Dual basis rule
Certified Financial Planner glossary · Certified Financial Planner
Definition
The rule assigning a donee two bases for gifted property with a built-in loss: the donor’s basis for gain and fair market value for loss.
Dual basis rule in plain English
Dad gifts stock he bought at 80 that now trades at 50. Your client, the donee, suddenly owns a built-in loss and needs to know which number is "basis" later. Dual basis rule assigns two figures: the donor's basis for measuring gain, and fair market value at the gift for measuring loss. Sell above 80 and the gain ladder starts at dad's cost. Sell below 50 and the loss ladder starts at FMV. That split exists so the family cannot gift a loss and then pretend the old high basis still travels for every purpose.
Practice Dual basis rule
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