We provide here a written summary of answers provided by the Department of Revenue to the committee at periodic question and answer sessions. These documents are classified as Revenue information issued for informational purposes only for the convenience of PICPA members. Pursuant to 61 Pa. Code Section 3.4, these documents should not be relied upon for any purpose or used in tax appeals. Taxpayers requiring a binding opinion on a specific fact situation may request a written letter ruling under 61 Pa. Code Section 3.3.
Q&A with the Pennsylvania Department of Revenue
Scenario: A taxpayer is a resident of Pennsylvania who receives an inter-vivos gift of an interest in a pass-through entity which does business in Pennsylvania. The Donor is not a resident of Pennsylvania.
How is the recipient taxpayer’s basis determined? Would the calculation of basis be changed if the pass-through entity (PTE) had never conducted business in Pennsylvania?
For purposes of determining the recipient taxpayer’s basis, a carryover basis from the donor would be used since it was a gift and the basis of property received as a gift is a carryover basis. See the previous answer for determining the donor’s basis at the time of the gift. The calculation would not change depending on whether the entity had conducted business in Pennsylvania or not.