According to the IRS:
To figure out the basis of property you receive as a gift, you must know three amounts:
- The adjusted cost basis to the donor just before the donor made the gift to you.
- The fair market value (FMV) at the time the donor made the gift.
- The amount of any gift tax paid on Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.
If the FMV of the property at the time of the gift is less than the donor’s adjusted basis, your adjusted basis depends on whether you have a gain or loss when you dispose of the property.