Journal Issue:
Agricultural Law Digest: Volume 24, Issue 12

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Indebtedness in Excess of Basis: A Problem Even for Gifts
( 2013-06-07) Harl, Neil ; Iowa State University Digital Repository

It is widely understood that indebtedness in excess of income tax basis is a problem in sales or exchanges of property.1 For example, taxable gain is recognized to the extent the sum of liabilities assumed or taken subject to by a corporation exceeds the aggregate basis of assets transferred in a tax-free exchange on formation of the corporation.2 That result can arise in connection with an installment sale,3 or about any other “sale or exchange” in addition to an otherwise tax-free exchange to a corporation, as noted.4 Transfers involving partnerships are subject to a somewhat different set of rules.5 What is less widely known is that the same result can occur with a gift.6

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Cases, Regulations and Statutes
( 2013-06-07) Achenbach, Robert ; Iowa State University Digital Repository
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