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the land was given as a gift over the course of 4 years at a value of $40,000 per year for a total gift value of $160,000.

Does this help? How could Ira have figured the max as $118,500 with this information being provided?

Very simply. The gift value of the property is irrelevant except in the rare case where that value is less than the cost basis of the person making the gift and the recipient sells the property for less than that cost basis.

The relevant amount is the cost basis of the property in the hands of the person giving the gift. Since you haven't provided that information (and I assume you don't have it) I assumed a worst case scenario where the cost basis is $0. This results in the maximum capital gains tax of $118,500. Your circumstances are likely to result in less than that tax bill, but that's the worst.

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