[samantha09]

Hi guys! On Becker there’s a PDF link for 2017 AICPA Newly Released Questions. Specifically, on Page 45 there’s a SIM that has me extremely confused and making me doubt myself.
It’s labeled as Task 85550-01

1) For one of the solutions it mentions that if there is a gift tax paid, the basis is increased by the gift tax that is attributable to the appreciation in the value of the gift.

I’m super confused as to where this is even coming from as I have never seen this discussed in Becker or the Ninja notes in such detail as this problem takes it. I’ve read somewhere that the basis increases by the gift tax paid but I’ve never heard of the lengthy calculation they do in the solution relative to the appreciation.

For the solution column labeled “Year 2 Gift Amount subject to tax” they often say in the solution that this answer is the amount in excess of FMV.
I am confused by this as well as I thought the basis for gifts was rollover basis, and THEN in the event of selling it the gift rules apply where you consider FMV.

I would appreciate any help or clarification from any one who has gone over this sim and could provide some clarity. Thanks! (Sorry if this is a dumb question I might just be really tired or have completely missed the point on this topic)

AUD - NINJA in Training
BEC - 82
FAR - 83
REG - 81

 

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