GIFT BASIS AND HOLDING PERIOD

General rule for tax basis in gifted property

the donors basis becomes the donees

exception to the rule of tax basis for gifted property

when FMV at date of gift is < Donors NBV

when sales price > NBV (basis)

use NBV as the basis and a gain is recognised

when sales price is < FMV (basis)

use the FMV as the basis and a gain is recognised

when sales price is between NBV and FMV (basis)

use sales price as basis

general rule for holding period for gifted property

the recipient of a gift gets to absorb the donors holding period

When the donee sells the gifted property at a sales price higher than the NBV (holding period)

the donee will use the donors holding period

when sales price < fmv holding period is

holding period begins at the date of the gift

when sales price is between NBV and FMV holding period is

the holding period is not relevant