The Waterbury Democrat. [volume] (Waterbury, Conn.) 1917-1946, 1944-02-23
YOUR FEDERAL
INCOME TAX
BASIS OF GAIN OR LOSS
part q

The basis for determining gain or
loss for Federal normal tax, surtax,
and victory tax purposes, where the
| property exchange had been ac-
Quired by the taxpayer 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 bettermentS in the case Of
real estate.
In the case Of property acquired
by gift, a distinction is made be-
tween property SO acquired before
January /, 1921, and after Decem-
Der 81, 1920. For property acquired
by gift or transfer in trust Except
by devise or bequest) before Janu-
ary I, 1921, the basis for determin-
ing either gain or loss In the fair
market value at the time Of the
gift. or transfer in trust.
For property acquired by gift
after December 81, 1920, the basis
to be 9sed depends upon whether q
probable gain or a 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 1t was not
acquired by gift. Thus, If a taxpayer
received a gift Of property from his
father in 1910, the basis would be
the cost Cor other basis) OF the
property to his father assuming
his father had bought it and had
not himself received 1t as gift, adj
justed by capital items, such as de-
probation and betterment applic-
able. If, however, his father had re-
ceived it also as gift, then the
basis would be the cost Cor other
basis) to the last person by whom
it was not acquired by gift, adjusted
asas described. (The "or other
basis mentioned in parentheses
would apply to property acquired by
the father by purchase prior to
March 1, 1913. or by devise or be-
quest, or other means).
In determining a loss on prop
erty acquired by gift after Decem-
Der 81, 1920, the basis is either the
same as it would be in the hands of
the donor or the last preceding.
owner by whom 1t was not acquired
by gift, or the fair market value Of
the property at the time of the gift,
whichever Is lower.
In the case Of property acquired
by bequest, devise, or inheritance,
the basis is the fair market value
of the property at the time Of such
acquisition. The time of acquisition
is the date of death of the decedent,
even though legal title may not pass
to the legatee until later date. No
distinction applies between property
SO acquired before January !, 1921,
and after December 81, 1920.
Fro property acquired after De-
cember 81, 1920, by any transfer in
trust, except as gift or by bequest
or devise, the rule Is that the basis
for determining gain or loss is the
same as 1t would be in the hands
Of the grantor, increased in the
amount of gain or decreased in the
amount of loss recognized to the
grantor upon such transfer under
the law applicable to the year in
which the transfer was made. The
| CAR1 CcoADAA AANACuoC0S CtSs1 0RPAAC0
to transfer Of property in trust
for a valuable consideration.
In determining the basis in the
case Of securities Of q corporation
which have been acquired at vari-
GUS times and In various amounts.
and which have been sold In vari-
GUS amounts and at various times,
the general rule is that the securi-
ties sold lin the absence Of iden.
tiflcation Of the particular securities
Sold shall be charged against the
earliest purchases Of such Securi-
ties.
To determine the basis Of COM
mon stocks received as a bonus with
a purchase Of preferred stock or
bonds, the total purchase price shall
be fairly apportioned between the
common stock and the securities
purchased.
Gains and losses resulting from
the sale or exchange Of capital as
sets are not subject to the victory
tax but are subject to the normal