Dual-basis gift rule
Certified Financial Planner glossary · Certified Financial Planner
Definition
If FMV at gift is less than the donor's basis, dual basis applies. A later sale between the two numbers produces neither gain nor loss.
Dual-basis gift rule in plain English
Mom gifts shares with a 100 basis that are worth 60 today. Your client sells later at $80, right between those two numbers, and wonders whether there is a tidy little capital gain. Dual-basis gift rule says no: when FMV at gift is below the donor's basis, dual basis applies, and a sale in the gap produces neither gain nor loss. The exam trap is grabbing the wrong end of the stick: do not use donor basis to invent a loss, and do not use FMV to invent a gain, when the sale sits between the two anchors.
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