It is not a donation, because she is not a recognized charity. It is a gift and it does have monetary value. You will have to file Form 709 showing the gift. She will have to increase her own basis in the property.
To figure out the basis of property you receive as a gift, you must know three amounts:
- The adjusted cost basis to the donor
- The fair market value (FMV) at the time the donor made the gift
- The amount of gift tax paid on Form 709
If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property.
- Your basis for figuring gain is the same as the donor's adjusted basis plus or minus any required adjustment to basis while you held the property.
- Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustment to basis while you held the property
NOTE: If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and have a gain, you have neither gain nor loss on the sale or disposition of the property.
If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift.
