Real estate Cap Gains

[pjrrk]

What is the name of your state? MA
Situation: I purchased some property from my father last year that he inherited from his sister two years ago. My purchase price was $100 - the intent was to effectively pass the inheritance on to me.
I sold the property recently at fair market value - I am now facing significant short term capital gains tax on the property because of the low cost basis.
I am looking for acceptable strategies to reduce the tax impact by either allowing him to take a loss on his income taxes or re-establish my cost basis to that which he inherited it at.
Two I have considered:
1> Writing a terms of sale contract between my father and myself setting the cost basis of the property to that which he obtained the property at upon inheritence. The intent is to set payment equal to allowable gift amounts over a period of as many years as is necessary.
2> Have him claim a loss on the sale of the property roughly equal to my gain.
Any advice on the legality of either of these strategies, or other possible solutions would be appreciated.

[tdavidl]

geeze, too bad he didn;t just gift it to you, then his basis & holding period would have passed onto you & it sounds like you would have had little gain & long term if any.

i think he should have filed a gift t/r either way as $100 wouldn't appear to be an arms length transaction & the irs would have probably viewed it as a gift anyway.