[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: 26CFR1.1015-4]

[Page 57-58]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.1015-4  Transfers in part a gift and in part a sale.

    (a) General rule. Where a transfer of property is in part a sale and 
in part a gift, the unadjusted basis of the property in the hands of the 
transferee is the sum of--
    (1) Whichever of the following is the greater:

[[Page 58]]

    (i) The amount paid by the transferee for the property, or
    (ii) The transferor's adjusted basis for the property at the time of 
the transfer, and
    (2) The amount of increase, if any, in basis authorized by section 
1015(d) for gift tax paid (see Sec. 1.1015-5).

For determining loss, the unadjusted basis of the property in the hands 
of the transferee shall not be greater than the fair market value of the 
property at the time of such transfer. For determination of gain or loss 
of the transferor, see Sec. 1.1001-1(e) and Sec. 1.1011-2. For special 
rule where there has been a charitable contribution of less than a 
taxpayer's entire interest in property, see section 170(e)(2) and Sec. 
1.170A-4(c).
    (b) Examples. The rule of paragraph (a) of this section is 
illustrated by the following examples:

    Example 1. If A transfers property to his son for $30,000, and such 
property at the time of the transfer has an adjusted basis of $30,000 in 
A's hands (and a fair market value of $60,000), the unadjusted basis of 
the property in the hands of the son is $30,000.
    Example 2. If A transfers property to his son for $60,000, and such 
property at the time of transfer has an adjusted basis of $30,000 in A's 
hands (and a fair market value of $90,000), the unadjusted basis of such 
property in the hands of the son is $60,000.
    Example 3. If A transfers property to his son for $30,000, and such 
property at the time of transfer has an adjusted basis in A's hands of 
$60,000 (and a fair market value of $90,000), the unadjusted basis of 
such property in the hands of the son is $60,000.
    Example 4. If A transfers property to his son for $30,000 and such 
property at the time of transfer has an adjusted basis of $90,000 in A's 
hands (and a fair market value of $60,000), the unadjusted basis of the 
property in the hands of the son ins $90,000. However, since the 
adjusted basis of the property in A's hands at the time of the transfer 
was greater than the fair market value at that time, for the purpose of 
determining any loss on a later sale or other disposition of the 
property by the son its unadjusted basis in his hands is $60,000.

[T.D. 6500, 25 FR 11910, Nov. 26, 1960, as amended by T.D. 6693, 28 FR 
12818, Dec. 3, 1963; T.D. 7207, 37 FR 20799, Oct. 5, 1972]