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15 February, 09:36

Bobby, a single man, owned a building with a fair market value of $2,000,000. Bobby's adjusted basis in the building was $1,000,000. This year, Bobby agreed to sell the building to his adult sone, Robby for $1,300,000. What is the amount of Bobby's taxable gift?

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  1. 15 February, 11:52
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    Bobby's taxable gift will amounts to $686,000

    Explanation:

    The bobby taxable gift amount is computed as:

    Discount = Fair market value - Selling Price

    where

    Fair market value is $2,000,000

    Selling Price is $1,300,000

    Putting the values above:

    = $2,000,000 - $1,300,000

    = $700,000

    This amount will be treated as a gift which will be eligible for the annual exclusion and therefore, creating the taxable gift amounts to $686,000 for the year.
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