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

§ 1.1014-0 Table of contents.§ 1.1014-1 Basis of property acquired from a decedent.§ 1.1014-2 Property acquired from a decedent.§ 1.1014-3 Other basis rules.§ 1.1014-4 Uniformity of basis; adjustment to basis.§ 1.1014-5 Gain or loss.§ 1.1014-6 Special rule for adjustments to basis where property is acquired from a decedent prior to his death.§ 1.1014-7 Example applying rules of §§ 1.1014-4 through 1.1014-6 to case involving multiple interests.§ 1.1014-8 Bequest, devise, or inheritance of a remainder interest.§ 1.1014-9 Special rule with respect to DISC stock.§ 1.1014-10 Basis of property acquired from a decedent must be consistent with property's Federal estate tax value.

Cases: Casey v. Commissioner, 38 T.C. 357 (1962); Quick Trust v. Commissioner, 54 T.C. 1336 (1970); Levin v. United States, 373 F.2d 434 (1st Cir. 1967)

Final rules 3

(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—

Amended 1978, 1997

1997 Pub. L. 105-34 Pub. L. 105–34 struck out “or” at end of pars. (1) and (2), struck out the period at end of par. (3) and inserted “, or”, and added par. (4).
1978 Pub. L. 95-600 Pub. L. 95–600, § 702(c)(1)(A), designated existing provisions as pars. (1) and (2) and added par. (3).

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(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,

Amended 2014

2014 Pub. L. 113-295 Pub. L. 113–295, § 221(a)(74)(A), amended par. (2) generally. Prior to amendment, par. (2) read as follows: “in the case of an election under either section 2032 or section 811(j) of the Internal Revenue Code of 1939 where the decedent died after October 21, 1942, its value at the applicable valuation date prescribed by those sections,”.

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

Amended 1980

1980 Pub. L. 96-222 Pub. L. 96–222 substituted “section 2032A” for “section 2032.1”.

(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:

Amended 2014

2014 Pub. L. 113-295 Pub. L. 113–295, § 221(a)(74)(B), struck out pars. (7) and (8). Prior to repeal, par. (7) related to property representing a surviving spouse’s one-half share of community property held by the surviving spouse and a decedent dying after Oct. 21, 1942, and on or before Dec. 31, 1947, and par. (8) related to property representing certain interests of the survivor in a joint and survivor’s annuity in the case of a decedent dying after Dec. 31, 1950, and before Jan. 1, 1954.

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

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(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;

Amended 2004

2004 Pub. L. 108-357 Pub. L. 108–357 inserted “and before January 1, 2005,” after “August 26, 1937,”.

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(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;

“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;” Opening words

Textual readingALL OF= property acquired from the decedent

“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”

“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”

Amended 1976

1976 Pub. L. 94-455 Pub. L. 94–455, § 1901(c)(8), struck out “Territory,” after “under the community property laws of any State,”.

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

Amended 1976, 2014

2014 Pub. L. 113-295 Pub. L. 113–295, § 221(a)(74)(B), struck out pars. (7) and (8). Prior to repeal, par. (7) related to property representing a surviving spouse’s one-half share of community property held by the surviving spouse and a decedent dying after Oct. 21, 1942, and on or before Dec. 31, 1947, and par. (8) related to property representing certain interests of the survivor in a joint and survivor’s annuity in the case of a decedent dying after Dec. 31, 1950, and before Jan. 1, 1954.
1976 Pub. L. 94-455 Pub. L. 94–455, § 1901(c)(8), struck out “Territory,” after “under the community property laws of any State,”.

(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—

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(A) annuities described in section 72;

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

(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).

Amended 1983

1983 Pub. L. 97-448 Pub. L. 97–448 added par. (10).

(c) Property representing income in respect of a decedent 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.

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(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.

Amended 1958, 1971, 1976, 1978, 1980

1980 Pub. L. 96-223 Pub. L. 96–223 repealed the amendment made by Pub. L. 94–455, § 2005(a)(1). See 1976 Amendment note below.
1978 Pub. L. 95-600 Pub. L. 95–600, § 515(1), substituted “December 31, 1979” for “December 31, 1976” in heading and text.
1976 Pub. L. 94-455 Pub. L. 94–455, § 2005(a)(1), substituted provision relating to the applicability of this section to decedents dying after 1976 for provision relating to a special rule with respect to DISC stock. See Repeals note below.
1971 Pub. L. 92-178 Pub. L. 92–178 added subsec. (d).
1958 Pub. L. 85-320 Pub. L. 85–320 repealed subsec. (d) which made section inapplicable to restricted stock options described in section 421 which the employee has not exercised at death.

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

Amended 1981

1981 Pub. L. 97-34 Pub. L. 97–34 added subsec. (e).

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(1) In general In the case of a decedent dying after December 31, 1981, if—

“In the case of a decedent dying” Opening words

“after December 31, 1981,” Opening words

Textual readingALL OF= donor takes decedent's adjusted basis

(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

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(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.

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(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—

Amended 2001, 2010, 2015

2015 Pub. L. 114-41 Pub. L. 114–41 added subsec. (f).
2010 Pub. L. 111-312 Pub. L. 111–312 amended section to read as if amendment by Pub. L. 107–16, § 541, had never been enacted. See 2001 Amendment note below. Prior to amendment, text of subsec. (f) read as follows: “This section shall not apply with respect to decedents dying after December 31, 2009.”
2001 Pub. L. 107-16 Pub. L. 107–16, § 541, added subsec. (f).

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

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(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

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(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,

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(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

(4) Regulations The Secretary may by regulations provide exceptions to the application of this subsection.