How is the basis of property determined for property acquired by gift?
The basis of property acquired by gift is the donor’s (the gift giver’s) adjusted basis in the property on the date of the gift, plus a portion of the gift tax paid as a result of the gift. Basis is usually determined with reference to the cost of an asset. Basis, however, is adjusted to reflect additional costs or improvements made with respect to an asset. For example, if the asset is real property, the beginning basis would be the cost of the property and then would increase to reflect costs incurred such as closing costs, architects’ fees, building permits, and costs of capital improvements. The basis would be decreased for depreciation deductions claimed with respect to the property.
The basis of property acquired by gift is the donor’s (the gift giver’s) adjusted basis in the property on the date of the gift, plus a portion of the gift tax paid as a result of the gift. Basis is usually determined with reference to the cost of an asset. Basis, however, is adjusted to reflect additional costs or improvements made with respect to an asset. For example, if the asset is real property, the beginning basis would be the cost of the property and then would increase to reflect costs incurred such as closing costs, architects’ fees, building permits, and costs of capital improvements. The basis would be decreased for depreciation deductions claimed with respect to the property. Basis is increased by the part of the gift tax paid that is due to the net increase in the value of the gift. Example: If a taxpayer receives a gift with a fair market value of $20,000 and an adjusted basis of $10,000, the net increase in value is $10,000. The gift tax paid of $3,000 is allocated to t
