The cost basis of a received as a gift ("gifted is determined by the giver's original cost basis and the fair market value (FMV) at the time you received the gift.
- If the FMV when you received the gift was more than the original cost basis, use the original cost basis when you sell. This is the most commonly-encountered situation
- If the FMV when you received the gift was less than the original basis, and you later sold
- More than the original basis: use the original basis
- More than the FMV at the time of the gift but less than the original basis: your selling price becomes the cost basis. You won't report a gain or loss in this situation
- Less than the FMV at the time of the gift: use the FMV at the time of the gift
The basis at death is equal to the fair market value as of the person's death. If the value of the property owned by the person who died had decreased since that person acquired it, the basis will be decreased.
However in a joint tenancy or a tenancy by the entirety that passes to the other owner by operation of law is considered property acquired from a decedent Therefore, the cost basis would be half of the original basis plus one half of the FMV of the decedent. The surviving tenant's basis in the property consists of his or her old basis in their original interest and the fair market value of the decedent's interest.
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