What is the basis of property received as a gift?
To figure the basis of property you get as a gift, you must know its adjusted
basis to the donor just before it was given to you. You also must know its
fair market value (FMV) at the time it was given to you. If the FMV of the
property at the time of the gift is less than the donor's adjusted basis,
your basis depends on whether you have a gain or loss when you dispose of
the property. Your basis for figuring 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 when you
received the gift, plus or minus any required adjustments to basis while you
held the property. See Adjusted Basis in Publication 551, Basis of
Assets.
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 or 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. Increase
your basis by all or part of any gift tax paid, depending on the date of the
gift. Also, for figuring gain or loss, you must increase or decrease your
basis by any required adjustments to basis while you held the property. See
Adjusted Basis in Publication 551, Basis of Assets.
If you received a gift before 1977, increase your basis in the gift (the
donor's adjusted basis) by any gift tax paid on it. However, do not increase
your basis above the FMV of the gift at the time it was given to you.
If you received a gift after 1976, increase your basis by the part of the
gift tax paid on it that is due to the net increase in value of the gift.
Figure the increase to basis by multiplying the gift tax paid by the following
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 less the donor's
adjusted basis. The amount of the gift is its value for gift tax purposes,
after reduction by any annual exclusion and any marital or charitable deduction
that applies to the gift. For more information on the gift tax, please see Publication 950, Introduction to Estate and Gift Taxes.
For additional information on this subject see Gifts.
Are business gifts deductible?
If you give business gifts in the course of your trade or business, you
can deduct the cost subject to special limits and rules. In general, you can
deduct no more than $25 for business gifts you give directly or indirectly
to any one person during your tax year. Exceptions may apply. For additional
information, refer to Tax Topic 512 and Publication 463, Travel,
Entertainment, Gift, and Car Expense .
For additional information on this subject see Gifts.
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