NSA Complete Enrolled Agents Review - Topic 29C - Adjusted Basis - Gift Property

Sep 26, 2026

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Sample review material for NSA Complete Enrolled Agents Exam preparation, focusing on Topic 29C, Adjusted Basis – Gift Property. It outlines the dual-basis rules for gift property, explains how gain or loss is computed using donor basis, gift-date fair market value, and the amount realized. It also covers gift tax basis add-ons, including pre-1977 and post-1976 gift tax treatment, and provides worked examples plus supporting discussion, question references, and final review card coverage for quick study.

LanguageEnglish

CategoryExam

FormatPDF

Pages5

Reading Time13 min

AccessFree to download

Sample Topic Coverage

C. Adjusted Basis – Gift Property

Gift Assets – The Basic Rules

Gift Tax Add-on to Basis

Examples – Gain/Loss on Sales of Gift Property by Donee

Holding Period of Gifts

Comprehensive Study Aid

Sample NSA Complete Enrolled Agents Review 􀁸 The NSA Complete EA Exam Review Course consists of three volumes devoted to each of the three parts of the Enrolled Agents Examination 􀁸 Each Part is divided into 50 topics, and each topic is divided into subtopics 􀁸 The enclosed sample is for Topic 29C, Adjusted Basis – Gift Property 􀁸 The “header box” for each subtopic discloses the priority of the topic (“Red”indicates that the topic is asked frequently on the exam and involves relatively straight-forward concepts) 􀁸 The “header box” also discloses the number of questions on that topic that appeared on the last ten publically available EA exams (frequency analysis discloses that this topic was the most tested of all topics on old exams) 􀁸 The header box is followed a concise and focused discussion of the basic tax law for the topic, supplemented with examples and occasional diagrams that summarize the basic law 􀁸 The discussion is followed by a selection of questions from prior EA exams during the open-era exam (see sample); this provides insights as to the level of detail to be expected on the exam 􀁸 Note that a few of the questions are shown in bold ; These are part of the “Top 150 Questions” for Part 1 of the exam. All 150 questions are repeated at the end of the module, and several blank answer sheets are provided to reinforce the concepts for quick study right before taking the exam. 􀁸 Answers and explanations for all questions are provided in the back matter of each study volume (see sample) 􀁸 Each part of the exam includes a set of Final Review Cards , which provide very concise summaries for memory jogging right before taking the exam 􀁸 The final package also includes 18 weekly study guides , 6 for each part of the exam, that discuss the tricks of the trade in studying for certain topics; more review questions are also included The following pages reproduce the discussion of Topic 29C, Adjusted Basis – Gift Property, the 10 prior exam questions related to this topic, the portion of the Answers & Explanations section for this topic, and a portion of the Final Review Card. Sample Topic Coverage C. Adjusted Basis – Gift Property | Priority of
Subtopic | No. of Questions on 1996-2006 Exams | | --- | --- | | Red | 21 | Gift Assets – The Basic Rules – Property acquired by a gift can create a “dual basis” problem in that the basis for loss may differ from the basis for gain. The basic rules are: (1) the basis for gain is always the donor’s adjusted basis; (2) the basis for loss is the lesser of the donor’s basis or the fair market value (FMV) of the gift on the date of the gift; and (3) if the amount realized (sales price) is between the two possible bases, then no gain or loss is recognized (the basis is assumed to equal the amount realized) . Gift Tax Add-on to Basis – In some cases, a donor may be required to pay a federal gift tax on gifted property. To mitigate multiple layers of taxation, the Code provides a special addition to the donor’s basis in determining a donee’s basis. The addition to the donor’s basis is determined as follows: 􀁸 Pre-1977 Gifts – 100% of the gift tax paid (as long as the basis doesn’t exceed FMV of the gift on the date of the gift) . 􀁸 Post-1976 Gifts – A portion of the gift tax related to appreciation in value of the gift: Addition = Gift Tax Paid x (Appreciation in Value / FMV of Gift @ Date of Gift) Figure 1-8 – Examples – Gain/Loss on Sales of Gift Property by Donee | Facts:
􀁸 Taxpayer receives 100 shares of stock as a gift on 4/1/2014
􀁸 Cost of stock to donor on 1/1/2010 was $10,000
􀁸 Donor paid a gift tax of $1,200 on the transfer | | | --- | --- | | Assuming $15,000 FMV of Gift on 4/1/2014: If sold on 9/1/2014 for $18,000:
Gain = $18,000 – $10,000 +[($5,000/$15,000) x $1,200]
Gain = $18,000 – $10,400
Gain = $7,600 long-term gain*
If sold on 9/1/2014 for $6,000:
Loss = $6,000 – $10,400
Loss = $4,400 long-term lo

FAQs

What are the basic dual-basis rules for gift property under Topic 29C?

The basis for gain is the donor’s adjusted basis; the basis for loss is the lesser of the donor’s basis or the gift’s fair market value on the gift date. If the amount realized falls between the two bases, no gain or loss is recognized.

How does the gift tax basis add-on work for donee basis?

In certain cases, the donor’s gift tax is added to the donor’s basis to determine the donee’s basis, using rules that differ for pre-1977 versus post-1976 gifts. For post-1976 gifts, the add-on is Gift Tax Paid multiplied by (Appreciation in Value / FMV on gift date).

When does the holding period begin for gift property?

If the donor’s basis is used, the donor’s holding period is tacked onto the seller’s holding period. If the fair market value is used as basis, the holding period begins on the date of the gift.

Sep 26, 2026

Uploaded by McGucket