Video: Gifted Property Basis

Dive into the intricacies of tax implications for gifted property with Nick Palazzolo, CPA, as he clarifies the basis determination in various scenarios of property sales between relatives. Watch as he skillfully breaks down the different outcomes when property is sold above, between, or below the original owner’s basis and purchase price. Using clear examples, Nick illustrates how to calculate gains or losses, discusses capital gains tax considerations, and details the treatment of investment versus personal use property losses. With his engaging teaching style, Nick ensures this concept is crystal clear, setting the foundation for an upcoming exploration into gift tax rules.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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All right, I know we have a whole lesson on gift tax, but this is kind of related. I mean, it's related parties, gifts, and generally you're gifting to people, you know, to related parties. That's something we'll see much more in depth with gift tax. And just this is helpful as well. It's here for a reason. So for property transactions, it's important to understand the concept of basis. I mean, for everything, it's important to understand the concept of basis, which is essentially the initial value of an asset for tax purposes. When a property is transferred between relatives, the tax implication will vary depending on the selling price relative to the original owner's basis and purchase price. So kind of talking like those charts where we saw choose the number in the middle for the basis. Now, when property is sold higher than the relative's basis, again, kind of just a recap, we're dealing with this, we will see this with gift tax. Again, when the property is sold for a price higher than the relative's basis, the gain on the sale can be calculated by subtracting the relative's basis from the selling price. Now, this gain is typically subject to capital gains tax, which depends on the holding period and the seller's tax bracket. Now, how do we calculate that? Gain on sale equals selling price minus relative's basis. Nothing too shocking, nothing too groundbreaking there. The property sold between the relative's basis and the relative's lower purchase price. In this scenario, there's no gain or loss. So this is what we saw earlier. Just want to feel this in your mind, want to make sure you understand. As the selling price falls between the relative's basis and their lower purchase price, the transaction is considered

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Property tax transactions

Module: 3 Concepts, 34 Videos

Taxable and Nontaxable Dispositions Overview

1:43

Introduction to Taxable and Nontaxable Dispositions

3:21

Gain Recognized on Property Received as Compensation

2:31

Like-Kind Exchanges