Diedrich v' Commr

1
Diedrich v. Commr
stock basis
50,000 fmv 1,000,000
gift
conditioned on
kids paying 60,000 gift tax
950,000 appreciation
parents
kids
Is this a gift to kids of 1 million followed
by kids payment of parents 60,000 gift tax
liability?
OR Is it a
net gift of 940,000?
2

• Diedrich Approach to Gain Computation
• Part-Sale/Part-Gift
• Part Sale
  Part Gift
• AR 60,000 (amt pd. by
  kids) 940,000 (remaining value)
• AB 50,000 (entire basis)
  0
• 10,000
  940,000
• taxable gain
  unrealized gain

950,000 total appreciation
3
Allocation of Basis
Approach 1011(b) Bargain sale to
charitable organization property total
basis 50,000 property total fmv
1,000,000 consideration paid by charity
60,000 (AR on part sale) AB for purposes of
determining gain from part sale is based upon
ratio AR from sale portion
(60,000) fmv of property (1,
000,000) Basis allocated to part sale 50,000
x .06 3,000
6
4

• Computing Gain With Allocation of Basis Approach
• Part Sale
  Part Gift
• 6
  94
• AR 60,000
  940,000
• AB 3,000
  47,000
• 57,000
  893,000
• taxable gain
  unrealized appreciation

950,000 total appreciation
94 of 50,000 total basis
5
Part Sale/ Part
Gift stock
basis 15,000 fmv 100,000
payment of gift tax
20,000
85,000 appreciation
parents
kids
6

• Diedrich Approach
  1011(b) Allocation Approach
• Part Sale Part Gift
  Part Sale Part Gift
  
  
• 20 80
  20
  80
• AR 20,000 80,000
  20,000 80,000
• less AB 15,000 ____0___
  3,000 12,000
• 5,000 80,000
  17,000
  68,000
• taxable gain unrealized
  taxable gain unrealized
• 
  gain
  gain

85,000 total appreciation
85,000 total appreciation
20 of 15,000 80 of 15,000
7
Part Sale/ Part
Gift stock
basis 25,000 fmv 100,000
payment of gift tax
20,000
75,000 appreciation
parents
kids
8

• Diedrich Approach
  1011(b) Allocation Approach
• Part Sale Part Gift
  Part Sale Part Gift
  
  
• 
  20
  80
• AR 20,000 80,000
  20,000 80,000
• less AB 25,000 ____0___
  5,000 20,000
• ( 5,000)
  80,000 15,000
  60,000
• tax loss unrealized
  taxable gain unrealized
• 
  gain
  gain

???
75,000 total appreciation
75,000 total appreciation
20 of 25,000 80 of 25,000