Basis of Inherited Property

[taxmanrick]

This one should be easy....

Mom, sole owner of a house she lived in, passes away. Her only two children, daughters Abi and Zel, inherit the property. Stepped up basis of the property at death is $150,000. Zel doesn't want anything to do with the house, so she accepts $15,000 in cash from Abi to "buy" Zel's share. The deed is recorded with Abi as the sole owner. At the time the deed is recorded, what is Abi's basis?

a) $165,000

b) $150,000

c) $90,000

d) $75,000

e) something else

Thanks!

--Rickc

 

[Possi]

I'd say she inherited half, or 75k.

Purchased $15k.$

I say $90k. 

Let's see if I'm right. 

[DANRVAN]

$150,000.  The transfer from Zel is a part purchase and part gift of Zel's basis of $75,000 ($15,000 + $60,000).

[Possi]

2 minutes ago, DANRVAN said:

$150,000.  The transfer from Zel is a part purchase and part gift of Zel's basis of $75,000 ($15,000 + $60,000).

OHHHHHHH.... hmmmm. Good. 

[taxmanrick]

Thanks, folks! I see both Possi's and Danrvan's suggestions as reasonable. Of course, I like Danrvan's better (sorry Possi!) Is there anyone else out there who would like to weigh in?

Thank you.

--Rickc

[Abby Normal]

Losses on sales to related parties are not deductible but are added to the basis of the buyer, so 75k + 15k price + 60k loss = 150k (ta da!)

On a related note, who would sell a 75k asset for 15k? I guess they're either well enough off and/or really love their sibling.

[taxmanrick]

Thank you, Abby.

$150,000 is what I will use to figure gain/loss on the sale.

--Rickc

[Pacun]

So, Zel's has to file a 709 form?

[Max W]

On 7/1/2020 at 1:16 PM, Abby Normal said:

Losses on sales to related parties are not deductible but are added to the basis of the buyer, so 75k + 15k price + 60k loss = 150k (ta da!)

On a related note, who would sell a 75k asset for 15k? I guess they're either well enough off and/or really love their sibling.

They may have thought they could take the $60,000 loss.

[GLJEANNE]

On 7/1/2020 at 3:16 PM, Abby Normal said:

Losses on sales to related parties are not deductible but are added to the basis of the buyer, so 75k + 15k price + 60k loss = 150k (ta da!)

On a related note, who would sell a 75k asset for 15k? I guess they're either well enough off and/or really love their sibling.

Oh they may really hate the sister, and worth it to get rid of her.