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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75383  
Subject: Re: $10,000 Gift Date: 10/17/2011 4:28 PM
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Once that person has it, I assume any investment gains they will be responsible for as the cost basis is at gift date?

That is not correct.

If the gift is something other than cash, the donor's tax basis will transfer to the recipient. So the recipient takes over the basis from the donor, and will be responsible for paying the tax on any gain while the donor held the property.

However, if the FMV of the gift is less than the basis (i.e., the donor suffered a loss before donating), then the FMV becomes the basis for purposes of calculating a loss. For purposes of calculating gains, the recipient's basis will still be the donor's basis. The idea here is that you can't transfer a loss on a property by making a gift of the property.

Choosing to make a gift of highly appreciated or depreciated property is something that must be done carefully.

In any case, the gift tax issues (not income tax, but gift tax) are all based on the FMV of the property.

--Peter
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