You do not have to report anything on your 2017 tax return for the property you receive as a gift. The donor of the property may a gift tax to file, but you will not deal with taxes on the property until the property is sold or otherwise disposed of. What you need to figure out is your basis in this property so that when and if you do sell it, you can then determine the amount of any gains, losses, and taxes on that transaction. For determining gain, the basis is the same as it would have been in the hands of the donor and is called a "carryover" basis.
To figure out the basis of property you receive as a gift, you must know three amounts:
- The adjusted cost basis to the donor just before the donor made the gift to you.
- The fair market value (FMV) at the time the donor made the gift.
- The amount of any gift tax paid on Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.
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.
- Your basis for figuring a gain is the same as the donor's adjusted basis, plus or minus any required adjustments to basis while you held the property.
- Your basis for figuring a loss is the FMV of the property when you received the gift, plus or minus any required adjustments 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 get a gain, you have neither a gain nor loss on the sale or disposition of the property.
