Question

In what ways can a capital asset be acquired and how is the holding period determined for each method of acquisition?

Answer 1

Assets can be acquired by purchase, by gift, or through inheritance. For stocks, bonds, other property, and other nontaxable exchanges, the holding period starts the day after the taxpayer acquired the property. For a gift, if the taxpayer's basis is the donor's basis, the holding period includes the donor's period. If the taxpayer's basis is the FMV, the holding period starts the day after the date of the gift. Property acquired through inheritance is always considered to have been held longer than one year.