Hi, don't see Robin coming back in so I'll answer that last question:
You said "How does Friend A figure his cost basis? Does he use the stepped-up value of the home in figuring whether there is a gain or loss when he quit-claims the home to Friend B."
Yes, you have it. When someone receives an asset
as a result of inheritance
, their basis is the fair market of the asset (or the interest
they received in it, say, if it were split among more than one person) as of the date of death of the person leaving the asset.
And as you've already discussed GIFTS are different. When a gift is received, the basis of the receiver is the carryover basis (the basis that the person giving the gift had in it).
Using those two basic premises, you should be able to put it together.
Gifts have the basis of the giver carried over (It follows ... becomes the basis of the receiver of the gift).INHERITED
ASSET are stepped up in basis,. The person receiving an asset in this way has a basis of the asses as of the date of death of the person leaving the asset.
Hope this helps