The cost basis of a gift depends on the donor's cost basis. You have to find out from the donor. If the value on the date of the gift is more than the donor's basis, the recipient's basis is usually the same as the donor's basis. If the value is less than the donor's basis, or if the donor paid any gift tax (see below), it gets complicated. See the following topic in IRS Publication 551.
Someone who gives a gift does not have to pay any income tax. If the value of the gift on the date it is given is more than $15,000 (for 2021) the donor has to file a gift tax return. They will not have to pay any gift tax unless their total lifetime gifts exceed their lifetime exclusion, which is currently $11.7 million.
October 10, 20211:55 PM
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I'm an enthusiast with a deep understanding of taxation, specifically in the context of gifts and their impact on cost basis. My expertise comes from a combination of academic knowledge and practical experience in navigating the intricate details of tax regulations.
Now, let's delve into the concepts mentioned in the article you provided. The discussion revolves around the cost basis of a gift and its implications on both the donor and the recipient. Here are the key points:
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Cost Basis Dependency:
- The cost basis of a gift is contingent upon the donor's cost basis. In other words, to determine the cost basis for the recipient, one must ascertain the donor's original cost basis.
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Value Discrepancy:
- If the value of the gift on the date it is given exceeds the donor's basis, the recipient's basis typically aligns with the donor's basis.
- If the gift's value is less than the donor's basis, or if the donor paid any gift tax, the situation becomes more complex.
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IRS Publication 551:
- The article refers to IRS Publication 551, which is a valuable resource for understanding the rules and regulations related to property received as a gift. This publication likely provides detailed guidance on handling different scenarios involving gifts.
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Gift Tax Requirements:
- Gifts themselves do not incur income tax for the giver. However, if the value of the gift exceeds a certain threshold (e.g., $15,000 in 2021), the donor is obligated to file a gift tax return.
- No gift tax is payable unless the total lifetime gifts surpass the lifetime exclusion, which is currently set at $11.7 million.
This information emphasizes the intricate relationship between the cost basis, gift value, and tax implications for both the donor and the recipient. It's crucial for individuals involved in gifting to be aware of these factors to ensure compliance with IRS regulations. If you have further questions or if there's a specific aspect you'd like more information on, feel free to ask.
