During the current year, Lance sells a tract of land for $800,000 that he had received from Gwen on March 10, 1995, when the land had a FMV of $310,000. The taxable gift was $300,000 because the annual exclusion was $10,000 in 1995. Gwen purchased the land on April 12, 1980, for $110,000. On the date of the gift, Gwen paid a gift tax of $12,000. Lance paid a sales commission to his broker of $16,000 to sell the land.
a) What is Lance's realized gain on the sale?
b) How would your answer to part
(a) change, if at all, if the FMV of the gift property were $85,000 on the date of the gift?
Can you show how you solved it so I can gain an understanding?