[Code of Federal Regulations]
[Title 26, Volume 11]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.1014-2]

[Page 42-44]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.1014-2  Property acquired from a decedent.

    (a) In general. The following property, except where otherwise 
indicated, is considered to have been acquired from a decedent and the 
basis thereof is determined in accordance with the general rule in Sec. 
1.1014-1:
    (1) Without regard to the date of the decedent's death, property 
acquired by bequest, devise, or inheritance, or by the decedent's estate 
from the decedent, whether the property was acquired under the 
decedent's will or under the law governing the descent and distribution 
of the property of decedents. However, see paragraph (c)(1) of this 
section if the property was acquired by bequest or inheritance from a 
decedent dying after August 26, 1937, and if such property consists of 
stock or securities of a foreign personal holding company.
    (2) Without regard to the date of the decedent's death, 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) Without regard to the date of the decedent's death, property 
passing without full and adequate consideration under a general power of 
appointment exercised by the decedent by will. (See section 2041(b) for 
definition of general power of appointment.)
    (5) 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, Territory, or possession of the 
United States or any foreign country, if at least one-half of the whole 
of the community interest in that property was includible in determining 
the value of the decedent's gross estate under part III, chapter 11 of 
the Internal Revenue Code of 1954 (relating to the estate tax) or 
section 811 of the Internal Revenue Code of 1939. It is not necessary 
for the application of this subparagraph that an estate tax return be 
required to be filed for the estate of the decedent or that an estate 
tax be payable.
    (6) 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 
that interest was required to be included in determining the value of 
the decedent's gross estate under section 811 of the Internal Revenue 
Code of 1939. It is necessary only that the value of a part of the 
survivor's interest in the annuity be includible in the gross estate 
under section 811. It is not necessary for the application of this 
subparagraph that an estate tax return be required to be filed for the 
estate of the decedent or that an estate tax be payable.
    (b) Property acquired from a decedent dying after December 31, 
1953--(1) In general. In addition to the property described in paragraph 
(a) of this section, and except as otherwise provided in subparagraph 
(3) of this paragraph, in the case of a decedent dying after December 
31, 1953, property shall also be considered to have been acquired from 
the decedent to the extent that both of the following conditions are 
met: (i) The property was 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), and 
(ii) the property is includible in the decedent's gross estate under the 
provisions of the Internal Revenue Code of 1954, or the Internal Revenue 
Code of 1939, because of such acquisition. The basis of such property

[[Page 43]]

in the hands of the person who acquired it from the decedent shall be 
determined in accordance with the general rule in Sec. 1.1014-1. See, 
however, Sec. 1.1014-6 for special adjustments if such property is 
acquired before the death of the decedent. See also subparagraph (3) of 
this paragraph for a description of property not within the scope of 
this paragraph.
    (2) Rules for the application of subparagraph (1) of this paragraph. 
Except as provided in subparagraph (3) of this paragraph, this paragraph 
generally includes all property acquired from a decedent, which is 
includible in the gross estate of the decedent if the decedent died 
after December 31, 1953. It is not necessary for the application of this 
paragraph that an estate tax return be required to be filed for the 
estate of the decedent or that an estate tax be payable. Property 
acquired prior to the death of a decedent which is includible in the 
decedent's gross estate, such as property transferred by a decedent in 
contemplation of death, and property held by a taxpayer and the decedent 
as joint tenants or as tenants by the entireties is within the scope of 
this paragraph. Also, this paragraph includes property acquired through 
the exercise or nonexercise of a power of appointment where such 
property is includible in the decedent's gross estate. It does not 
include property not includible in the decedent's gross estate such as 
property not situated in the United States acquired from a nonresident 
who is not a citizen of the United States.
    (3) Exceptions to application of this paragraph. The rules in this 
paragraph are not applicable to the following property:
    (i) Annuities described in section 72;
    (ii) Stock or securities of a foreign personal holding company as 
described in section 1014(b)(5) (see paragraph (c)(1) of this section);
    (iii) Property described in any paragraph other than paragraph (9) 
of section 1014(b). See paragraphs (a) and (c) of this section.

In illustration of subdivision (ii), assume that A acquired by gift 
stock of a character described in paragraph (c)(1) of this section from 
a donor and upon the death of the donor the stock was includible in the 
donor's estate as being a gift in contemplation of death. A's basis in 
the stock would not be determined by reference to its fair market value 
at the donor's death under the general rule in section 1014(a). 
Furthermore, the special basis rules prescribed in paragraph (c)(1) of 
this section are not applicable to such property acquired by gift in 
contemplation of death. It will be necessary to refer to the rules in 
section 1015(a) to determine the basis.
    (c) Special basis rules with respect to certain property acquired 
from a decedent--(1) Stock or securities of a foreign personal holding 
company. The basis of certain stock or securities of a foreign 
corporation which was a foreign personal holding company with respect to 
its taxable year next preceding the date of the decedent's death is 
governed by a special rule. If such stock was acquired from a decedent 
dying after August 26, 1937, by bequest or inheritance, or by the 
decedent's estate from the decedent, the basis of the property in the 
hands of the person who so acquired it (notwithstanding any other 
provision of section 1014) shall be the fair market value of such 
property at the date of the decedent's death or the adjusted basis of 
the stock in the hands of the decedent, whichever is lower.
    (2) Spouse's interest in community property of decedent dying after 
October 21, 1942, and on or before December 31, 1947. In the case of a 
decedent dying after October 21, 1942, and on or before December 31, 
1947, a special rule is provided for determining the basis of such part 
of any property, representing the surviving spouse's one-half share of 
property held by the decedent and the surviving spouse under the 
community property laws of any State, Territory, or possession of the 
United States or any foreign country, as was included in determining the 
value of the decedent's gross estate, if a tax under chapter 3 of the 
Internal Revenue Code of 1939 was payable upon the decedent's net 
estate. In such case the basis shall be the fair market value of such 
part of the property at the date of death (or the optional valuation 
elected under section 811(j) of the Internal Revenue Code of

[[Page 44]]

1939) or the adjusted basis of the property determined without regard to 
this subparagraph, whichever is the higher.