Basis Other than Cost
There are times when cost alone cannot be used as basis. In some cases, the fair market value (FMV) or adjusted basis is used.
Property Received as a Gift
To determine the basis of property received as a gift, taxpayers must know its adjusted basis to the donor just before it was given to the taxpayer. Taxpayers also need to know the FMV at the time of the donation and the amount of any gift tax paid on the donation. Determination of the adjusted basis of property received as a gift can be very complex. It is beyond the scope of VITA/TCE.
Property Inherited Before 2010 and after 2010
The basis of property inherited before 2010 and after 2010 is generally the FMV of the property on the date of the decedent's death. However, this can vary if the personal representative of the estate elects to use an alternate valuation date or other acceptable method. If the basis of the inherited property is determined by a method other than the FMV of the property on the date of the decedent's death, it is beyond the scope of VITA/TCE. The taxpayer will need to be referred to a professional tax preparer.
Property Inherited During 2010 (after December 31, 2009, and before January 1, 2011)
Special rules may apply to property inherited from a decedent who died in 2010. Determining the basis of such property can be complex. Refer taxpayers to a professional tax preparer for determination of basis issues. For more information on the special rules, see Publication 4895, Tax Treatment of a Property Acquired from a Decedent Dying in 2010.
For additional information on how to figure the basis, refer to the Basis of Property chapter in Publication 17.
Refer taxpayers to a professional tax preparer if they need assistance to compute the basis of property that was inherited or received as a gift. If the taxpayer knows the basis of the property, you can provide assistance.