How Are Capital Gains Calculated on Gifted Property?
When property received as a gift is later sold, the capital-gain computation can be governed by special previous-owner rules. The recipient should retain the donor's acquisition records and the gift documentation.
Quick Answer
For gifted property, the recipient should not automatically substitute the property's value on the gift date as the tax cost. The previous owner's cost and relevant holding history can matter.
Gift and Capital Gain Are Different Events
Receiving property as a gift and later selling it are separate tax events. Capital-gain computation generally becomes relevant when the property is transferred.
Previous Owner's Cost
Where the statutory previous-owner rule applies, the previous owner's acquisition cost and relevant improvement cost can be important in determining the recipient's cost.
Previous Owner's Holding Period
The holding period can also require consideration of the previous owner's period under the applicable provisions.
Keep the Gift and Purchase Records
Retain the gift deed, donor's acquisition documents, improvement records and eventual sale documents.
Check the Tax Treatment of the Gift Separately
The tax implications of receiving a gift can be a separate question from the capital gain on a later sale. Do not combine the two calculations automatically.
Important
Gift transactions can involve relationship-based exemptions, valuation rules and other provisions. The capital-gain calculation should be based on the actual facts.
Frequently Asked Questions
Does the recipient get a new cost on the date of the gift?
Not necessarily. Special previous-owner rules can determine the applicable cost.
Can the donor's holding period matter?
Yes. The previous owner's holding period can be relevant for capital-gain classification.
Should I keep the donor's old purchase documents?
Yes. They can be important for establishing cost and holding history when the gifted asset is later sold.
Related EZTax Resources
- What Is Capital Gain in Income Tax?
- What Is Short-Term and Long-Term Capital Gain?
- How to Calculate Capital Gain From Shares?
- How to Report Capital Loss in ITR?
- Which ITR Form Should I Use for Capital Gains?
- Does AIS Show Capital Gains?
- Capital Gains Income Tax Guide
Official Sources
For current capital-gains and ITR guidance, refer to the Income Tax Department resources for the relevant assessment year.
Income Tax Department — ITR-2 FAQ
Income Tax Department — Set-off / Carry-forward of Losses FAQ
