Frequently Asked Tax Questions And Answers
Keyword: Gifts
4.7 Interest/Dividends/Other Types of Income: Gifts & Inheritances
Are gifts, bequests, or inheritances taxable?
Generally, property you receive as a gift, bequest, or inheritance is not
included in your income. However, if property you receive this way later produces
income such as interest, dividends, or rentals, that income is taxable to
you. For additional information, refer to Publication 17, Your Federal
Income Tax, Chapter 13. If you inherit an Individual Retirement Arrangement
(IRA) or proceeds from a retirement (pension) plan, special rules apply. Refer
to Publication 590, Individual Retirement Arrangements (IRAs),
or Publication 575, Pension and Annuity Income, for further information.
For additional information on this subject see Gifts.
References:
10.1 Capital Gains, Losses/Sale of Home: Property (Basis, Sale of Home, etc.)
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.
References:
10.2 Capital Gains, Losses/Sale of Home: Stocks (Options, Splits, Traders)
I received stock as a gift from my grandparents. I am selling the stock
this year. How can I figure the basis of the gifted stock?
To figure the basis of property you receive as a gift, you must know its 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 the amount of any gift tax paid on it.
If the FMV of the property was less than the donor's adjusted basis, your basis
for figuring 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 figuring 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.
If the FMV of the property was equal to or greater than the donor's adjusted basis,
your basis for figuring gain or loss on its sale or other disposition is the same
as 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.
For further complete information, refer to Publication 17, chapter 14, Basis
of Property.
For additional information on this subject see Gifts.
References:
12.7 Small Business/Self-Employed/Other Business : Income & Expenses
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
Chapter 28 of Publication 17, Your Federal Income Tax .
For additional information on this subject seeGifts.
References:
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