In short
Property received as a gift or inheritance is excluded from the recipient's gross income. Income the property earns afterward, such as dividends or rent, is taxable to the recipient.
Key takeaways
- Gifts generally take the donor's basis; inherited property generally takes fair market value at death.
- Payments from an employer called gifts are usually taxable compensation.
- Any gift tax is the donor's responsibility.
Where it's tested
REG: Individual Taxation: Gross Income — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Which of the following items is included in a taxpayer's federal gross income?