Question
What is the basis of property received as a gift?
Answer

To figure out the basis of property received as a gift, you must know three amounts:

If the FMV of the property at the time the donor made the gift is less than the donor's adjusted basis, your adjusted basis depends on whether you have a gain or loss when you dispose of the property.

  • Your basis for figuring a gain is the same as the donor's adjusted basis, plus or minus any required adjustments to basis while you held the property.
  • Your basis for figuring a loss is the FMV of the property at the time the donor made the gift, plus or minus any required adjustments to basis while you held the property.
  • Note: If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and get a gain, you have neither a gain nor loss on the sale or disposition of the property.

If the FMV of the property at the time the donor made the gift is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis just before the donor made the gift.

  • If the donor paid a gift tax on the gift and made the gift after 1976, increase your basis by the gift tax paid on the net increase in value. To figure out the net increase in value or for other information on gifts received before 1977, see Publication 551, Basis of Assets.
  • For figuring gain or loss, you must increase or decrease your basis by any required adjustments to basis while you held the property.