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Internal Revenue Code, § 1014. Basis Of Property Acquired From A Decedent

I.R.C. § 1014(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—
I.R.C. § 1014(a)(1)
the fair market value of the property at the date of the decedent's death,
I.R.C. § 1014(a)(2)
in the case of an election under section 2032, its value at the applicable valuation date prescribed by such section,
I.R.C. § 1014(a)(3)
in the case of an election under section 2032A, its value determined under such section, or
I.R.C. § 1014(a)(4)
to the extent of the applicability of the exclusion described in section 2031(c), the basis in the hands of the decedent.
I.R.C. § 1014(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:
I.R.C. § 1014(b)(1)
Property acquired by bequest, devise, or inheritance, or by the decedent's estate from the decedent;
I.R.C. § 1014(b)(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;
I.R.C. § 1014(b)(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;
I.R.C. § 1014(b)(4)
Property passing without full and adequate consideration under a general power of appointment exercised by the decedent by will;
I.R.C. § 1014(b)(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;
I.R.C. § 1014(b)(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;
I.R.C. § 1014(b)(7)
[Struck by Pub. L. 113-295, Div. A, Sec. 221(a)(74)(B).]
I.R.C. § 1014(b)(8)
[Struck by Pub. L. 113-295, Div. A, Sec. 221(a)(74)(B).]
I.R.C. § 1014(b)(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—
I.R.C. § 1014(b)(9)(A)
annuities described in section 72;
I.R.C. § 1014(b)(9)(B)
property to which paragraph (5) would apply if the property had been acquired by bequest; and
I.R.C. § 1014(b)(9)(C)
property described in any other paragraph of this subsection.
I.R.C. § 1014(b)(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).
I.R.C. § 1014(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.
I.R.C. § 1014(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.
I.R.C. § 1014(e) Appreciated Property Acquired By Decedent By Gift Within 1 Year Of Death
I.R.C. § 1014(e)(1) In General
In the case of a decedent dying after December 31, 1981, if—
I.R.C. § 1014(e)(1)(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
I.R.C. § 1014(e)(1)(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.
I.R.C. § 1014(e)(2) Definitions
For purposes of paragraph (1)
I.R.C. § 1014(e)(2)(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.
I.R.C. § 1014(e)(2)(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.
I.R.C. § 1014(f) Basis Must Be Consistent With Estate Tax Return
For purposes of this section—
I.R.C. § 1014(f)(1) In General
The basis of any property to which subsection (a) applies shall not exceed—
I.R.C. § 1014(f)(1)(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
I.R.C. § 1014(f)(1)(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.
I.R.C. § 1014(f)(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.
I.R.C. § 1014(f)(3) Determination
For purposes of paragraph (1), the basis of property has been determined for purposes of the tax imposed by chapter 11 if—
I.R.C. § 1014(f)(3)(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,
I.R.C. § 1014(f)(3)(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
I.R.C. § 1014(f)(3)(C)
the value is determined by a court or pursuant to a settlement agreement with the Secretary.
I.R.C. § 1014(f)(4) Regulations
The Secretary may by regulations provide exceptions to the application of this subsection.
(Aug. 16, 1954, ch. 736, 68A Stat. 296; Feb. 11, 1958, Pub. L. 85-320, 2, 72 Stat. 5; Dec. 10, 1971, Pub. L. 92-178, title V, 502(f), 85 Stat. 550; Oct. 4, 1976, Pub. L. 94-455, title XIX, 1901(c)(8), title XX, 2005(a)(1), 90 Stat. 1803, 1872; Nov. 6, 1978,Pub. L. 95-600, title V, 515(1), title VII, 702(c)(1)(A), 92 Stat. 2884, 2926; Apr. 1, 1980, Pub. L. 96-222, title I, 107(a)(2)(A), 94 Stat. 222; Apr. 2, 1980, Pub. L. 96-223, title IV, 401(a), 94 Stat. 299; Aug. 13, 1981, Pub. L. 97-34, title IV, 425(a), 95 Stat. 318; Jan. 12, 1983, Pub. L. 97-448, title I, 104(a)(1)(A), 96 Stat. 2379; Pub. L. 105-34, title V, Sec. 508(b), Aug. 5, 1997, 111 Stat 788; Pub. L. 107-16, title V, Sec. 541, June 7, 2001, 115 Stat. 38;Pub. L. 108-357, title IV, Sec. 413(c)(18), Oct. 22, 2004, 118 Stat. 1418; Pub. L. 111-312, title III, Sec. 301(a), Dec. 17, 2010, 124 Stat. 3296; Pub. L. 113-295, Div. A, title II, Sec. 221(a)(74)(A), 221(a)(74)(B), Dec. 19, 2014, 128 Stat. 4010; Pub. L. 114-41, title II, Sec. 2004(a), July 31, 2015, 129 Stat. 443.)
BACKGROUND NOTES
AMENDMENTS
2015 - Subsec. (f). Pub. L. 114-41, Sec. 2004(a), added subsec. (f).
2014 - Subsec. (a)(2). Pub. L. 113-295, Div. A, Sec. 221(a)(74)(A), amended par. (2). Before 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,”
Subsec. (b)(7). Pub. L. 113-295, Div. A, Sec. 221(a)(74)(B) struck par. (7). Before being struck, (7) read as follows:
“(7) In the case of decedents dying after October 21, 1942, and on or before December 31, 1947, such part of any property, representing the surviving spouse's one-half share of property held by a decedent and the surviving spouse under the community property laws of any State, or possession of the United States or any foreign country, as was included in determining the value of the gross estate of the decedent, if a tax under chapter3 of the Internal Revenue Code of 1939 was payable on the transfer of the net estate of the decedent. In such case, nothing in this paragraph shall reduce the basis below that which would exist if the Revenue Act of 1948 had not been enacted;”
Subsec. (b)(8). Pub. L. 113-295, Div. A, Sec. 221(a)(74)(B) struck par. (8). Before being struck, (8) read as follows:
“(8) In the case of decedents dying after December 31, 1950, and before January 1, 1954, property which represents the survivor's interest in a joint and survivor's annuity if the value of any part of such interest was required to be included in determining the value of decedent's gross estate under section 811 of the Internal Revenue Code of 1939;”
2010 - Subsec. (f). Pub. L. 111-312, Sec. 301(a), amended Sec. 1014 to read as it would read if subtitle E of title V of Pub. L. 107-16 had never been enacted. Subsec. (f), as added by Pub. L. 107-16, Sec. 542(e)(1), would have read as follows:
“(f) Termination.— This section shall not apply with respect to decedents dying after December 31, 2009.
2004 - Subsec. (b)(5). Pub. L. 108-357, Sec. 413(c)(18), amended par. (5) by inserting “and before January 1, 2005,” after “August 26, 1937,”.
2001--Subsec. (f). Pub. L. 107-16, Sec. 541. added subsec. (f).
1997--Subsec. (a). Pub. L. 105-34, Sec. 508(b) amended subsec. (a) by striking “or” at the end of paragraphs (1) and (2), substituting “, or” for the period at the end of paragraph (3), and inserting a new paragraph (4) at the end.
1983--Subsec. (b)(10). Pub. L. 97-448 added par. (10).
1981--Subsec. (e). Pub. L. 97-34 added subsec. (e).
1980--Subsec. (a)(3). Pub. L. 96-222 substituted “section 2032A” for “section 2032.1”.
Subsec. (d). Pub. L. 96-223 repealed the amendment made by Pub. L. 94-455, 2005(a)(1). See 1976 Amendment note below.
1978--Subsec. (a). Pub. L. 95-600, 702(c)(1)(A), designated existing provisions as pars. (1) and (2) and added par. (3).
Subsec. (d). Pub. L. 95-600, 515(1), substituted “December 31, 1979" for “December 31, 1976” in heading and text.
1976--Subsec. (b)(6), (7).Pub. L. 94-455, 1901(c)(8), struck out “Territory,” after “under the community property laws of any State,”.
Subsec. (d). 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--Subsec. (d). Pub. L. 92-178 added subsec. (d).
1958--Subsec. (d). 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.
EFFECTIVE DATE OF 2015 AMENDMENT
Amendment by Sec. 2004(a) of Pub. L. 114-41 effective for property with respect to which an estate tax return is filed after the date of the enactment of this Act.
EFFECTIVE DATE OF 2014 AMENDMENT
Amendment by Div. A, Sec. 221(a)(74)(A) and 221(a)(74)(B) of Pub. L. 113-295 effective on the date of enactment of this Act [Enacted: Dec. 19, 2014].
Section 221(b)(2) of Pub. L. 113-295, Div. A, provided the following Savings Provision:
“(2) SAVINGS PROVISION.—If—
“(A) any provision amended or repealed by the amendments made by this section applied to—
“(i) any transaction occurring before the date of the enactment of this Act [Enacted: Dec. 19, 2014],
“(ii) any property acquired before such date of enactment, or
“(iii) any item of income, loss, deduction, or credit taken into account before such date of enactment, and
“(B) the treatment of such transaction, property, or item under such provision would (without regard to the amendments or repeals made by this section) affect the liability for tax for periods ending after date of enactment, nothing in the amendments or repeals made by this section shall be construed to affect the treatment of such transaction, property, or item for purposes of determining liability for tax for periods ending after such date of enactment.”
EFFECTIVE DATE OF 2010 AMENDMENT
Amendment by Sec. 301(a) of Pub. L. 111-312 effective for estates of decedents dying, and transfers made, after December 31, 2009. Section 304 ofPub. L. 111-312, and struck by Pub. L. 112-240, Sec. 101(a)(2), provided the following sunset provision:
“SEC. 304. APPLICATION OF EGTRRA SUNSET TO THIS TITLE. Section 901 of the Economic Growth and Tax Relief Reconciliation Act of 2001 shall apply to the amendments made by this section.”
REINSTATEMENT OF ESTATE TAX; REPEAL OF CARRYOVER BASIS
Section 301 of Pub. L. 111-312 provided:
“(a) IN GENERAL.—Each provision of law amended by subtitle A or E of title V of the Economic Growth and Tax Relief Reconciliation Act of 2001 is amended to read as such provision would read if such subtitle had never been enacted.
“(b) CONFORMING AMENDMENT.—On and after January 1, 2011, paragraph (1) of section 2505(a) of the Internal Revenue Code of 1986 is amended to read as such paragraph would read if section 521(b)(2) of the Economic Growth and Tax Relief Reconciliation Act of 2001 had never been enacted.
“(c) SPECIAL ELECTION WITH RESPECT TO ESTATES OF DECEDENTS DYING IN 2010.—Notwithstanding subsection (a), in the case of an estate of a decedent dying after December 31, 2009, and before January 1, 2011, the executor (within the meaning of section 2203 of the Internal Revenue Code of 1986) may elect to apply such Code as though the amendments made by subsection (a) do not apply with respect to chapter 11 of such Code and with respect to property acquired or passing from such decedent (within the meaning of section 1014(b) of such Code). Such election shall be made at such time and in such manner as the Secretary of the Treasury or the Secretary's delegate shall provide. Such an election once made shall be revocable only with the consent of the Secretary of the Treasury or the Secretary's delegate. For purposes of section 2652(a)(1) of such Code, the determination of whether any property is subject to the tax imposed by such chapter 11 shall be made without regard to any election made under this subsection.
“(d) EXTENSION OF TIME FOR PERFORMING CERTAIN ACTS.—
“ (1) ESTATE TAX.—In the case of the estate of a decedent dying after December 31, 2009, and before the date of the enactment of this Act, the due date for—
“(A) filing any return under section 6018 of the Internal Revenue Codeof 1986 (including any election required to be made on such a return) as such section is in effect after the date of the enactment of this Act without regard to any election under subsection (c),
“(B) making any payment of tax under chapter 11 of such Code, and
“(C) making any disclaimer described in section 2518(b) of such Code of an interest in property passing by reason of the death of such decedent, shall not be earlier than the date which is 9 months after the date of the enactment of this Act.
“(2) GENERATION-SKIPPING TAX.—In the case of any generation-skipping transfer made after December 31, 2009, and before the date of the enactment of this Act, the due date for filing any return under section 2662 of the Internal Revenue Code of 1986 (including any election required to be made on such a return) shall not be earlier than the date which is 9 months after the date of the enactment of this Act.
“(e) EFFECTIVE DATE.—Except as otherwise provided in this section, the amendments made by this section shall apply to estates of decedents dying, and transfers made, after December 31, 2009.”
EFFECTIVE DATE OF 2004 AMENDMENTS
Amendment by Section 413(c)(18) of Pub. L. 108-357 applicable for taxable years of foreign corporations beginning after December 31, 2004, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end.
EFFECTIVE DATE OF 2001 AMENDMENTS
Amendment by Section 541 of Pub. L. 107-16 applicable on the date of enactment of this Act [Enacted: June 7, 2001].
Section 901 (Sunset of Provisions of Act) of Pub. L. 107-16, as amended byPub. L. 107-358 and Pub. L. 111-312, Sec. 101(a),and struck by Pub. L. 112-240, Sec. 101(a)(1) (effective for taxable, plan, or limitation years beginning after Dec. 31, 2012, and estates of decedents dying, gifts made, or generation skipping transfers after Dec. 31, 2012), provided that:
“(a) IN GENERAL.--All provisions of, and amendments made by, this Act shall not apply--
“(1) to taxable, plan, or limitation years beginning after December 31, 2012, or
“(2) in the case of title V, to estates of decedents dying, gifts made, or generation skipping transfers, after December 31, 2012.
“(b) APPLICATION OF CERTAIN LAWS.--The Internal Revenue Code of 1986 and the Employee Retirement Income Security Act of 1974 shall be applied and administered to years, estates, gifts, and transfers described in subsection (a) as if the provisions and amendments described in subsection (a) had never been enacted.
“(c) EXCEPTION.-Subsection (a) shall not apply to section 803 (relating to no federal income tax on restitution received by victims of the Nazi regime or their heirs or estates).”
EFFECTIVE DATE OF 1997 AMENDMENTS
Amendment by Section 508(b) of Pub. L. 105-34 applicable to estates of decedents dying after December 31, 1997.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 97-448 effective, except as otherwise provided, as if it had been included in the provision of the Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such amendment relates, see section 109 of Pub. L. 97-448, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Section 425(b) of Pub. L. 97-34 provided that: “The amendment made by subsection (a) [amending this section] shall apply to property acquired after the date of the enactment of this Act [Aug. 13, 1981] by decedents dying after December 31, 1981.”
EFFECTIVE DATE OF 1980 AMENDMENTS AND REVIVAL OF PRIOR LAW
Amendment by Pub. L. 96-223 (repealing section 2005(a)(1) of Pub. L. 94-455 and the amendment made thereby, which had amended this section) applicable in respect of decedents dying after Dec. 31, 1976, and except for certain elections, this title to be applied and administered as if those repealed provisions had not been enacted, see section 401(b), (e) of Pub. L. 96-223, set out as a note under section 1023 of this title.
Amendment by Pub. L. 96-222 effective, except as otherwise provided, as if it had been included in the provisions of the Revenue Act of 1978, Pub. L. 95-600, to which such amendment relates, see section 201 of Pub. L. 96-222, set out as an Effective Date of 1980 Amendment note under section 32 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Section 702(c)(10) of Pub. L. 95-600 provided that: “The amendments made by this subsection [amending this section and sections 1001, 1223, and 2614 of this title] shall take effect as if included in the amendments and additions made by, and the appropriate provisions of the Tax Reform Act of 1976 [Pub. L. 94-455, Oct. 4, 1976, 90 Stat 1525].”
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(c)(8) of Pub. L. 94-455 applicable with respect to taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as a note under section 2 of this title.
Amendment by section 2005(a)(1) of Pub. L. 94-455 applicable in respect of decedents dying after Dec. 31, 1976, see section 2005(f) of Pub. L. 94-455, set out as an Effective Date note under section 1015 of this title.
EFFECTIVE DATE OF 1971 AMENDMENT
Amendment by Pub. L. 92-178 applicable with respect to taxable years ending after Dec. 31, 1971, except that a corporation may not be a DISC for any taxable year beginning before Jan. 1972, see section 507 of Pub. L. 92-178, set out as a note under section 991 of this title.
EFFECTIVE DATE OF 1958 AMENDMENT
Amendment by Pub. L. 85-320 applicable with respect to taxable years ending after Dec. 31, 1956, but only in the case of employees dying after such date, see section 3 of Pub. L. 85-320, set out as a note under section 421 of this title.
REPEALS
Pub. L. 94-455, 2005(a)(1), cited as a credit to this section, and the amendment made thereby, were repealed by Pub. L. 96-223, title IV, 401(a), 94 Stat. 299, resulting in the text of this section reading as it read prior to enactment of section 2005(a)(1). See Effective Date of 1980 Amendments and Revival of Prior Law note above.
ELECTION OF CARRYOVER BASIS RULES BY CERTAIN ESTATES
Pub. L. 96-223, title IV, 401(d), Apr. 2, 1980, 94 Stat. 300, as amended by Pub. L. 99-514, 2, Oct. 22, 1986, 100 Stat. 2095, provided that: “Notwithstanding any other provision of law, in the case of a decedent dying after December 31, 1976, and before November 7, 1978, the executor (within the meaning of section 2203 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) of such decedent's estate may irrevocably elect, within 120 days following the date of enactment of this Act [Apr. 2, 1980] and in such manner as the Secretary of the Treasury or his delegate shall prescribe, to have the basis of all property acquired from or passing from the decedent (within the meaning of section 1014(b) of the Internal Revenue Code of 1986) determined for all purposes under such Code as though the provisions of section 2005 of the Tax Reform Act of 1976 [Pub. L. 94-455] (as amended by the provisions of section 702(c) of the Revenue Act of 1978 [Pub. L. 95-600] applied to such property acquired or passing from such decedent.”