Joe$$s friend John purchased an automobile for $$60,000$ from a dealer for his personal use and has not taken tax depreciation on that automobile. Two years later, John gives the automobile to Joe for $$20,000$ at a time when the automobile is worth $$40,000($sells it for an amount that is $$20,000$ below the fair market value of the automobile$).$ John paid no gift tax on the transfer.

a$.$ What is Joe$$s basis in the automobile and how do you calculate it$?$ Assume Joe will sell the automobile for a gain in your determination of basis.

b$.$ What Treasury Regulation supports your answer? To find the regulation, you may wish to search for $$part gift part sale.$$