What is the basis of a gifted asset?
Mia Ramsey
Published Apr 01, 2026
When you receive a gift, you generally take the donor’s basis in the property. (This is often referred to as a “carryover” or “transferred” basis.) The carryover basis is increased — but not above fair market value (FMV) — by any gift tax paid that is attributable to appreciation in value of the gift.
How does cost basis work with gifted stock?
The cost basis of stock you received as a gift (“gifted stock”) is determined by the giver’s original cost basis and the fair market value (FMV) of the stock at the time you received the gift. If the FMV when you received the gift was more the original cost basis, use the original cost basis when you sell.
Your basis for figuring a 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.
How to determine cost basis of gifted property?
If your grandfather bought the property, then there is your starting point. You are going to need to find a way to figure out what he paid for it. You can research the property records at the courthouse and see if the sale was recorded. If your grandfather inherited the property, then we have a new scenario.
How is the basis of a gift determined?
Where an asset transferred by gift depreciates to a value below the donor’s original cost, the recipient’s basis is the fair market value of the asset at the time of the gift.
Can a gift recipient’s carryover basis be increased?
Neither Gain Nor Loss. The gift recipient’s carryover basis can be increased where the donor has paid a federal gift tax on the transfer. The amount of the gift tax that is attributable to the appreciation in value of the asset as of the date of the gift can be added by the recipient to his carryover basis.
How does FMV affect the adjusted basis of a gift?
If the FMV of the property at the time of the gift is less than the donor’s adjusted basis, your adjusted basis depends on whether you have a gain or loss when you dispose of the property.
