Increased by the amount of any passive activity losses allocable to suchĪs previously discussed, the donee's basis in a gifted asset is carried (A) The basis of such interest immediately before the transfer shall be (6) Special Rule for Gifts-In the case of a disposition of any interest To the donor's basi the adjusted basis now exceeds fair market value? What happens if after adding the suspended losses Furthermore, there is no gain, since theĭepending on the particular fact pattern, this could pose some The basis for determining loss is $90,000 Jones later sells the property for $95,000. Market value of th property at the date of the gift is $90,000. Has an adjusted basis of $100,000 at the date of the gift. Albert Jones acquires by gift income-producing property which If the property is sold for a price between the donor's basis and itsįair market value at the time of the gift, neither gain nor loss isĮxample. The basis for determining a loss is the fair market value of The basis for computing gain is the donor's basis at the time If the donor's basis in the property at the time of the gift exceeds itsįair market value, any gain or loss resulting from a subsequentĭisposition of the property by the donee is computed as follows |IRC Utilize any of John's suspended losses, but will instead realize aīenefit upon disposition of his interest in XYZ in the form o a smaller
$15,000), assuming no gift tax was required to be paid (due to theĪvailability of the unified credit by John).
Irc 469 plus#
Steve on January 1, Steve's basis will be $45,000 ($30,000 plus If John made a gift of the interest to his brother The fair market value of the partnership interest on On Januaryġ, 1993 his basis in the partnership was $30,000 with suspended passive Donor owned an interest in partnership XYZ. Of the gain or loss recognized upon the disposition of the activityĮxample. The benefit of those losses will instead be reflected in the computation Therefore, since the donor's suspended losses hav in essence beenĬapitalized, the donee will never be able to deduct those losse as such. The basis as adjusted cannot exceed the fair market value. 1015(d)(6) and generation skipping transfer tax |IRC Sec.Ģ654(a)(1) paid on the transfer attributable to the appreciation in theĪctivity. 469(j)(6) and the portion of any gift tax Of the activity to the donee will be the donor's basis plus any When an activity with suspended losses is transferred by gift, the basis On the other hand, if the basis of the donor in the property at the time of the gift goes beyond its fair market value, the basis for computing gain is the donor's basis at the time of the gift while the basis for computing loss is the fair market value at the time of the gift. Instead, the benefit of the losses can be seen in the computation of the gain or loss accepted upon the activity distribution. Hence, arising from the fact that the donor's suspended losses have actually been capitalized, the donee does not have the capability to deduct the losses as such. The basis as adjusted cannot go over the fair market value. When such undertaking is performed, the basis of the activity to the donee is the donor's basis, plus suspended losses and the component of any gift tax and generation-skipping transfer tax received on the transfer that can be attributed to the activity appreciation. (Estates & Trusts) by Svagna, MarcoĪbstract- An activity with suspended losses can be transferred by gift. March 1994 Gifts of passive activities may yield a surprising result.