,CANADA ,CU/OMS                       #A
& ,REV5UE ,AG5CY

              ,9COME ,TAX
          ,9T]PRET,N ,BULLET9
    
,SUBJECT3 ,9COME ,TAX ,ACT
  ,9T]-,VIVOS ,GIFTS ( ,CAPITAL ,PROP]TY
  6,9DIVIDUALS ,DIRECTLY OR ,"? ,TRU/S
,NUMB]3 ,,IT-#BJI;,R
,DATE3 ,MAY #AH1 #AIHC
,REF];E3 ,SEC;N #FI 7AL SUBSEC;NS
  #GC7#A7 & 7#B71 P>AGRAPHS #AJG7#B77A71
  7B7 & 7D7 (! ,ACT2 & SUBSEC;NS
  #BJ7#A71 7#A.A7 & 7#A.B7 & #BF7#C71
  7#D7 & 7#E7 (! ,9COME ,TAX ,APPLIC,N
  ,RULES1 #AIGA 7,,ITAR77

  ,? BULLET9 REPLACES & C.ELS ,,X-#BJI
DAT$ ,MAY #E1 #AIGE4 ,CURR5T REVI.NS >E
DESIGNAT$ 0V]TICAL L9ES4

#A4 ,? BULLET9 4CUSSES ! 9COME TAX
  E6ECTS 6DONOR & DONEE ( V>I\S TYPES (
  GIFT TRANSAC;NS4 ,! BULLET9 USES    #A
              ,,IT-#BJI;,R           A#A
  EXAMPLES 6ILLU/RATE ^! E6ECTS1 GR\P$
  "U ! FOLL[+ H1D+S3
  ,A4 ,GIFT 6AN 9DIVIDUAL OR A TRU/
    79CLUD+ A SP\SE OR A SP\SE TRU/ 9
    CASES ": AN ELEC;N IS MADE N 6H !
    PROVI.NS ( SUBSEC;N #GC7#A7 APPLY--
    SEE #B 2L72
  ,B4 ,GIFT 6AN 9DIVIDUAL OR A TRU/
    79CLUD+ A SP\SE OR A SP\SE TRU/ 9
    CASES ": AN ELEC;N IS MADE N 6H !
    PROVI.NS ( SUBSEC;N #GC7#A7 APPLY--
    SEE #B 2L7--TRANSI;NAL PROVI.NS2
  ,C4 ,GIFT 6A SP\SE OR A SP\SE TRU/ 7":
    NO ELEC;N IS MADE72
  ,D4 ,GIFT 6A SP\SE OR A SP\SE TRU/ 7":
    NO ELEC;N IS MADE7--TRANSI;NAL
    PROVI.NS4
#B4 ,= GIFTS ( CAPITAL PROP]TY 0A
  TAXPAY] AF #AIGA & 2F #AIHJ 6A SP\SE
  OR A SP\SE TRU/ :5 BO? ! TAXPAY] &!
  DONEE 7 RESID5T 9 ,CANADA1 SUBSEC;N
  #GC7#A7 PROVID$ =A M&ATORY ROLLOV] (!
  PROP]TY AT XS UNDEPRECIAT$ CAPITAL CO/
  9 ! CASE ( DEPRECIA# PROP]TY & AT   #B
              ,,IT-#BJI;,R           B#A
  XS ADJU/$ CO/ BASE 9 ! CASE ( O!R
  PROP]TY4 ,H["E1 9 RESPECT ( S* GIFTS
  AF #AIGI1 ! TAXPAY] MAY ELECT N 6H !
  PROVI.NS ( SUBSEC;N #GC7#A7 APPLY4 7,=
  A4I;NAL 4CUS.NS ( ? SUBSEC;N SEE ,,IT-
  #BEH;,R#B & ,,IT-#CBE;,R74
#C4 ,A GIFT IS G5],Y DEF9$ Z A VOLUNT>Y
  TRANSF] ( PROP]TY )\T 3SID],N4 ,!
  ESS5TIAL REQUISITES (A GIFT >E3 9T5;N
  & CAPAC;Y (! DONOR 6MAKE ! GIFT2
  -PLET$ DELIV]Y 6A DONEE2 & A3EPT.E (!
  GIFT 0! DONEE4
--------------------------------------#B
#D4 ,! EXAMPLE >E BAS$ ON ! FOLL[+
  PR9CIPLES & ASSUMP;NS3
  7A7 ,! ,DE"P;T 3SID]S T A SETTLOR &!
    TRU/ HE CR1TES1 &A TRU/ & XS
    B5EFICI>IES1 OP]ATE AT NON->M'S L5G?
    UN.S ! FACTS (A "PICUL> SITU,N
    9DICATE O!RWISE4 ,! EXAMPLES 9VOLV+
    TRU/S ASSUME T ! "PIES 9VOLV$ >E N
    D1L+ AT >M'S L5G?4 ,^? N 9VOLV+
    TRU/S AL ASSUME T ! DONOR & DONEE >E
    N D1L+ AT >M'S L5G?4              #C
              ,,IT-#BJI;,R           A#B
  7B7 ,! CAPITAL B5EFICI>Y (A TRU/ DID N
    PUR*ASE 8 CAPITAL 9T]E/4
  7C7 ,NO "O HAS MADE AN ELEC;N 6USE
    ,VALU,N ,"D VALUES PURSUANT
    6SUBSEC;N #BF7#G7 (! ,,ITAR4
#E4 ,! T]MS 8CO/ AM.T0 & 8SP\SE TRU/0 >E
  EXPLA9$ Z FOLL[S3
  7A7 ,CO/ AM.T4 ,PURSUANT 6P>AGRAPHS
    #AJG7#B77A7 & 7B71 A TRU/ 4TRIBUTES
    PROP]TY 6A CAPITAL B5EFICI>Y =
    PROCE$S EQUAL 6XS CO/ AM.T 6! TRU/1
    &! CAPITAL B5EFICI>Y ACQUIRES !
    PROP]TY = PROCE$S EQUAL 6! TRU/'S
    CO/ AM.T4 8,CO/ AM.T0 IS /AT$ 9
    SUBSEC;N #BDH7#A7 6BE ! ADJU/$ CO/
    BASE =A CAPITAL PROP]TY O!R ?AN
    DEPRECIA# PROP]TY1 &! UNDEPRECIAT$
    CAPITAL CO/ =A DEPRECIA# PROP]TY
    DET]M9$ 0PRORAT+ ! UNDEPRECIAT$
    CAPITAL CO/ ( ALL PROP]TY 9 ! CLASS
    ON ! BASIS (! CAPITAL CO/ ( EA*
    PROP]TY4
  7B7 ,SP\SE ,TRU/4 ,A TAXPAY] CR1TES A
    SP\SE TRU/ =! B5EFIT ( 8 SP\SE    #D
              ,,IT-#BJI;,R           B#B
    7SUBSEC;N #GC7#A77 ": ! SP\SE IS
    5TITL$ 6RCV ALL 9COME (! TRU/ T
    >ISES 2F ! SP\SE'S D1?1 & ONLY !
    SP\SE 7PRIOR 6D1?7 MAY RCV OR
    O!RWISE OBTA9 ! USE ( ANY (! 9COME
    OR CAPITAL (! TRU/4 ,BO? ! TAXPAY]
    &! SP\SE M/ 2 RESID5T 9 ,CANADA AT !
    "T ! TRU/ IS CR1T$4 ,9 ! EXAMPLES ":
    A SP\SE TRU/ 4TRIBUTES PROP]TY 6!
    CAPITAL B5EFICI>Y1 ! ASSUMP;N IS T X
    IS A 4TRIBU;N PRIOR 6! D1? (! SP\SE
    :O IS1 "!=E1 ! CAPITAL B5EFICI>Y4
  
,TRANSCRIB]'S NOTE3
  7,PAGE #C1 BLANK PAGE7
--------------------------------------#D
#F4 ,! EXAMPLES USE ! FOLL[+ A2REVI,NS3
    ,,ACB1 ,ADJU/$ CO/ BASE
    ,,FMV1 ,FAIR M>KET VALUE
    ,,CCA1 ,CAPITAL CO/ ALL[.E
    ,,UCC1 ,UNDEPRECIAT$ CAPITAL CO/


                                      #E
               ,,EXAMPLES            A#D
    
,TRANSCRIB]'S NOTE3
  7,! ODD PAGES IS ! FR5* V].N (!
  PREVI\S PAGE47

,A4 ,GIFT 6AN ,9DIVIDUAL OR A ,TRU/
  79CLUD+ A SP\SE OR A SP\SE TRU/ 9
  CASES ": AN ELEC;N IS MADE N 6H !
  PROVI.NS ( SUBSEC;N #GC7#A7 APPLY7

7#A7 ,A GIFT ( CAPITAL PROP]TY 7O!R ?AN
  DEPRECIA# PROP]TY7
  ,ASSUMP;NS
  ,CO/ ( CAPITAL PROP]TY 6DONOR 4#AJJ
  ,,FMV ON DATE ( GIFT 4#AEJ
  ,RESULTS
  ,! PROCE$S ( 4POSI;N >E DEEM$ 6BE
    4#AEJ & "!=E ! DONOR IS SUBJECT 6TAX
    ON A CAPITAL GA9 ( 4#EJ4
  ,! DONEE ACQUIRES ! CAPITAL PROP]TY =A
    DEEM$ CO/ ( 4#AEJ4
  ,REF];E3 #FI7#A77B71 #FI7#A77C7
7#B7 ,A GIFT ( DEPRECIA# PROP]TY
  ,ASSUMP;NS                          #F
              ,,IT-#BJI;,R           B#D
  ,CAPITAL CO/ ( DEPRECIA# PROP]TY
    6DONOR 4#AJJ
  ,,UCC ON DATE ( GIFT 4#GE
  ,,FMV ON DATE ( GIFT 4#AAJ
  ,RESULTS
  ,! DONOR HAS DEEM$ PROCE$S ( 4POSI;N (
    4#AAJ & "!=E IS SUBJECT 6TAX ON A
    CAPITAL GA9 ( 4#AJ & RECAPTURE (
    ,,CCA ( 4#BE4
  ,! DONEE ACQUIRES ! PROP]TY AT A DEEM$
    CAPITAL CO/ ( 4#AAJ4
  ,REF];E3 #FI7#A77B71 #FI7#A77C7
7#C7 ,TAK+ ! RESULTS 9 ,EXAMPLE 7#A7 &
  ASSUM+ T ! DONEE (! CAPITAL PROP]TY IS
  A TRU/1 ! FOLL[+ O3URS :5 ! TRU/
  4TRIBUTES ! CAPITAL PROP]TY 6! CAPITAL
  B5EFICI>Y4
  ,FUR!R ASSUMP;N 6,EXAMPLE 7#A7
  ,,FMV ( CAPITAL PROP]TY ON DATE (
    4TRIBU;N 4#BJJ
  ,RESULTS
  ,! TRU/ IS DEEM$ 64POSE (! CAPITAL
    PROP]TY = PROCE$S ( 4#AEJ 7XS CO/
                                      #G
              ,,IT-#BJI;,R           C#D
    AM.T7 & "!=E NO CAPITAL GA9 OR LOSS
    >ISES4
  ,! CAPITAL B5EFICI>Y ACQUIRES !
    PROP]TY AT A DEEM$ CO/ ( 4#AEJ 7!
    CO/ AM.T 6! TRU/74
  ,REF];E3 #AJG7#B77A71 #AJG7#B77B7
7#D7 ,TAK+ ! RESULTS 9 ,EXAMPLE 7#B7 &
  ASSUM+ T ! DONEE (! DEPRECIA# PROP]TY
  IS A TRU/1 ! FOLL[+ O3URS ON 4TRIBU;N
  (! PROP]TY 6! CAPITAL B5EFICI>Y3
  ,FUR!R ASSUMP;NS 6,EXAMPLE 7#B7
  ,,UCC ON DATE ( 4TRIBU;N 4#IJ
  ,,FMV ON DATE ( 4TRIBU;N 4#ABJ
  ,RESULTS
  ,! TRU/ IS DEEM$ 64POSE (! DEPRECIA#
    PROP]TY = PROCE$S ( 4#IJ1 XS CO/
    AM.T1 & "!=E NO CAPITAL GA9 OR LOSS1
    OR RECAPTURE ( ,,CCA >ISES4
  ,! CAPITAL B5EFICI>Y ACQUIRES !
    DEPRECIA# PROP]TY AT A DEEM$ CAPITAL
    CO/ ( 4#AAJ & IS DEEM$ 6H BE5 ALL[$
    ,,CCA ( 4#BJ4
  7,,UCC IS 4#IJ74
                                      #H
              ,,IT-#BJI;,R           D#D
  ,REF];E3 #AJG7#B77A71 #AJG7#B77B71
    #AJG7#B77D7
--------------------------------------#F
,B4 ,GIFT 6AN ,9DIVIDUAL OR A ,TRU/
  79CLUD+ A SP\SE OR A SP\SE TRU/ 9
  CASES ": AN ELEC;N IS MADE N 6H !
  PROVI.NS ( SUBSEC;N #GC7#A7 APPLY7--
  ,TRANSI;NAL ,PROVI.NS

7#E7 ,SUBSEC;N #BF7#E7 (! ,,ITAR
  PROVIDES RULES = CALCULAT+ ! ADJU/$
  CO/ BASE AF #AIGA ( CAPITAL PROP]TY1
  O!R ?AN DEPRECIA# PROP]TY OR A "PN]%IP
  9T]E/1 6A NON->M'S L5G? TRANSF]EE ":
  S* PROP]TY 0 [N$ 0A TAXPAY] ON ,JUNE
  #AH1 #AIGA & HAS1 0"O OR M NON->M'S
  L5G? TRANSAC;NS OR EV5TS1 2COME VE/$ 9
  ! NON->M'S L5G? TRANSF]EE 7& EI !
  TAXPAY] OR A TRANSF]EE [N$ ! PROP]TY
  AT ,DECEMB] #CA1 #AIGA74 ,=A DETAIL$
  4CUS.N ( ? TOPIC SEE ,,IT-#ACB;,R#B4
  ,! FOLL[+ EXAMPLE ILLU/RATES ! OP],N (
  ? SUBSEC;N ": "! IS A GIFT ( CAPITAL
  PROP]TY1 O!R ?AN DEPRECIA#          #I
              ,,IT-#BJI;,R           A#F
  PROP]TY OR A "PN]%IP 9T]E/4
  ,ASSUMP;NS
  ,CO/ ( CAPITAL PROP]TY 6DONOR 4#AJJ
  ,,FMV ON ,VALU,N ,"D 4#AAJ
  ,,FMV ON DATE ( GIFT 4#AEJ
  ,RESULTS
  ,! PROCE$S ( 4POSI;N >E DEEM$ 6BE
    4#AEJ & "!=E ! DONOR IS SUBJECT 6TAX
    ON A CAPITAL GA9 ( 4#DJ4
  ,REF];E3 #FI7#A77B71 #BF7#C7 7,,ITAR7
7#E;A7 ,FUR!R ASSUMP;N
  ,! DONEE IS AN 9DIVIDUAL :O
    SUBSEQU5TLY 4POSES (! CAPITAL
    PROP]TY 9 AN >M'S L5G? TRANSAC;N =
    4#AFJ4
  ,RESULTS
  ,! ADJU/$ CO/ BASE (! PROP]TY =! DONEE
    IS -PUT$ Z FOLL[S3
  ,CO/ """"""""""""""""""""""""""" 4#AJJ
  ,,FMV ON ,VALU,N ,"D """"""""""" 4#AAJ
  ,PROCE$S """"""""""""""""""""""" 4#AFJ
  ,REF];E3 #BF7#E7 7,,ITAR7
  "!=E3 ,CO/ (! PROP]TY 7M$IAN7 "" 4#AAJ
                                     #AJ
              ,,IT-#BJI;,R           B#F
  PLUS3 ,CAPITAL GA9 6DONOR """"""" 4#DJ
  ,,ACB 6DONEE """"""""""""""""""" 4#AEJ
  ,PROCE$S """"""""""""""""""""""" 4#AFJ
  ,CAPITAL GA9 6DONEE """"""""""""" 4#AJ
  ,REF];E3 #BF7#C7 7,,ITAR7
    #BF7#E77C77;I7 7,,ITAR7
7#F7 ,TAK+ ! RESULTS 9 ,EXAMPLE 7#E7 &
  ASSUM+ T ! DONEE (! CAPITAL PROP]TY IS
  A TRU/1 ! FOLL[+ O3URS :5 ! TRU/
  4TRIBUTES ! CAPITAL PROP]TY 6! CAPITAL
  B5EFICI>Y4
  ,FUR!R ASSUMP;NS 6,EXAMPLE 7#E7
  ,,FMV ( CAPITAL PROP]TY ON DATE (
    4TRIBU;N 4#BJJ
  ,B5EFICI>Y SELLS ! PROP]TY 9 AN >M'S
    L5G? TRANSAC;N = PROCE$S ( 4#BAJ
  ,RESULTS
  ,! CAPITAL PROP]TY IS 4TRIBUT$ 6!
    B5EFICI>Y = PROCE$S EQUAL 6XS CO/
    AM.T1 I4E41 XS ,,ACB4 ,! ,,ACB IS
    -PUT$ Z FOLL[S3
  ,REF];E3 #AJG7#B77A7
  ,CO/ """"""""""""""""""""""""""" 4#AJJ
                                     #AA
              ,,IT-#BJI;,R           C#F
  ,,FMV ON ,VALU,N ,"D """"""""""" 4#AAJ
  ,PROCE$S 7,,FMV ON DATE (
    4TRIBU;N7 """""""""""""""""""" 4#BJJ
  ,REF];E3 #BF7#C7 & 7#E7 7,,ITAR7
    #BF7#D7 7,,ITAR7
  "!=E3 ,CO/ ( PROP]TY 7M$IAN7 """ 4#AAJ
  PLUS3 ,CAPITAL GA9 6DONOR """"""" 4#DJ
  ,,ACB """""""""""""""""""""""""" 4#AEJ
  ,REF];E3 #BF7#E77C77;I71 #BF7#E7
    7,,ITAR7
--------------------------------------#H
,? ,,ACB IS ! CO/ AM.T 6! TRU/ & H;E IS
  ! DEEM$ PROCE$S ON 4TRIBU;N4 ,NO
  CAPITAL GA9 OR LOSS 6! TRU/ RESULTS Z
  ! DEEM$ PROCE$S >E 4#AEJ &! ,,ACB IS
  4#AEJ4
,:5 ! B5EFICI>Y SELLS ! PROP]TY 7>M'S
  L5G?7 = PROCE$S ( 4#BAJ1 ! ,,ACB (!
  PROP]TY 6! B5EFICI>Y IS CALCULAT$ Z
  FOLL[S3
  ,CO/ """"""""""""""""""""""""""" 4#AJJ
  ,,FMV ON ,VALU,N ,"D """"""""""" 4#AAJ
  ,PROCE$S """"""""""""""""""""""" 4#BAJ
                                     #AB
              ,,IT-#BJI;,R           A#H
  "!=E3 ,CO/ 7M$IAN7 """"""""""""" 4#AAJ
  PLUS3 ,CAPITAL GA9 6DONOR """"""" 4#DJ
  ,,ACB """""""""""""""""""""""""" 4#AEJ
  ,ACTUAL PROCE$S """""""""""""""" 4#BAJ
  ,CAPITAL GA9 """""""""""""""""""" 4#FJ
  ,REF];E3 #BF7#C7 7,,ITAR71
    #BF7#E77C77;I7 7,,ITAR71 #BF7#E7
    7,,ITAR7
  ,S9CE ,VALU,N ,"D ! CAPITAL PROP]TY
    HAS APPRECIAT$ 04#AJJ 74#BAJ M9US
    #AAJ72 ! CAPITAL GA9 6! DONOR &!
    B5EFICI>Y TOTALS 4#AJJ 74#DJ PLUS
    #FJ74
7#G7 ,A GIFT ( DEPRECIA# PROP]TY ": !
  DONOR OR "S"O N AT >M'S L5G? ) HM _H
  ACQUIR$ ! PROP]TY PRIOR 6#AIGB4
  ,ASSUMP;NS
  ,CAPITAL CO/ ( DEPRECIA# PROP]TY
    6DONOR 4#AJJ
  ,,FMV ON ,VALU,N ,"D 4#AJE
  ,,UCC ON DATE ( GIFT 4#GE
  ,,FMV ON DATE ( GIFT 4#AAE
  ,RESULTS
                                     #AC
              ,,IT-#BJI;,R           B#H
  ,"U P>AGRAPH #FI7#A77B7 ! DONOR HAS
    DEEM$ PROCE$S ( 4POSI;N ( 4#AAE1 :
    IS CALL$ 8PROCE$S ( 4POSI;N "!(
    O!RWISE DET]M9$0 9 SUBSEC;N #BJ7#A7
    (! ,,ITAR4 ,! DEEM$ PROCE$S (
    4POSI;N "U P>AGRAPH #BJ7#A77A7 >E !N
    CALCULAT$ Z FOLL[S3
  ,REF];E3 #FI7#A77B7
  ,CAPITAL CO/ """"""""""""""""""" 4#AJJ
  ,PROCE$S ( 4POSI;N Z
    O!RWISE DET]M9$ """""""" 4#AAE
  ,,FMV ON ,VALU,N ,"D """"" 4#AJE  4#AJ
  ,REF];E3 #BJ7#A7 7,,ITAR7
  ,DEEM$ PROCE$S """"""""""""""""" 4#AAJ
  ,CAPITAL CO/ """"""""""""""""""" 4#AJJ
  ,CAPITAL GA9 """""""""""""""""""" 4#AJ
  ,! DONOR "!=E IS SUBJECT 6TAX ON A
    CAPITAL GA9 ( 4#AJ & RECAPTURE (
    ,,CCA ( 4#BE4
  ,! DONEE IS DEEM$ 6ACQUIRE ! DEPRECIA#
    PROP]TY AT A CAPITAL CO/ ( 4#AAJ4
  ,REF];E3 #BJ7#A77B77;I7 7,,ITAR7
7#G;A7 ,FUR!R ,ASSUMP;NS
                                     #AD
              ,,IT-#BJI;,R           C#H
  ,! DONEE IS AN 9DIVIDUAL :O SELLS !
    DEPRECIA# PROP]TY 9 AN >M'S L5G?
    TRANSAC;N = 4#ABJ :5 ! ,,UCC IS
    4#AJJ4
  ,RESULTS
  ,PROCE$S CALCULAT$ Z FOLL[S3
  ,REF];E3 #BJ7#A77A7 7,,ITAR7
  ,CAPITAL CO/ =
    #BJ7#A77A7 """"""""""""""""""" 4#AJJ
  ,PROCE$S ( 4POSI;N Z
    O!RWISE DET]M9$ """""""" 4#ABJ
    ,,FMV ON ,VALU,N ,"D """ 4#AJE  4#AE
  ,DEEM$ PROCE$S "U
    #BJ7#A77A7 """"""""""""""""""" 4#AAE
  ,CAPITAL CO/ """"""""""""""""""" 4#AAJ
  ,CAPITAL GA9 """"""""""""""""""""" 4#E
  ,RECAPTURE ( ,,CCA """""""""""""" 4#AJ
-------------------------------------#AJ
7#H7 ,TAK+ ! RESULTS 9 ,EXAMPLE 7#G7 &
  ASSUM+ T ! DONEE (! DEPRECIA# PROP]TY
  IS A TRU/1 ! FOLL[+ EXAMPLE ILLU/RATES
  ! RESULT ( 4TRIBUT+ ! DEPRECIA#
  PROP]TY 6! CAPITAL B5EFICI>Y4
                                     #AE
              ,,IT-#BJI;,R          A#AJ
  ,FUR!R ASSUMP;NS 6,EXAMPLE 7#G7
  ,,FMV (! DEPRECIA# PROP]TY ON DATE (
    4TRIBU;N 4#ABJ
  ,,UCC ON DATE ( 4TRIBU;N 4#HJ
  ,RESULTS
  ,! TRU/ HAS DEEM$ PROCE$S ( 4POSI;N (
    XS CO/ AM.T 7,,UCC7 ( 4#HJ4
    ,SUBSEC;N #BJ7#A7 (! ,,ITAR DOES N
    APPLY Z ! DEEM$ PROCE$S ( 4#HJ >E
    LESS ?AN ! CAPITAL CO/ (! PROP]TY 7:
    IS 4#AJJ1 PURSUANT 6SUBP>AGRAPH
    #BJ7#A77B77II7 (! ,,ITAR74 ,?US1 NO
    CAPITAL GA9 OR LOSS OR RECAPTURE (
    ,,CCA >ISES 6! TRU/4
  ,REF];E3 #AJG7#B77A7
  ,! B5EFICI>Y ACQUIRES ! DEPRECIA#
    PROP]TY AT A DEEM$ CAPITAL CO/ (
    4#AAJ & IS DEEM$ 6H BE5 ALL[$ ,,CCA
    ( 4#CJ 7,,UCC IS 4#HJ74
  ,REF];E3 #AJG7#B77D7
7#H;A7 ,FUR!R ASSUMP;NS
  ,! B5EFICI>Y SELLS ! PROP]TY 9 AN >M'S
    L5G? TRANSAC;N = PROCE$S ( 4#ABE1 AT
    A "T :5 ! ,,UCC IS 4#GJ4         #AF
              ,,IT-#BJI;,R          B#AJ
  ,RESULTS
  ,SUBSEC;N #BJ7#A7 (! ,,ITAR IS
    APPLICA# 6CALCULATE ! DEEM$ PROCE$S
  ,REF];E3 #BJ7#A.B7 & #BJ7#A77B77;II7
    (! ,,ITAR
  ,CAPITAL CO/ """"""""""""""""""" 4#AJJ
  ,PROCE$S ( 4POSI;N Z
    O!RWISE DET]M9$ """""""" 4#ABE
  ,,FMV ON ,VALU,N ,"D """"" 4#AJE  4#BJ
  ,DEEM$ PROCE$S "U
    #BJ7#A77A7 """"""""""""""""""" 4#ABJ
  ,"!=E ! B5EFICI>Y HAS A CAPITAL GA9 (
    4#AJ 74#ABJ M9US 4#AAJ71 &A
    RECAPTURE ( ,,CCA ( 4#DJ4
  
,C4 ,GIFT 6A ,SP\SE OR A ,SP\SE ,TRU/
  7": NO ELEC;N IS MADE7

7#I7 ,A GIFT ( CAPITAL PROP]TY 7O!R ?AN
  DEPRECIA# PROP]TY7
  ,ASSUMP;NS
  ,CO/ ( CAPITAL PROP]TY 6DONOR 4#AJJ
  ,,FMV ON DATE ( GIFT 4#AEJ
  ,RESULTS                           #AG
              ,,IT-#BJI;,R          C#AJ
  ,! PROCE$S ( 4POSI;N >E DEEM$ 6BE
    4#AJJ 7! ,,ACB 6! DONOR7 & "!=E NO
    CAPITAL GA9 OR LOSS 6! DONOR >ISES4
  ,REF];E3 #GC7#A77F7
  ,! SP\SE OR ! SP\SE TRU/ ACQUIRES !
    CAPITAL PROP]TY AT A DEEM$ CO/ (
    4#AJJ4
  ,REF];E3 #GC7#A7
7#AJ7 ,A GIFT ( DEPRECIA# PROP]TY
  ,ASSUMP;NS
  ,CO/ ( DEPRECIA# PROP]TY 6DONOR 4#AJJ
  ,,UCC ON DATE ( GIFT 4#GE
  ,,FMV ON DATE ( GIFT 4#AAJ
  ,RESULTS
  ,! DONOR HAS DEEM$ PROCE$S ( 4POSI;N (
    4#GE 7! ,,UCC 6! DONOR7 & "!=E NO
    CAPITAL GA9 OR RECAPTURE ( ,,CCA
    >ISES4
  ,REF];E3 #GC7#A77E7
  ,! SP\SE OR SP\SE TRU/ ACQUIRES !
    DEPRECIA# PROP]TY AT A DEEM$ CAPITAL
    CO/ ( 4#AJJ & IS DEEM$ 6H BE5 ALL[$
    ,,CCA ( 4#BE 7,,UCC IS 4#GE74
  ,REF];E3 #GC7#B7                   #AH
              ,,IT-#BJI;,R           #AB
7#AA7 ,TAK+ ! RESULTS 9 ,EXAMPLE 7#I7 &
  ASSUM+ T ! DONEE (! CAPITAL PROP]TY IS
  A SP\SE TRU/1 ! FOLL[+ O3URS :5 !
  SP\SE TRU/ 4TRIBUTES ! CAPITAL PROP]TY
  6! CAPITAL B5EFICI>Y 7! SP\SE74
  ,FUR!R ASSUMP;NS 6,EXAMPLE 7#I7
  ,,FMV ( CAPITAL PROP]TY ON DATE (
    4TRIBU;N 4#BJJ
  ,RESULTS
  ,! SP\SE TRU/ IS DEEM$ 64POSE (!
    CAPITAL PROP]TY = PROCE$S ( 4#AJJ
    7XS 8CO/ AM.T07 & "!=E NO CAPITAL
    GA9 OR LOSS 6! TRU/ >ISES4
  ,REF];E3 #AJG7#B77A7
  ,! CAPITAL B5EFICI>Y 7! SP\SE7
    ACQUIRES ! PROP]TY AT ! TRU/'S CO/
    AM.T ( 4#AJJ4
  ,REF];E3 #AJG7#B77B7
7#AB7 ,TAK+ ! RESULTS 9 ,EXAMPLE 7#AJ7 &
  ASSUM+ T ! DONEE (! DEPRECIA# PROP]TY
  IS A SP\SE TRU/1 ! FOLL[+ O3URS ON
  4TRIBU;N (! DEPRECIA# PROP]TY 6!
  CAPITAL B5EFICI>Y 7! SP\SE74
                                     #AI
              ,,IT-#BJI;,R          A#AB
  ,FUR!R ASSUMP;NS 6EXAMPLE 7#AJ7
  ,,UCC AT DATE ( 4TRIBU;N 4#FJ
  ,,FMV AT DATE ( 4TRIBU;N 4#ABJ
  ,RESULTS
  ,! SP\SE TRU/ IS DEEM$ 64POSE (!
    DEPRECIA# PROP]TY = PROCE$S EQUAL
    64#FJ 7XS CO/ AM.T7 & "!=E "! >E NO
    TAX 3SEQU;ES =! TRU/4
  ,REF];E3 #AJG7#B77A7
  ,! CAPITAL B5EFICI>Y 7! SP\SE7
    ACQUIRES ! DEPRECIA# PROP]TY AT A
    DEEM$ CAPITAL CO/ ( 4#AJJ & IS DEEM$
    6H BE5 ALL[$ ,,CCA ( 4#DJ 7,,UCC IS
    4#FJ74
  ,REF];E3 #AJG7#B77B7
  
,D4 ,GIFT 6A ,SP\SE OR A ,SP\SE ,TRU/
  7": NO ELEC;N IS MADE7--,TRANSI;NAL
  ,PROVI.NS

7#AC7 ,A GIFT ( CAPITAL PROP]TY 7O!R ?AN
  DEPRECIA# PROP]TY OR A P>NT]%IP
  9T]E/74 7,! -;TS ON SUBSEC;N #BF7#E7
                                     #BJ
              ,,IT-#BJI;,R          B#AB
  (! ,,ITAR AT ,EXAMPLE 7#E7 >E APPLICA#
  "H47
  ,ASSUMP;NS
  ,CO/ ( CAPITAL PROP]TY 6DONOR 4#AJJ
  ,,FMV ON ,VALU,N ,"D 4#AAJ
  ,,FMV ON DATE ( GIFT 4#AEJ
  ,RESULTS
  ,! DONOR IS DEEM$ 64POSE (! CAPITAL
    PROP]TY = PROCE$S EQUAL 64#AAJ1 8
    ,,ACB4 ,"!=E A CAPITAL GA9 OR LOSS
    DOES N >ISE 6! DONOR4
  ,REF];E3 #GC7#A71 #BF7#C7 &
    7#D77,,ITAR7
7#AC;A7 ,FUR!R ASSUMP;NS
  ,! DONEE IS ! SP\SE1 :O SUBSEQU5TLY
    4POSES (! PROP]TY 9 AN >M'S L5G?
    TRANSAC;N = 4#AFJ4
  ,RESULTS
  ,! ADJU/$ CO/ BASE (! PROP]TY =! SP\SE
    7! DONEE7 IS -PUT$ PURSUANT
    6SUBSEC;N #BF7#E7 (! ,,ITAR Z FOLL[3
  ,CO/ """"""""""""""""""""""""""" 4#AJJ
  ,,FMV ON ,VALU,N ,"D """"""""""" 4#AAJ
                                     #BA
              ,,IT-#BJI;,R          C#AB
  ,PROCE$S """"""""""""""""""""""" 4#AFJ
  "!=E3 ,CO/ (! PROP]TY 7M$IAN7
    7,,ACB7 """""""""""""""""""""" 4#AAJ
  ,REF];E3 #BF7#C77,,ITAR7
  ,Z ! PROCE$S >E 4#AFJ ! CAPITAL GA9 IS
    4#EJ4 ,! RESULT IS T ! 8TAX-FREE
    Z"O0 C>RIES 6! SUBSEQU5T [N]4
-------------------------------------#AD
7#AD7 ,TAK+ ! RESULTS 9 ,EXAMPLE 7#AC7 &
  ASSUM+ T ! DONEE (! CAPITAL PROP]TY IS
  A SP\SE TRU/1 ! FOLL[+ O3URS :5 ! TRU/
  4TRIBUTES ! CAPITAL PROP]TY 6! CAPITAL
  B5EFICI>Y4 ,! CAPITAL B5EFICI>Y 9 !
  EXAMPLE IS ! SP\SE &! 4TRIBU;N (!
  CAPITAL IS PRIOR 6! D1? (! SP\SE4
  ,FUR!R ASSUMP;NS 6,EXAMPLE 7#AC7
  ,,FMV ( CAPITAL PROP]TY ON DATE (
    4TRIBU;N 4#BJJ
  ,B5EFICI>Y SELLS ! PROP]TY 9 AN >M'S
    L5G? TRANSAC;N = PROCE$S ( 4#BAJ
  ,RESULTS
  ,! CAPITAL PROP]TY IS 4TRIBUT$ 6!
    B5EFICI>Y = PROCE$S EQUAL 6! TRU/'S
    8CO/ AM.T0 7,,ACB74 ,! ,,ACB     #BB
              ,,IT-#BJI;,R          A#AD
    IS -PUT$ PURSUANT 6SUBSEC;N #BF7#E7
    (! ,,ITAR3
  ,REF];E3 #AG7#B77A7
  ,CO/ 4#AJJ
  ,,FMV ON ,VALU,N ,"D 4#AAJ
  ,PROCE$S 7,,FMV ON DATE ( 4TRIBU;N1
    SUBSEC;N #BF7#D7 (! ,,ITAR7 4#BJJ
  "!=E3 ,CO/ (! PROP]TY 7M$IAN1 : IS AL
    ! ,,ACB1 SUBSEC;N #BF7#E7 (! ,,ITAR7
    4#AAJ
  ,REF];E 7#BF7#C77,,ITAR7
  ,! CO/ AM.T 6! SP\SE TRU/ & H;E !
    DEEM$ PROCE$S ( 4TRIBU;N IS 4#AAJ4
    ,NO CAPITAL GA9 OR LOSS 6! SP\SE
    TRU/ RESULTS Z ! DEEM$ PROCE$S >E
    4#AAJ &! ,,ACB IS AL 4#AAJ4
  ,:5 ! B5EFICI>Y SELLS ! PROP]TY 7>M'S
    L5G?7 = PROCE$S ( 4#BAJ1 ! ,,ACB (!
    PROP]TY 6! B5EFICI>Y IS CALCULAT$ Z
    FOLL[S3
  ,CO/ 4#AJJ
  ,,FMV ON ,VALU,N ,"D 4#AAJ
  ,PROCE$S 4#BAJ
                                     #BC
              ,,IT-#BJI;,R          B#AD
  "!=E3 ,CO/ 7M$IAN1 AL ! ,,ACB7 4#AAJ
  ,REF];E3 #BF7#C7 & 7#E7 7,,ITAR7
  ,Z ! ACTUAL PROCE$S >E 4#BAJ1 !
    CAPITAL GA9 6! B5EFICI>Y IS 4#AJJ
    74#BAJ LESS 4#AAJ74
7#AE7 ,A GIFT ( DEPRECIA# PROP]TY 6A
  SP\SE OR A SP\SE TRU/1 ": ! DONOR OR
  "S"O N AT >M'S L5G? ) HM _H ACQUIR$ !
  PROP]TY PRIOR 6#AIGB4
  ,ASSUMP;NS
  ,CO/ ( DEPRECIA# PROP]TY 6DONOR 4#AJJ
  ,,FMV ON ,VALU,N ,"D 4#AJE
  ,,UCC ON DATE ( GIFT 4#GE
  ,,FMV ON DATE ( GIFT """"""""""" 4#AAJ
  ,RESULTS
  ,! DONOR HAS DEEM$ PROCE$S ( 4POSI;N (
    4#GE 7,,UCC7 : RESULTS 9 NO CAPITAL
    GA9 OR LOSS OR RECAPTURE ( ,,CCA 6!
    DONOR4
  ,REF];E3 #GC7#A77E7
  ,! SP\SE OR SP\SE TRU/ IS DEEM$
    6ACQUIRE ! DEPRECIA# PROP]TY AT A
    CAPITAL CO/ ( 4#AJJ & IS DEEM$ 6H
                                     #BD
              ,,IT-#BJI;,R          C#AD
    BE5 ALL[$ ,,CCA ( 4#BE 7,,UCC IS
    4#GE74
  ,REF];E3 #GC7#A7 & 7#B7
  ,SUBSEC;N #BJ7#A7 (! ,,IT> IS N
    APPLICA# 6! DONOR4
  ,REF];E3 #BJ7#A.A77,,ITAR7
-------------------------------------#AF
7#AE;A7 ,FUR!R ASSUMP;NS
  ,! DONEE IS ! SP\SE :O SELLS !
    DEPRECIA# PROP]TY IS AN >M'S L5G?
    TRANSAC;N = 4#ABJ1 :5 ! ,,UCC IS
    4#FJ4
  ,RESULTS
  ,Z ! CAPITAL (! DEPRECIA# PROP]TY
    74#AJJ7 IS LESS ?AN ! ,,FMV ON
    ,VALU,N ,"D 74#AJE7 &! PROCE$S (
    4POSI;N O!RWISE DET]M9$ 74#ABJ7 &1
    2C ( SUBSEC;N #BJ7#A.A7 (! ,,IT>1
    SUBSEC;N #BJ7#A7 (! ,,ITAR IS
    APPLICA#4 ,! DEEM$ PROCE$S >E !N
    DET]M9$ Z FOLL[S3
  

                                     #BE
              ,,IT-#BJI;,R          A#AF
  ,CAPITAL CO/ """"""""""""""""""" 4#AJJ
  ,PROCE$S ( 4POSI;NS Z
    O!RWISE DET]M9$ """""""" 4#ABJ
  ,,FMV ON ,VALU,N ,"D """"" 4#AJE  4#AE
  ,DEEM$ PROCE$S """"""""""""""""" 4#AAE
  ,"!=E ! SP\SE IS SUBJECT 6TAX ON A
    CAPITAL GA9 ( 4#AE 74#AAE M9US #AJJ7
    &! RECAPTURE ( ,,CCA IS 4#DJ 74#AJJ
    M9US #FJ74
7#AF7 ,TAK+ ! RESULTS 9 ,EXAMPLE 7#AE7 &
  ASSUM+ T ! DONEE (! DEPRECIA# PROP]TY
  IS A SP\SE TRU/1 ! FOLL[+ EXAMPLE
  ILLU/RATES ! RESULT ( 4TRIBUT+ !
  PROP]TY 6! CAPITAL B5EFICI>Y 7!
  SP\SE74
  ,FUR!R ASSUMP;NS 6,EXAMPLE 7#AE7
  ,,FMV (! DEPRECIA# PROP]TY ON DATE (
    4TRIBU;N 0! TRU/ 4#ABJ
  ,,UCC ON DATE ( 4TRIBU;N 4#FJ
  ,RESULTS
  ,! SP\SE TRU/ HAS DEEM$ PROCE$S (
    4POSI;N EQUAL 6XS CO/ AM.T ( 4#FJ
    7,,UCC74 ,SUBSEC;N #BJ7#A7 (! ,,ITAR
    DOES N APPLY Z ! DEEM$ PROCE$S   #BF
              ,,IT-#BJI;,R          B#AF
    ( 4#FJ >E LESS ?AN ! CAPITAL CO/ (!
    PROP]TY 7: IS 4#AJJ1 PURSUANT
    6SUBP>AGRAPH #BJ7#A77B77II7 (!
    ,,ITAR74 ,"!=E A CAPITAL GA9 OR LOSS
    OR A RECAPTURE ( ,,CCA 6! TRU/ DOES
    N >ISE4
  ,REF];E3 #AJG7#B77A7
  ,! SP\SE 7CAPITAL B5EFICI>Y7 ACQUIRES
    ! DEPRECIA# PROP]TY =A CAPITAL CO/ (
    4#AJJ & IS DEEM$ 6H BE5 ALL[$ ,,CCA
    ( 4#DJ 7,,UCC IS 4#FJ74
  ,REF];E3 #AJG7#B77B7
7#AF;A7 ,FUR!R ASSUMP;NS
  ,! SP\SE SELLS ! DEPRECIA# PROP]TY 9
    AN >M'S L5G? TRANSAC;N1 = PROCE$S (
    4#ABE1 :5 ! ,,UCC IS 4#FJ4
  ,RESULTS
  ,SUBSEC;N #BJ7#A7 (! ,,ITAR IS
    APPLICA#1 PURSUANT 6SUBSEC;N
    #BJ7#A.B7 (! ,,ITAR4 ,! DEEM$
    PROCE$S >E3
  

                                     #BG
              ,,IT-#BJI;,R          C#AF
  ,CAPITAL CO/ """"""""""""""""""" 4#AJJ
  ,PROCE$S ( 4POSI;N Z
    O!RWISE DET]M9$ """""""" 4#ABE
  ,,FMV ON ,VALU,N ,"D """"" 4#AJE  4#BJ
  ,DEEM$ PROCE$S """"""""""""""""" 4#ABJ
  ,"!=E ! SP\SE HAS A CAPITAL GA9 ( 4#BJ
    74#ABJ M9US #AJJ71 &A RECAPTURE (
    ,,CCA ( 4#DJ4
  














                                     #BH