@curious4913 wrote:
If I am not wrong recipient's cost basis is adjusted cost basis of donor on the date of receiving such property.
But how does donor calculates this adjusted cost basis particularly when house was purchased 10 years ago by said donor and he made various improvements by himself and paid cash for help most of the times.
Now the fair market value is almost 4 times than he originally purchased. But unless donor can give a detailed proof of improvements ..recipient's cost basis will always be donor' original purchase price 10 years ago??
That is correct; the recipient's (donee's) basis will be the donor's cost basis and the recipient takes the holding period of the donor (long term in this case). Note that if the fair market value is less than the adjusted basis at the time of the gift, then that is taken into consideration upon a disposition of the property.
See https://www.irs.gov/faqs/capital-gains-losses-and-sale-of-home/property-basis-sale-of-home-etc/prope...
You will have to re-create (somehow) a record of improvements made, but note that you cannot include the value of your labor or the original homeowner's labor, only the cost of the materials.
