Juliana purchased land in 2012 for $50,000. She gave the land to Tom, her brother, in 2015, when the fair market value was $70,000. No gift tax is paid on the transfer. Tom subsequently sells the property for $63,000.
a. What is Tom's basis in the land, and what is his realized gain or loss on the sale?
b. Assume instead that the land has a fair market value of $45,000 and that Tom sold the land for $43,000. Now what is Tom's basis in the land, and what is his realized gain or loss on the sale?