BASIS OF PROPERTY ACQUIRED BY GIFT.

SEC. 43. BASIS OF PROPERTY ACQUIRED BY GIFT. (a) Increase for Gift Tax Paid.—Section 1015 (relating to basis of property acquired by gifts and transfers in trust) is amended by adding at the end thereof the following new subsection: “(d) Increased Basis for Gift Tax Paid.— “(1) In general.— If— “(A) the property is acquired by gift on or after the date of the enactment of the Technical Amendments Act of 1958, the basis shall be the basis determined under subsection (a), increased (but not above the fair market value of the property at the time of the gift) by the amount of gift tax paid with respect to such gift, or “(B) the property was acquired by gift before the date of the enactment of the Technical Amendments Act of 1958 and has not been sold, exchanged, or otherwise disposed of before such date, the basis of the property shall be increased on such date by the amount of gift tax paid with respect to such gift, but such increase shall not exceed an amount equal to the amount by which the fair market value of the property at the time of the gift exceeded the basis of the property in the hands of the donor at the time of the gift. “(2) Amount of tax paid with respect to gift.—For purposes of paragraph (1), the amount of gift tax paid with respect to any gift is an amount which bears the same ratio to the amount of gift tax paid under chapter 12 with respect to all gifts made by the donor for the calendar year in which such gift is made as the amount of such gift bears to the taxable gifts (as defined in section 2503 (a) but computed without the deduction allowed by section 2521) made by the donor during such calendar year. For purposes of the preceding sentence, the amount of any gift shall be the amount included with respect to such gift in determining (for the purposes of section 2503 (a)) the total amount of gifts made during the calendar year, reduced by the amount of any deduction allowed with respect to such gift under section 2522 (relating to charitable deduction) or under section 2523 (relating to marital deduction). “(3) Gifts treated as made one-half by each spouse.—For purposes of paragraph (1), where the donor and his spouse elected, under section 2513 to have the gift considered as made one-half by 72 Stat. 1641 each, the amount of gift tax paid with respect to such gift under chapter 12 shall be the sum of the amounts of tax paid with respect to each half of such gift (computed in the manner provided in paragraph (2)). “(4) Treatment as adjustment to basis.—For purposes of section 1016 (b), an increase in basis under paragraph (1) shall be treated as an adjustment under section 1016 (a). “(5) Application to gifts before less.—With respect to any property acquired by gift before 1955, references in this subsection to any provision of this title shall be deemed to refer to the corresponding provision of the Internal Revenue Code of 1939 or prior revenue laws which was effective for the year in which such gift was made.” (b) Cross Reference.—Section 2501 (b) is amended to read as follows: “(b) Cross References.— “(1) For increase in basis of property acquired by gift for gift tax paid, see section 1015 (d). “(2) For exclusion of transfers of property outside the United States by a nonresident who is not a citizen of the United States, see section 2511 (a).”