Bargain Sales Example
Barbara Bennett sells to Medical Teams International property appraised at $100,000 for a price of $40,000. The cost basis of the property is $25,000.
She is entitled to a $60,000 deduction (the difference between the appraised value and the sale price). She will be taxed on $30,000 of the gain and avoid tax on $45,000 of the gain. This is because the $25,000 cost basis is prorated between the sale portion and the gift portion.
The sale portion is 40% of the total value of the property, so 40% of the cost basis or $10,000 becomes associated with the sale portion. The other 60% of the cost basis or $15,000 becomes associated with the gift portion.
If you have questions, please contact Linda Ranz at 425.284.1941 or firstname.lastname@example.org.
The information on this Web site does not constitute legal, financial, tax or estate planning advice and
should not be relied upon as a substitute for such advice. Medical Teams International encourages you to
seek the counsel of your own professional adviser as you determine how to proceed.