Corduroy Frog Posted December 19, 2021 Report Share Posted December 19, 2021 20 years ago Paul purchased Land for $100,000. In 2021, he sold land to his brother for $150,000. However, the FMV appraised at $190,000. If it has any bearing on the transaction, Paul has NOT made a gift to his brother in 2021 of $15,000 or any other amount. Neither Paul nor his brother are married. Question: 1. How much long-term capital gain must Paul report from this transaction? 2. What is the basis in the land for his brother after the transaction? Quote Link to comment Share on other sites More sharing options...
Lee B Posted December 19, 2021 Report Share Posted December 19, 2021 Good Summary article: https://ruraltax.org/files-ou/Related_Parties.pdf Quote Link to comment Share on other sites More sharing options...
jklcpa Posted December 19, 2021 Report Share Posted December 19, 2021 It's a bargain sale to related party and is part cap gain sale and part gift. The cap gain portion is $50K (selling price minus basis), and the gift is $40K (FMV minus selling price). For basis in the hands of the transferee, please see sec 1.1015-4. The link also has helpful examples: https://www.law.cornell.edu/cfr/text/26/1.1015-4 Disclaimer - answers applies only to this scenario and would differ depending on the seller/transferor's type of entity, the type of property being sold, depreciated or not, and whether sold at gain or loss. 1 Quote Link to comment Share on other sites More sharing options...
Corduroy Frog Posted December 20, 2021 Author Report Share Posted December 20, 2021 Great responses and articles. Thank you very much. Quote Link to comment Share on other sites More sharing options...
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