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Community property. Property that

Basis Increase

qualified electing fund (as defined in

represents the decedent’s surviving

section 1295) with respect to the

Basis Increase is the sum of the General

spouse’s one-half share of the community

decedent.

Basis Increase (defined later) and the

property held by the decedent and his or

Spousal Property Basis Increase (defined

Amount of Increase to

her surviving spouse will be treated as

later).

owned by (and acquired from) the

Basis

decedent if at least one-half of the whole

General Basis Increase

of the community interest in such property

The executor can allocate General Basis

General Basis Increase is the sum of the

is treated as owned by (and acquired

Increase (defined in General Basis

aggregate basis increase and the

from) the decedent under the community

Increase, later), and/or Spousal Property

carryovers/unrealized losses increase.

property laws of the state (or possession

Basis Increase (defined in Spousal

However, for a decedent who was neither

of the United States or any foreign

Property Basis Increase, later) to eligible

a resident nor citizen of the United States,

country) that apply to the decedent.

property (defined earlier) but not in

the General Basis Increase is limited to

excess of the amount needed to increase

the Aggregate Basis Increase (limited as

Property Not Eligible for

the decedent’s adjusted basis to the

described below).

property’s FMV as of the date of the

Increase to Basis

Aggregate Basis Increase

decedent’s death. The result is that, for

Only property owned by and acquired

each property, the sum of the decedent’s

Aggregate Basis Increase is $1,300,000.

from the decedent is eligible for allocation

adjusted basis in that property and the

However, for a decedent who was neither

of Basis Increase. See Rules relating to

Basis Increase allocated to that property

a resident nor citizen of the United States,

ownership, earlier.

can not exceed the FMV of that property

the Aggregate Basis Increase is $60,000.

on the decedent’s date of death.

The executor cannot allocate Basis

Carryovers/Unrealized Losses

Increase to cash, whether acquired from

The executor can allocate Basis

Increase

the decedent, in exchange for property

Increase (defined in Basis Increase, later)

acquired from the decedent, or otherwise.

Carryovers/Unrealized Losses Increase is

to property owned by and acquired from

The executor cannot allocate any

the sum of the following three items.

the decedent on a property-by-property

Basis Increase to property or proceeds

basis. For example, the executor can

1. The amount of any capital loss

acquired after the decedent’s death in

allocate Basis Increase to one or more

carryovers under section 1212(b) that

exchange for property acquired from the

shares of stock or to a particular block of

would (but for the decedent’s death) be

decedent. The basis of this property is

stock rather than to the decedent’s entire

carried from the decedent’s last taxable

determined under other applicable rules

holding of that stock.

year to a later tax year. See

for determining basis.

Carryforwards, below.

Basis Increase may not be allocated

2. The amount of any net operating

Even if property acquired from the

separately to a life estate and remainder

decedent was owned by the decedent at

loss (NOL) carryovers under section 172

interest in the same property.

the time of death, the basis of the types of

that would (but for the decedent’s death)

be carried from the decedent’s last

property acquired from the decedent

Decedent’s Adjusted Basis

discussed below, under Property

taxable year to a later tax year. See

Generally, the adjusted basis of the

Carryforwards, below.

Acquired by the Decedent by Gift Within 3

property in the hands of the decedent as

3. The amount of any losses that

Years of Death and under Stock or

of the date of the decedent’s death is the

Securities of Certain Entities, generally

would be allowable under section 165 if

decedent’s cost or other basis, adjusted

the property acquired from the decedent

cannot be increased under section 1022.

as required by sections 1016, 1017, and

This property is ineligible property.

had been sold at FMV immediately before

1018 or as otherwise specifically provided

the decedent’s death (“unrealized

Property Acquired by the

for under applicable provisions of Internal

losses”). See Unrealized Losses, later.

Decedent by Gift Within 3 Years

Revenue laws.

of Death

Note. The amount of any losses that

Property acquired by gift. If the

would be allowable under section 165 is

decedent acquired property by gift, the

Generally, property that the decedent

determined based on a hypothetical sale

decedent’s adjusted basis at death is the

acquired by gift or lifetime transfer for less

and does not require an actual sale of

decedent’s basis determined under

than adequate and full consideration in

property.

section 1015, adjusted as required by

money or money’s worth during the

sections 1016, 1017, and 1018 or as

3-year period ending on the date of the

For any decedent who was neither

otherwise specifically provided for under

decedent’s death is not eligible for a basis

a citizen nor resident of the United

applicable provisions of Internal Revenue

increase. However, property acquired by

States the amount of the

laws. The decedent’s original basis under

CAUTION

the decedent from the decedent’s spouse

Carryovers/Unrealized Losses Increase is

section 1015 is the same as it would be in

during such 3-year period will generally

zero.

the hands of the donor or the last

be eligible for a basis increase, unless,

preceding owner by whom it was not

during the 3-year period, the decedent’s

Carryforwards

acquired by gift, except that if such basis

spouse acquired the property in whole or

The Carryovers/Unrealized Losses

(adjusted for the period before the date of

in part by gift or lifetime transfer for less

Increase includes any capital loss

the gift as provided in section 1016) is

than adequate and full consideration in

carryovers under section 1212(b) and the

greater than the FMV of the property at

money or money’s worth.

NOL carryovers under section 172 that

the time of the gift, then for the purpose of

Stock or Securities of Certain

would (but for the decedent’s death) be

determining loss the basis shall be such

Entities

carried forward to tax years after the

FMV.

decedent’s last tax year.

The decedent’s interest in the following

Fair Market Value (FMV)

Capital loss. The capital loss

types of property is not eligible for an

increase in basis.

Generally, for purposes of section 1022,

carryforward included in the Carryovers/

•

Stock or securities of a foreign personal

the FMV of property is the price at which

Unrealized Losses Increase is the amount

holding company.

the property would change hands

of any capital loss carryforward that would

•

Stock of a domestic international sales

between a willing buyer and a willing

(but for the decedent’s death) be carried

corporation (DISC) or former DISC.

seller, neither being under any

to a tax year of the decedent after the

•

Stock of a foreign investment company.

compulsion to buy or sell and both having

decedent’s last tax year. Generally, you

•

Stock of a passive foreign investment

reasonable knowledge of the relevant

can figure the decedent’s capital loss

company unless such company is a

facts.

carryforward using the Capital Loss

-4-

Instructions For Form 8939 - Allocation Of Increase In Basis For Property Acquired From A Decedent - 2010 Page 5

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