Property transaction planning
The Basis Planner
Set basis by how property arrived: donor carryover for gifts (with a dual loss basis), date-of-death step-up for inheritances, and add-back for wash sales.
How the exam words it
- -The stem gifts property whose FMV is below the donor's basis and asks the gain or loss on a later sale, testing the double-basis rule.
- -It inherits property and asks the basis and holding period, pointing to date-of-death FMV and automatic long-term treatment.
- -It sells at a loss and repurchases within 30 days and asks the basis of the replacement shares after the wash sale.
- -It gives a lifetime gift of appreciated property and asks the donee's carryover basis for gain.
The playbook
- 1Use the donor's carryover basis to figure gain on a gift, but the lower gift-date FMV to figure loss; a sale between the two yields no gain or loss.
- 2Step inherited property to its date-of-death FMV (or alternate valuation date) and treat the holding period as automatically long-term.
- 3Add a wash-sale disallowed loss to the basis of the replacement securities, preserving the loss for later.
- 4Track holding periods: a gift tacks the donor's period for gain, while inherited property is always long-term.
The trap
Using date-of-death FMV for a gift, or the gift-date FMV to figure a gain. A gift carries over the donor's basis, with a lower loss basis only when FMV is below it; only inheritances are stepped up.
How the exam varies it
The same pattern, re-skinned along these axes:
Gift carryover basis versus the dual basis for lossInherited date-of-death step-up and automatic long-term holdingWash-sale disallowed-loss add-back to replacement basis
Drill this pattern
8 questions of The Basis Planner from across the AUD topics. Clear it by getting 5 right with a streak of 3.