Yes. You would add any improvement costs to the basis. Your basis for the gifted home is as follows:
If the FMV
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.
If the FMV
of the property at the time of the gift is less than the donor's adjusted basis, your adjusted basis depends on whether you have
a gain or loss when you dispose of the property.
