Question: How to determine property income when an individual sells commercial real estate received as a gift? Is it possible to use the inventory valuation on the date of the gift agreement as the acquisition cost?
Answer: When there is an increase in value when selling commercial real estate, regardless of the period of ownership, property income arises.
The income from the increase in value when selling donated commercial real estate will be the price (cost) of selling such property in accordance with paragraph 7 of Article 331 of the Tax Code, since there is actually no acquisition price.
When selling commercial real estate received as a gift, there are no legal grounds for applying the market value in accordance with paragraph 6 of Article 331 of the Tax Code, since the market value is applied when selling property received as an inheritance, charitable assistance, with the exception of cases of receiving property free of charge in accordance with paragraph 5 of Article 331 of the Tax Code
In this regard, in this case, the inventory valuation or market value is not recognized as the acquisition cost.