Investment property

[cpabsd]

Taxpayer and spouse bought land in 2005 for 160k.  During 2017, taxpayer gifts land to child and child's spouse.  FMV was $56k.  I believe there is no loss to be claimed as the child and child's spouse now have basis in land of $160k.  Is this correct?  

The property that was given had $68,000 on disallowed investment interest accumulated.  Since the taxpayer no longer owns the investment property, what happens to that previously disallowed investment interest?  Is it able to be deducted or continues to be carried forward?  

Any sites would be helpful.  Thank you in advance.  

[Lee B]

No cites, but to best of my knowledge:

1.  Unused Investment Interest continues to carry forward.

2.  When FMV at the the time of gifting is less than donor's basis, then the FMV is the donee's basis for the purpose of calculating a loss.

3   When calculating a gain, then the the donor's basis is used.

4.  If the donee sells the land for less than the donor's basis but more than the FMV, then there is no gain or loss.

   

[Lee B]

For tax purposes, the donor should have sold the land, harvested the capital loss even if it ends up being a carry forward, then given them the cash .

[jklcpa]

cbslee's first post about basis issues and gain or loss calculation is correct.

As far as the investment interest expense, it must still be carried forward and is subject to the usual limitation. In other words, it will be allowed when the taxpayer has sufficient investment income to allow it.  A gift of property is not considered a disposition since it does not result in a taxable transaction.