26 U.S.C. § 1014 — Basis of property acquired from a decedent

submitted 72 years ago by ch. 736 to r/title-26-INTERNAL-REVENUE-CODE · 1,443 words · no verdicts yet

in plain englishAI-generated · not legal advice

Usually, property received from a person who died gets a tax basis equal to its fair market value at death, subject to the section’s special rules. The section lists property treated as received from the decedent and rules for income rights, DISC stock, gifts shortly before death, and estate-tax values.

(a) In general. Unless this section provides otherwise, property received from, or passing from, a decedent has a basis equal to its fair market value at the decedent’s death. If section 2032 was elected, use the value on that section’s valuation date. If section 2032A was elected, use the value determined under that section. To the extent section 2031(c)’s exclusion applies, use the decedent’s basis. This rule applies only if the property was not sold, exchanged, or otherwise disposed of before death by the person receiving it. (b) Property treated as received from the decedent. This includes: (1) property received by bequest, devise, or inheritance, including by the estate; (2) property transferred during life in a trust paying income for life to, or as directed by, the decedent, when the decedent kept the power to revoke; (3) for a decedent dying after December 31, 1951, such a trust when the decedent kept power to change enjoyment by altering, amending, or ending the trust; (4) property passing without full and adequate payment under a general power of appointment exercised by will; (5) for deaths after August 26, 1937 and before January 1, 2005, stock or securities of a foreign corporation that, for its taxable year immediately preceding the decedent’s death, was a foreign personal holding company under the law applicable to that year, with basis equal to the lower of fair market value at death or the decedent’s basis; (6) for deaths after December 31, 1947, community property representing the surviving spouse’s one-half share when at least half of the community interest was included in the decedent’s gross estate; (7) and (8) are repealed; (9) for deaths after December 31, 1953, property acquired because of death, ownership form, or another condition, including exercise or nonexercise of a power of appointment, when it must be included in the gross estate. If that property was acquired before death, reduce the subsection (a) basis by pre-death deductions for exhaustion, wear, obsolescence, amortization, and depletion. That basis applies beginning at death. This paragraph does not apply to section 72 annuities, property described in paragraph (5), or property described in another paragraph of this subsection; and (10) property included under section 2044, with the last three sentences of paragraph (9) applying. (c) Income in respect of a decedent. This section does not apply to a right to receive income in respect of a decedent under section 691. (d) DISC stock. If DISC or former DISC stock receives a new basis under subsection (a), reduce that basis by any amount that would have been included as a section 995(c) dividend if the decedent had lived and sold it at fair market value on the estate-tax valuation date. Determine the hypothetical gain without the last sentence of section 996(e)(2). The valuation date is death, or the section 2032 valuation date if elected. (e) Appreciated property gifted within one year. For a decedent dying after December 31, 1981, if the decedent received appreciated property by gift within one year before death and it returns to the donor or the donor’s spouse, that person’s basis is the decedent’s adjusted basis immediately before death. “Appreciated property” means property whose value when gifted exceeded its adjusted basis. If the estate or a trust of which the decedent was grantor sells such property and the donor or spouse receives the proceeds, the same rule applies to that extent. (f) Estate-tax consistency. A basis under subsection (a) may not exceed the property’s final estate-tax value, or, if no final value was determined, the value identified in a statement under section 6035(a), but only when including the property increased estate-tax liability after allowable credits. Value is considered determined if it is reported under section 6018 and not timely challenged by the Secretary, specified by the Secretary and not timely challenged by the executor, or determined by a court or settlement with the Secretary. The Secretary may make regulatory exceptions.

the actual law source: uscode.house.gov ↗public domain

(a) In general

Except as otherwise provided in this section, the basis of property in the hands of a person acquiring the property from a decedent or to whom the property passed from a decedent shall, if not sold, exchanged, or otherwise disposed of before the decedent’s death by such person, be—

(1)

the fair market value of the property at the date of the decedent’s death,

(2)

in the case of an election under section 2032, its value at the applicable valuation date prescribed by such section,

(3)

in the case of an election under section 2032A, its value determined under such section, or

(4)

to the extent of the applicability of the exclusion described in section 2031(c), the basis in the hands of the decedent.

(b) Property acquired from the decedent

For purposes of subsection (a), the following property shall be considered to have been acquired from or to have passed from the decedent:

(1)

Property acquired by bequest, devise, or inheritance, or by the decedent’s estate from the decedent;

(2)

Property transferred by the decedent during his lifetime in trust to pay the income for life to or on the order or direction of the decedent, with the right reserved to the decedent at all times before his death to revoke the trust;

(3)

In the case of decedents dying after December 31, 1951, property transferred by the decedent during his lifetime in trust to pay the income for life to or on the order or direction of the decedent with the right reserved to the decedent at all times before his death to make any change in the enjoyment thereof through the exercise of a power to alter, amend, or terminate the trust;

(4)

Property passing without full and adequate consideration under a general power of appointment exercised by the decedent by will;

(5)

In the case of decedents dying after August 26, 1937, and before January 1, 2005, property acquired by bequest, devise, or inheritance or by the decedent’s estate from the decedent, if the property consists of stock or securities of a foreign corporation, which with respect to its taxable year next preceding the date of the decedent’s death was, under the law applicable to such year, a foreign personal holding company. In such case, the basis shall be the fair market value of such property at the date of the decedent’s death or the basis in the hands of the decedent, whichever is lower;

(6)

In the case of decedents dying after December 31, 1947, property which represents the surviving spouse’s one-half share of community property held by the decedent and the surviving spouse under the community property laws of any State, or possession of the United States or any foreign country, if at least one-half of the whole of the community interest in such property was includible in determining the value of the decedent’s gross estate under chapter 11 of subtitle B (section 2001 and following, relating to estate tax) or section 811 of the Internal Revenue Code of 1939;

[(7)

, (8) Repealed. Pub. L. 113–295, div. A, title II, § 221(a)(74)(B), Dec. 19, 2014, 128 Stat. 4049]

(9)

In the case of decedents dying after December 31, 1953, property acquired from the decedent by reason of death, form of ownership, or other conditions (including property acquired through the exercise or non-exercise of a power of appointment), if by reason thereof the property is required to be included in determining the value of the decedent’s gross estate under chapter 11 of subtitle B or under the Internal Revenue Code of 1939. In such case, if the property is acquired before the death of the decedent, the basis shall be the amount determined under subsection (a) reduced by the amount allowed to the taxpayer as deductions in computing taxable income under this subtitle or prior income tax laws for exhaustion, wear and tear, obsolescence, amortization, and depletion on such property before the death of the decedent. Such basis shall be applicable to the property commencing on the death of the decedent. This paragraph shall not apply to—

(A)

annuities described in section 72;

(B)

property to which paragraph (5) would apply if the property had been acquired by bequest; and

(C)

property described in any other paragraph of this subsection.

(10)

Property includible in the gross estate of the decedent under section 2044 (relating to certain property for which marital deduction was previously allowed). In any such case, the last 3 sentences of paragraph (9) shall apply as if such property were described in the first sentence of paragraph (9).

This section shall not apply to property which constitutes a right to receive an item of income in respect of a decedent under section 691.

(d) Special rule with respect to DISC stock

If stock owned by a decedent in a DISC or former DISC (as defined in section 992(a)) acquires a new basis under subsection (a), such basis (determined before the application of this subsection) shall be reduced by the amount (if any) which would have been included in gross income under section 995(c) as a dividend if the decedent had lived and sold the stock at its fair market value on the estate tax valuation date. In computing the gain the decedent would have had if he had lived and sold the stock, his basis shall be determined without regard to the last sentence of section 996(e)(2) (relating to reductions of basis of DISC stock). For purposes of this subsection, the estate tax valuation date is the date of the decedent’s death or, in the case of an election under section 2032, the applicable valuation date prescribed by that section.

(e) Appreciated property acquired by decedent by gift within 1 year of death

(1) In general

In the case of a decedent dying after December 31, 1981, if—

(A)

appreciated property was acquired by the decedent by gift during the 1-year period ending on the date of the decedent’s death, and

(B)

such property is acquired from the decedent by (or passes from the decedent to) the donor of such property (or the spouse of such donor),

the basis of such property in the hands of such donor (or spouse) shall be the adjusted basis of such property in the hands of the decedent immediately before the death of the decedent.

(2) Definitions

For purposes of paragraph (1)—

(A) Appreciated property

The term “appreciated property” means any property if the fair market value of such property on the day it was transferred to the decedent by gift exceeds its adjusted basis.

(B) Treatment of certain property sold by estate

In the case of any appreciated property described in subparagraph (A) of paragraph (1) sold by the estate of the decedent or by a trust of which the decedent was the grantor, rules similar to the rules of paragraph (1) shall apply to the extent the donor of such property (or the spouse of such donor) is entitled to the proceeds from such sale.

(f) Basis must be consistent with estate tax return

For purposes of this section—

(1) In general

The basis of any property to which subsection (a) applies shall not exceed—

(A)

in the case of property the final value of which has been determined for purposes of the tax imposed by chapter 11 on the estate of such decedent, such value, and

(B)

in the case of property not described in subparagraph (A) and with respect to which a statement has been furnished under section 6035(a) identifying the value of such property, such value.

(2) Exception

Paragraph (1) shall only apply to any property whose inclusion in the decedent’s estate increased the liability for the tax imposed by chapter 11 (reduced by credits allowable against such tax) on such estate.

(3) Determination

For purposes of paragraph (1), the basis of property has been determined for purposes of the tax imposed by chapter 11 if—

(A)

the value of such property is shown on a return under section 6018 and such value is not contested by the Secretary before the expiration of the time for assessing a tax under chapter 11,

(B)

in a case not described in subparagraph (A), the value is specified by the Secretary and such value is not timely contested by the executor of the estate, or

(C)

the value is determined by a court or pursuant to a settlement agreement with the Secretary.

(4) Regulations

The Secretary may by regulations provide exceptions to the application of this subsection.

Source credit: (Aug. 16, 1954, ch. 736, 68A Stat. 296; Pub. L. 85–320, § 2, Feb. 11, 1958, 72 Stat. 5; Pub. L. 92–178, title V, § 502(f), Dec. 10, 1971, 85 Stat. 550; Pub. L. 94–455, title XIX, § 1901(c)(8), title XX, § 2005(a)(1), Oct. 4, 1976, 90 Stat. 1803, 1872; Pub. L. 95–600, title V, § 515(1), title VII, § 702(c)(1)(A), Nov. 6, 1978, 92 Stat. 2884, 2926; Pub. L. 96–222, title I, § 107(a)(2)(A), Apr. 1, 1980, 94 Stat. 222; Pub. L. 96–223, title IV, § 401(a), Apr. 2, 1980, 94 Stat. 299; Pub. L. 97–34, title IV, § 425(a), Aug. 13, 1981, 95 Stat. 318; Pub. L. 97–448, title I, § 104(a)(1)(A), Jan. 12, 1983, 96 Stat. 2379; Pub. L. 105–34, title V, § 508(b), Aug. 5, 1997, 111 Stat. 860; Pub. L. 107–16, title V, § 541, June 7, 2001, 115 Stat. 76; Pub. L. 108–357, title IV, § 413(c)(18), Oct. 22, 2004, 118 Stat. 1508; Pub. L. 111–312, title III, § 301(a), Dec. 17, 2010, 124 Stat. 3300; Pub. L. 113–295, div. A, title II, § 221(a)(74), Dec. 19, 2014, 128 Stat. 4049; Pub. L. 114–41, title II, § 2004(a), July 31, 2015, 129 Stat. 454.)

history & why it existsrecord from the source credit

1954Enacted · Act of Aug. 16, 1954, ch. 736
1958Amended · Pub. L. 85-320 · 72 Stat. 5
1971Amended · Pub. L. 92-178 · 85 Stat. 550
1976Amended · Pub. L. 94-455 · 90 Stat. 1803, 1872
1978Amended · Pub. L. 95-600 · 92 Stat. 2884, 2926
1980Amended · Pub. L. 96-222 · 94 Stat. 222
1980Amended · Pub. L. 96-223 · 94 Stat. 299
1981Amended · Pub. L. 97-34 · 95 Stat. 318
1983Amended · Pub. L. 97-448 · 96 Stat. 2379
1997Amended · Pub. L. 105-34 · 111 Stat. 860
2001Amended · Pub. L. 107-16 · 115 Stat. 76
2004Amended · Pub. L. 108-357 · 118 Stat. 1508
2010Amended · Pub. L. 111-312 · 124 Stat. 3300
2014Amended · Pub. L. 113-295 · 128 Stat. 4049
2015Amended · Pub. L. 114-41 · 129 Stat. 454

A history note hasn’t been published yet. The record shows enactment by ch. 736 on 1954-08-16.

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