Question

Brody and tanya recently sold some land they owned for $200,000. they received the land five years ago as a wedding gift from brody's aunt jeanette. aunt jeanette purchased the land many years ago when the property was worth $20,000. at the date of the gift, the property was worth $100,000 and aunt jeanette paid $40,000 in gift tax. what is the long term capital gain on the sale of the property

Answer 1

When calculating the long term capital gain on the sale of the property, it is important to make sure adjustments are made from the original date of purchase and when the land was gifted. 

To solve:
Adjusted amount = Original purchase amount + (gift tax X difference in what the land was worth/original land worth amount)
Adjusted amount = $20,000 + ($40,000 X $80,000/$100,000)
Adjusted amount = $52,000

Land owned for $200,000
Adjust amount is $52,000

$200,000 - $52,000 = $148,000

The long-term capital gain on the property is $148,000.