Question

On July 31, 2020, Jessica-Anne received land and a building from Janice as a gift. Janice's adjusted basis and the fair market value at the date of the gift are as follows:

Asset Adjusted Basis FMV Land $200,000 $260,000 Building 640,000 700,000

Janice paid gift tax of $60,000 on the transfer.

Round any division to four decimal places. Round your final answers to the nearest dollar.

a. Determine Jessica-Anne's adjusted basis for the land and building.

Jessica-Anne's total basis for the assets received from Janice is $

Jessica-Anne's adjusted basis for the land is $

Jessica-Anne's adjusted basis for the building is $

Answer 1

Answer :-

A :-

1 ). Jessica-Anne's total basis for the assets received from Janice =

   = Jessica-Anne's adjusted basis for the land + Jessica-Anne's adjusted basis for the building =

  = $213,846 + $645,143 = $858,989

Therefore, Jessica-Anne's total basis for the assets received from Janice = $858,989

2 ). Jessica-Anne's adjusted basis for the land =

Adjusted Basis for land formula = Adjusted basis + [( Appreciation / Fair market value ) x Gift tax]

Appreciation = Fair market value - Adjusted basis

so, we have

Adjusted Basis = $200,000

Fair market value = $260,000

and , Gift tax = $60,000

Step 1 = Appreciation = $260,000 - $200,000

= $60,000

Step 2 = Put all the values in the formula

Adjusted Basis for land =  $200,000 + [ ( $60,000 / $260,000 ) x $60,000]

= $200,000 + [0.2307 x $60,000]

= $200,000 + $13,846.15

= $213,846.15

therefore, Jessica-Anne's adjusted basis for the land = $213846

3) . Jessica-Anne's adjusted basis for the building =

Adjusted Basis for building formula = Adjusted basis + [( Appreciation / Fair market value ) x Gift tax]

Appreciation = Fair market value - Adjusted basis

so, we have

Adjusted Basis = $640,000

Fair market value = $700,000

and , Gift tax = $60,000

Step 1 = Appreciation = $700,000 - $640,000

= $60,000

Step 2 = Put all the values in the formula

Adjusted Basis for Building =  $640,000 + [ ( $60,000 / $700,000 ) x $60,000]

= $640,000 + [0.0857 x $60,000]

= $640,000 + $ 5,142.85

= $645,142.85

Therefore , Jessica-Anne's adjusted basis for the building = $645,143