
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document affected by Public Law 107-16 Section 541]
[CITE: 26USC1014]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
          Subchapter O--Gain or Loss on Disposition of Property
 
               PART II--BASIS RULES OF GENERAL APPLICATION
 
Sec. 1014. Basis of property acquired from a decedent


(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--
        (1) the fair market value of the property at the date of the 
    decedent's death,
        (2) 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,
        (3) in the case of an election under section 2032A, its value 
    determined under such section, or
        (4) to the extent of the applicability of the exclusion 
    described in section 2031(c), the basis in the hands of the 
    decedent.

(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:
        (1) Property acquired by bequest, devise, or inheritance, or by 
    the decedent's estate from the decedent;
        (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;
        (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;
        (4) Property passing without full and adequate consideration 
    under a general power of appointment exercised by the decedent by 
    will;
        (5) In the case of decedents dying after August 26, 1937, 
    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;
        (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;
        (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 chapter 3 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;
        (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;
        (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--
            (A) annuities described in section 72;
            (B) property to which paragraph (5) would apply if the 
        property had been acquired by bequest; and
            (C) property described in any other paragraph of this 
        subsection.

        (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).

(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.

(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.

(e) Appreciated property acquired by decedent by gift within 1 year of 
        death

                           (1) In general

        In the case of a decedent dying after December 31, 1981, if--
            (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
            (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.

                           (2) Definitions

        For purposes of paragraph (1)--

        (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.

        (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.

(Aug. 16, 1954, ch. 736, 68A Stat. 296; Pub. L. 85-320, Sec. 2, Feb. 11, 
1958, 72 Stat. 5; Pub. L. 92-178, title V, Sec. 502(f), Dec. 10, 1971, 
85 Stat. 550; Pub. L. 94-455, title XIX, Sec. 1901(c)(8), title XX, 
Sec. 2005(a)(1), Oct. 4, 1976, 90 Stat. 1803, 1872; Pub. L. 95-600, 
title V, Sec. 515(1), title VII, Sec. 702(c)(1)(A), Nov. 6, 1978, 92 
Stat. 2884, 2926; Pub. L. 96-222, title I, Sec. 107(a)(2)(A), Apr. 1, 
1980, 94 Stat. 222; Pub. L. 96-223, title IV, Sec. 401(a), Apr. 2, 1980, 
94 Stat. 299; Pub. L. 97-34, title IV, Sec. 425(a), Aug. 13, 1981, 95 
Stat. 318; Pub. L. 97-448, title I, Sec. 104(a)(1)(A), Jan. 12, 1983, 96 
Stat. 2379; Pub. L. 105-34, title V, Sec. 508(b), Aug. 5, 1997, 111 
Stat. 860.)

                       References in Text

    Section 811 of the Internal Revenue Code of 1939, referred to in 
subsecs. (a)(2) and (b)(6), (8), was classified to section 811 of former 
Title 26, Internal Revenue Code. For table of comparisons of the 1939 
Code to the 1986 Code, see Table I preceding section 1 of this title. 
See, also, section 7851(e) of this title for provision that references 
in the 1986 Code to a provision of the 1939 Code, not then applicable, 
shall be deemed a reference to the corresponding provision of the 1986 
Code, which is then applicable.
    Chapter 3 of the Internal Revenue Code of 1939, referred to in 
subsec. (b)(7), was comprised of sections 800 to 951 of former Title 26, 
Internal Revenue Code. For table of comparisons of the 1939 Code to the 
1986 Code, see Table I preceding section 1 of this title. See also 
section 7851(a)(2)(A) of this title for applicability of chapter 3 of 
former title 26. See also section 7851(e) of this title for provision 
that references in the 1986 Code to a provision of the 1939 Code, not 
then applicable, shall be deemed a reference to the corresponding 
provision of the 1986 Code, which is then applicable.
    Revenue Act of 1948, referred to in subsec. (b)(7), is act Apr. 2, 
1948, ch. 168, 62 Stat. 110. For complete classification of this Act to 
the Code, see Tables.
    The Internal Revenue Code of 1939, referred to in subsec. (b)(9), is 
act Feb. 10, 1939, ch. 2, 53 Stat. 1, as amended. Prior to the enactment 
of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], the 1939 
Code was classified to former Title 26, Internal Revenue Code. For table 
of comparisons of the 1939 Code to the 1986 Code, see Table I preceding 
section 1 of this title.


                               Amendments

    1997--Subsec. (a). Pub. L. 105-34 struck out ``or'' at end of pars. 
(1) and (2), struck out the period at end of par. (3) and inserted ``, 
or'', and added par. (4).
    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, Sec. 2005(a)(1). See 1976 Amendment note below.
    1978--Subsec. (a). Pub. L. 95-600, Sec. 702(c)(1)(A), designated 
existing provisions as pars. (1) and (2) and added par. (3).
    Subsec. (d). Pub. L. 95-600, Sec. 515(1), substituted ``December 31, 
1979'' for ``December 31, 1976'' in heading and text.
    1976--Subsec. (b)(6), (7). Pub. L. 94-455, Sec. 1901(c)(8), struck 
out ``Territory,'' after ``under the community property laws of any 
State,''.
    Subsec. (d). Pub. L. 94-455, Sec. 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 1997 Amendment

    Section 508(e)(1) of Pub. L. 105-34 provided that: ``The amendments 
made by subsections (a) and (b) [amending this section and section 2031 
of this title] shall apply 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, Sec. 2005(a)(1), cited as a credit to this section, 
and the amendment made thereby, were repealed by Pub. L. 96-223, title 
IV, Sec. 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, Sec. 401(d), Apr. 2, 1980, 94 Stat. 300, 
as amended by Pub. L. 99-514, Sec. 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.''

                  Section Referred to in Other Sections

    This section is referred to in sections 42, 179, 197, 338, 355, 382, 
551, 1001, 1223, 1246, 1291, 1296, 1367, 1400C, 2032A, 2654 of this 
title.
