@DJ
“Ninja Question #730 and #722 seem to contradict each other. When you receive a gift is the basis the fair market value at the date the gift is received or is the basis the donor’s basis?”
There are a few gift giving tax laws that you just have to memorize and then it will make sense. The related party loss rules follow the same pattern.
#730 is an example of inherited property.
Inherited property basis:
– property acquired by bequest or inheritance generally takes as its basis the step-up or step-down to the FMV at the date of the decedent’s death
– if validly elected by the executor, the asset is valued using FMV at the earlier of the distribution date of the asset (if sold after death of decedent but before six months period is over) or six months after death
Holding period for inherited property:
– property acquired from a decedent is automatically considered to be long-term property
#722
Gifted property basis for gain/loss purposes:
– property acquired as a gift generally retains the cost basis it had in the hands of the donor at the time of the gift
– basis is increased by any gift tax paid
Exception rules if FMV of gift is lower than adjusted basis at date of gift, and recipient sells the gift:
1) Sale of gifts at price greater than donor’s rollover basis –> gain is difference between sale price and the rollover basis
2) Sale of gifts at price less than lower FMV (loss basis) –> basis is the FMV of the gift at the time the gift was given for determining loss purposes
3) Sale less than rollover cost basis but greater than lower FMV –> no gain or loss
Also, keep in mind that the holding period generally follows whether the donor's basis is being used or date of the FMV.
BEC = 72 (6/08/16)
FAR = ?
REG = ?
AUD = ?
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