The Waterbury Democrat., 1943-02-25
YOUR INCOME
 TAX
No. 40 BASIS or GAIN OR LOSS FART l\
No. 10

(PART 9
 The basis for determining gain or loss, for Federal income tax pur- poses, where the property ex. changed had been acquired by the taxpayer in payment for services rendered, is the fair market value of the property at the date of re- ceipt. This basis is then adjusted for capital items, such as deprecia- ton and betterfnents in the case of real estate.
 In the case of property acquired by gift, Q distinction is made be- tween property 50 acquired before January 1, 1921, and after Decem- Der 31, 1920. For property acquired by gift or transfer In trust (except by devise or bequest) before Janil- ary 1, 1921, the basis for deter mining either gain or loss is the fair market value at the time of the gift, or transfer in trust.
 For property acquired by gift after December 31, 1920, the basis to be used depends upon whether a probable gain or loss is involved. In determining a gain the basis is the same as 1t would be in the hands of the donor or the last pre- ceding owner by whom it was not acquired by gift. Thus, if c tax payer received 6 gift of property from his father in i940, the basis would be the cost Cor other basis) of the property to his father (as- suming his father had bought 1t and had not himself received t as 6 gift), adjusted by capital items, such as depreciation and better ments applicable. If, however, his father had received 1t also as Q gift, then the basis would be the cost tor other basis) to the last person by whom it was not ac- quired by gift, adjusted as de- scribed. CThe tor other. basis men, tioned in parentheseS would apply to property acquired by the father by purchase prior to March l, 1913, or by devise or hequest, or other neans.)
 Tn determining a loss on prop erty acquired by gift after Decem- Der S1, 1920, the basis Is either the same as it would be in the hands of the donor or the last preceding owner by whom it was not acquired by gift, or the fair market value of the property at the time of the gift, whichever is lower.
 Tn the case of property acquired by beuuest, devise, or inheritance, the basis is the fair market value of the property ct the time of such acquisition. The time of acQuisi- ton Is the date of death of the decedent, even though legal title may not pass to the legatee until Q later date. No distinction applies between property so acquired be- fore January 1, 1921, and after De- cember 3l, 1920.
 For property acquired after De- cember 3i. 1920, by any transfer in trust. except as a gift or by bequest or devise, the rule is that the basis for determining gain or loss is the same as it would be in the hands of the grantor, increased in the amount of gain or decreased in the amount of loss recognized to the grant0r upon such transfer under the law applicable to the year in which the transfer was made. The expression increased" etc, applies to Q transfer of property in trust for Q valuable confederation.
 Tn determining the basis in the case Of securities of q corporation which have been acquired at various times and ln various amounts, and which have been sold fn vaKlous amounts and at various times the general rule is that the eecuFlllel sold fin the absence of ideniinea- ten eg the particular securities soldl ahail he ehagHed against ihf earliest purchases of snrh seeul' tlaa.
 TO astsrmlns flss hasis of com mon stock received e s bonus Niti Q ullreAnno of pIoieI1oa stock q. boll6a. tho total purchase price aIlal he fafgly npnerkinneA b1Waeu ala' common alo1k end l11n aeeuTglle| purchased.