preceding owner by whom it was not acquired by gift, except that if such basis (adjusted for the period before the date of the gift as provided in section 1016) is greater than the fair market value of the ...

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