Reg. sec. 1.1015-4
• Transferee’s basis for part sale/part gift is
the greater of
– amount paid by the transferee for property
OR
– the transferor’s adjusted basis for property at
the time of transfer.
Example 1
• Property with FMV of $50; G’s basis is $5 and
G’s debt, which H will pay, is $1.
• The rule tells us that H’s basis will be $5. Why?
• H assumes debt and has $1 basis in “sale”
portion; $1 of G’s basis allocated to sale portion.
(Thus, G will have no gain on the sale portion.)
• G has $4 of basis left; H takes her $4 basis for
gift portion.
• H has total basis of $5 ($1 plus $4), same as
G’s, which is greater than amount paid.
Example 2
• Property with FMV of $50; G’s basis is $5;
G’s debt, which H will pay, is $4.
• The rule tell us H’s basis will be $5. Why?
• H assumes debt and has $4 basis in “sale”
portion; $4 of G’s basis allocated to sale
portion. (Thus G will have no gain on the sale
portion.)
• G has $1 basis left; H takes her $1 basis for
gift potion.
• H has total basis of $5 ($4 plus $1), same as
G’s basis, which is greater than what H paid.
Example 3
• Property with FMV of $50; G’s basis is $5; G’s
debt, which H will pay, is $25.
• The rule tells us that H’s basis will be $25.
Why?
• H assumes debt and has $25 basis in “sale”
portion; all of G’s basis allocated to sale portion.
(G will have $20 of gain on the sale portion.)
• No basis left to be allocated to gift portion.
• H has total basis of $25 ($25 plus $0), the
amount he paid, which is greater than G’s basis.