Discussion:Tax cost basis
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Discussion Forum Index --> Tax Questions --> Tax cost basis
| 5 January 2006 | |
| taxpayer "gifted" property to a family trust. Basis of property to trust is same as in taxpayer's hands + any gift tax PAID.
Q---is the gift tax due but not physically paid in since the unified credit was used to offset the tax due considered Tax Paid. The unified credit is less after the offset than before, constituting a payment? | |
| 5 January 2006 | |
| Taxes offset by the unified credit are not taxes paid.
I sincerely doubt the tax law is meant to be so generous that TP could both use the credit and increase the property's basis. | |
| 7 January 2006 | |
| I practice in this area and agree with Rlw. As with most tax basis issues, usually only "cash out of pocket" gives you additional basis with the exception of a valid loan, which would be future "cash out of pocket." However, you can add capitlized items to the property's basis, such as capitalized taxes, capital improvements, etc. Be careful with this one: if the trust did not pay for the improvements, it may not get the additional basis plus you may have additional "gifts" of the property's improvement. If the gifts, i.e. capital improvements or property taxes, were reported as gifts or were annual exclusion gifts, the trust would be allowed to add to basis assuming not previously deducted as depreciation or tax expense. (PS-I meant this to be a short answer. Hope its helpful, anyway.) | |
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