Receiving Act of Donation
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user314159
Level 1

Receiving Act of Donation

My mother and I were co-owners in a residential property. This past year, I donated my half of ownership in the property to my mother. Does she need to count the donation as any kind of income in her taxes? Do I need to show anything on my taxes? The act of donation has no monetary value on it.

3 Replies
ColeenD3
Employee Tax Expert

Receiving Act of Donation

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.

 

 

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user314159
Level 1

Receiving Act of Donation

Thanks for the help. The notorized forms we received are titled "Act of Donation" and "Act of Acceptance," so that's why I referred to it as an act of donation. 

 

So just to make sure I understand correctly, based on this thread, as the recipient, my mom's taxes are unaffected and she doesn't need to show anything on her taxes, but I must file form 709 with my taxes as the donor and potentially pay some extra tax. However, turbotax doesn't have this form and I need to get it from the IRS.

 

I found this thread defining "cost basis" as essentially original cost plus changes in value during ownership. Is there a difference between "cost basis" and "adjusted cost basis?"

 

I never bought the ownership in the property, rather I inherited it. Based on what I'm seeing in different threads, I would expect my "original cost" in the cost basis calculation to be the fair market value at the date of inheritance. Is that correct?

 

Finally, I was planning to e-file with turbotax. How does e-filing work when there are forms such as form 709 that are unknown to turbotax? Also, must I file the 709 form or one like it with my state return as well? 

ColeenD3
Employee Tax Expert

Receiving Act of Donation

The Form 709 is separate from your Federal Tax Return. You will not be required to pay any tax as the Uniform Gift and Estate Tax is quite high. You can print the form from here.

 

Yes, your cost basis is the FMV on the date of death, plus any improvements.

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