Thank you everyone for the help...I have tried all your ideas, and though they seem to be getting me closer, it's not quite working right yet. I am sorry this is so hard for me to figure out, I am sure I am making some dumb mistake.

Right now I am using portb.7 for the input pin, as to not interfere with the used components on the lab X2 pin. So far I have no response to anything from the output program, the codes I am currently using are as follows.

Transmitting Program
CLEAR

DEFINE OSC 20 'Defines oscillator rate
INCLUDE "modedefs.bas"
ADCON1=%11111111 'Sets all ports to digital
TRISD.0=0 'Sets Portd.0 to output
LED VAR BYTE : LED=1 'Declares and defines LED variable
LOOP: 'Start of main loop
SERout PORTD.0,T2400,[LED] : PAUSE 50 'Sends LED value serially
IF LED=1 THEN
LED=0
ELSE
LED=1
ENDif 'out of portd.0
GOTO LOOP 'Repeat forever
END

Receiving Program:

CLEAR

DEFINE OSC 20 'Defines oscillator
INCLUDE "modedefs.bas"
ADCON1=%11111111 'Sets all ports to digital
TRISB=%10000000 'Sets Portb.4 to input
LED VAR BYTE 'Declares and sets LED variable to 0
LOOP:
SERIn PORTB.7,T2400,[LED]: PAUSE 50 'Checks portb.4 for serial imput
IF LED=1 THEN 'If LED equals 1, turn LED 2 on and 3
PORTB.1=1 'off, otherwise turn 3 on and two off
PORTB.2=0
ELSE
PORTB.1=0
PORTB.2=1
ENDIF
PAUSE 100 'Pause to see results
GOTO LOOP 'Repeat
END

I am wondering is possibly I am not using the right defines?

Thanks,
Matt