TAX 9863 Lecture Notes - Lecture 26: Gift Tax, Blackacre, Capital Expenditure
Document Summary
Gift subject to liability that includes donor"s adjusted basis. Yes because donor is relieved of obligation to pay liabilities w/ donee assuming liabilities. No different than donee giving additional cash consideration in transaction and donor paying off liability before actually gifting property= amount realized by donor. Donor would recognize gain if liability is greater than gifted property"s adjusted basis bc gain is equal to amount realized- adjusted basis. Donee would have basis in gift property received as greater amount paid by donee or donor"s adjusted basis for the property followed by increase in amt of gift taxes paid. Only way for donor to avoid taxable gain on excess liability over adjusted basis is through decedent"s estate. Taxable gains of liabilities over adjusted basis in gift properties apply not only to preexisting liabilities, but those created from gift transaction themselves. Arises in net gift tax transaction: when donee pays gift tax liability that donor is supposed to pay.
