R2 Property Taxation

What is the reportable gain or loss on sale of a gifted asset?

General rule: the donee’s basis is the donor’s adjusted basis (rollover rule)

Exception occurs when the donee’s adjusted basis is greater than the fair market value of the asset at date of transfer

Gain or loss is determined in three ways:

1. If the adjusted basis < sale of the gift, then the gain is based on the adjusted basis

2. If the FMV > sale of the gift, then the loss is based on the FMV

3. If the adjusted basis < sale of the gift AND the FMV > sale of the gift, then there is no gain or loss

If the executor of a decedent’s estate elects the alternate valuation date and none of the property is included in the gross estate has been sold or distributed, the estate assets must be valued as of how many months after the decedent’s death?

6 months

What is the de minimis safe harbor rule?

• If a company does not have an applicable financial statement, then it can only expense items costing up to $2,500 each

• If a company does have an applicable financial statement, then it can expense items costing up to $5,000 each

What is the reportable gain or loss on sale of PP&E that has been transferred from personal to business use?

• Similar to treatment of sale of gifted assets

• Basis will be the lesser of the original cost basis adjusted for any improvements or the fair market value on date of conversion

• Gain based on adjusted basis if sale > adjusted basis

• Loss based on FMV if FMV < sale

What is the reportable gain or loss on sale of an asset inherited?

• Step-up/down rule: asset must be marked up/down to FMV at date of death and the sale/disposal is ALWAYS considered long-term, despite length of ownership

• If alternate valuation date is taken, the basis of the asset is the FMV at the earlier of the distribution date of the asset or six months after death