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.

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

a. $30,000

b. $60,000

c. Yes

Explanation:

When the property's fair market value is equal to or greater than the adjusted basis of the donor, then the basis is the adjusted basis of the donor at the time you got the gift.

So,

a. The donors basis for the land is

= $90,000 ×$40,000 ÷ ($40,000+$80,000)

= $30,000

b. The donors basis for the building is

= $90,000 × $80,000 ÷ ($40,000+$80,000)

= $60,000

c. - the basis of the land and the building is same because the fair market value of the property was more than the donor's adjusted basis

engine assembler, survey reasearcher, auditor