Discussion:Land Ownership, Basis and Gain Treatment
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Discussion Forum Index --> Tax Questions --> Land Ownership, Basis and Gain Treatment
| 19 June 2007 | |
| I have a client who recently sold some land that he acquired through a gift (had been in the family for generations) in 1994 with a basis of 20K per County Appraisal records, but in reality was 80-90K per the client, but I don't believe that amount involved a survey. The client had borrowed $42K against the land, and on 3/01/07 received $50 from a buyer to pay off the $42K plus received the additional $8K. Title had passed to the buyer. My client soon after found out that there is an interested party that is willing to pay him $200K for the same land. The previous buyer is happy to receive his $50K back and allow the sale to occur. Is there any precedent that would allow the 3/1/07 'sale' to be deemed a temporary loan instead of a sale? If so, would the client use the original $20K as the basis or is there a better determination of basis? | |
| 19 June 2007 | |
| I don't believe you have proved that the 20K is even the initial basis. | |
| 19 June 2007 | |
| Can it be a loan when title passed to the buyer? The buyer knows it can be sold for 200k and he will be happy to get back his 50k? Wow! What was the FMV and donor's basis at the time of the gift regarding the gain on the original sale? | |
| 19 June 2007 | |
| What does a County appraisal have to do with the gifted basis? What was the gifters basis? That's what you need to know. Not that it matters since the property was sold, recorded, and transfered. Have your client buy it back for 50K. Then that is the new basis.
Sounds like you want the sale rescinded to get long term capital gain treatment on the larger 200k sale price? Doubt that is possible. | |
| 20 June 2007 | |
| I am with Soloman....how is initial buyer "happy to receive his $50K back" and allow a sale when he/she could presumably sell it for $200K? I wish I was that wealthy/altruistic! | |
| 20 June 2007 | |
| Client has no proof of the gifter's basis other than appraisal records at the time. So, that's part of the issue here. The buyer that is happy to receive the $50K back and call it a loan is a friend who was helping out in financial difficulties. And, yes 'Gosix', we are trying to qualify for LTCG treatment on the $200K, but still not sure what basis to use and if the sale in March may be deemed a loan. | |
| 21 June 2007 | |
| Sounds like your Client has no basis at all. Countys do not do apprasials but assessments. Assessments are usually less than true market value. Gifts should belower of cost or FMV at time of gift. No answers for you. | |
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