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Assets Received by Gift

To figure the basis of property you receive as a gift, you must know the adjusted basis to the donor just before it was given to you, its fair market value (FMV) at the time it was given to you and any gift tax paid on it.

FMV less than Donor's Adjusted Basis - If the FMV of the property was less than the donor's adjusted basis, your basis for gain on its sale or other disposition is the same as the donor's adjusted basis plus or minus any required adjustment to basis during the period you held the property. Your basis for loss on its sale or other disposition is its FMV at the time you received the gift plus or minus any required adjustment to basis during the period you held the property.

FMV equal to or more than donor's adjusted basis - If the FMV of the property was 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. Increase your basis by all or part of the gift tax paid, depending on the date of the gift. For figuring gain or loss from a sale or other disposition of the property or figuring depreciation, depletion or amortization deductions on business property, you must increase or decrease your basis (the donor's adjusted basis) by any required adjustments to basis while you held the property.

Gifts received before 1977 - If you receive a gift before 1977, increase your basis in the gift by the gift tax paid on it. However, do not increase your basis above the FMV of the gift when it was given to you.

Gifts received after 1976 - If you received a gift after 1976, increase your basis in the gift by the part of the gift tax paid that is due to the net increase in the value of the gift. Figure the increase by multiplying the gift tax paid on the gift by a fraction. The numerator of the fraction is the net increase in value of the gift, and the denominator is the amount of the gift. The net increase in value of the gift is the FMV of the gift minus the donor's adjusted basis.