Series 22: Taxation Of Estates And Gifts

Taxation of Estates and Gifts

When someone gives an asset to another person as a gift, or leaves an asset to another person at death, the recipient’s cost basis is the lower of the (1) giver’s cost basis or the (2) fair market value at the time of the gift. The giver’s holding period will correspond to cost basis. For example, if the giver has held the asset for two years with a cost basis of $20 and the asset is now worth $30, the recipient’s cost basis would also be $20 with a holding period of 2 years.

If the donor owes estate or gift taxes, the tax is based on the difference between the asset’s fair market value at the time the gift