Marc-TaxMan
Level 8

IRS considers it 2 transactions: part sale (with proportional basis); part gift with carryover basis.

Assuming full value is $320,000 IRS considers approx 75% to be a sale (of 75% of their basis) and 25% to be a gift.

The 75% purchased gets new basis to purchaser; the 25% gift gets carryover basis to donee.

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