§1015 Basis of property acquired by gifts and transfers in trust

Summary

Tells how to figure the tax "basis" (the number used to figure gain or loss) when someone gets property by gift or certain trust transfers. If the property was given after December 31, 1920, the person who got it usually uses the same basis the donor had. But if the donor’s adjusted basis is higher than the property’s fair market value (FMV) at the gift date, then for figuring a loss the basis is the FMV. If the new owner does not know the donor’s facts, the IRS must try to get them. If the IRS cannot, it will use the FMV of the property as of the date the donor got it. If the property came by a trust transfer (not by gift, will, or inheritance) after December 31, 1920, the basis is the grantor’s basis changed by any gain or loss the grantor had to report when making the transfer. Property acquired on or before December 31, 1920, gets a basis equal to its FMV when acquired. Gift tax can raise the donee’s basis. For gifts made on or after September 2, 1958, the basis is the donor’s basis plus the part of gift tax that applies to that gift, but not above the FMV at the gift. Gifts made before September 2, 1958, that were still held on that date get an increase then, limited the same way. The gift tax allocated to a particular gift is the share of the donor’s total gift tax for the year that matches that gift’s taxable amount; special rules apply if the donor split the gift with a spouse. For gifts after December 31, 1976, the increase is the gift tax paid times the ratio of the gift’s net appreciation (FMV minus donor’s basis) to the gift amount, but never more than the tax paid. Transfers covered by the rules for transfers incident to divorce are handled under those divorce-transfer rules, not these rules.