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We plan to give a gift of real property to a relative. Its value is lower than the original purchase price. Can we take a capital loss? If so, on what basis?

Forum|Forum|6 years ago
May 18, 2020
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Best answer by Anonymous_

"Can we take a capital loss?"

No, you cannot recognize a loss for federal income tax purposes on property gifted to individual(s).

A

Anonymous_Answer

Employee

"Can we take a capital loss?"

No, you cannot recognize a loss for federal income tax purposes on property gifted to individual(s).

Hal_Al

Employee

Your relative will need to know both your basis, in the property, and the market value, on the date of the gift.

The usual rule, for a gift, is that the recipient's basis is the giver's basis (what you paid for it). However, if the relative ends up selling it at a loss, he has to use the market value (on the date of the gift) as his basis, instead.

In the situation where the recipient's selling price is higher than the asset's value on the date of the gift but lower than the donor's cost basis, the recipient will have neither a gain nor a loss.

Reference: https://corporate.findlaw.com/finance/tax-basis-of-inherited-and-gifted-property.html