What is the basis of property that I received as a gift?
To figure out the basis of property you receive as a gift, you must know three amounts:
- The adjusted cost basis to the donor just before the donor made the gift to you
- The fair market value (FMV) at the time the donor made the gift
- The amount of any gift tax paid on Form 709
If the FMV of the property at the time of 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 the basis while you held the property.
Your basis for figuring a loss is the FMV of the property when you received the gift, plus or minus any required adjustments to the basis while you held the property.
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 is equal to or greater than the donor’s adjusted basis, your basis is the donor’s adjusted basis at the time you received the gift.
All About Randall Brody
Randall is the Founder of Tax Samaritan, a boutique firm specializing in the preparation of taxes and the resolution of tax problems for Americans living abroad, as well as the other unique tax issues that apply to taxpayers. Here, they help taxpayers save money on their tax returns.