What is the basis of property acquired by gift?
The term “basis” generally refers to a taxpayer’s capital stake in property, which is used when determining the gain or loss on the sale or exchange of property. Basis is also used to determine the amount of depreciation allowances. Basis is generally the cost of or amount paid for the property. Under section 1015(a) of the Internal Revenue Code (IRC), the recipient of a gift (donee) generally has the same basis in the gift as the basis of the gift giver (donor) or last preceding owner by whom it was not acquired by gift. If this basis, however, after being adjusted for the period before the date of the gift, is more than the fair market value of the gift at the time the property was given away, then the basis for determining loss is the fair market value of the property. For gifts acquired after September 2, 1958, the basis is the basis under section 1015(a) plus the amount of gift tax paid. This new basis cannot be more than the fair market value at the time of the gift. Under sectio
