The date of death value of the prior gift should not be considered as a part of this calculation. The act of making the gift in 1960 removed that asset from the estate.
You could encounter issues if a gift tax return was not filed relative to the 1960 transaction. That could lead the IRS to determine that a gift was not actually made at that time and/or that $70,000 was not the correct value, etc.
No, it does not appear that it was "accepted"
The value for gift tax purposes in 1960 would be the fair market value at that time, i.e. $70,000.
The grandson's basis would be $15,000 plus any gift tax paid on the gift.
The death in 2001 is only relevant to this property if he did NOT make the gift in 1960.
The best possibility of finding out if gift tax was paid or if a gift tax return was filed would be to refer to the lawyer and accountant. One or the other of them should have that information. The grandfather SHOULD have a copy of the gift tax return, if one were filed, and a copy of the canceled check, if any taxes were paid - but it seems more likely that the information would be available from the professionals.
Thank you. I will reply then accept with bonus. If local professionals are also passed away and no documentation of the gift can be located, wouldn't the IRS have some record of the documentation from 1960? How would the grandson obtain the record from them? Would he have standing to ask for it or would the executor of the grandfather's estate have to request it? Even though that is far back, wouldn't they have some computer record?
The IRS "should" have a record. The executor should have standing to request it. The executor might also have a record of it independently of the original professionals or the IRS. I am not sure if the donee has standing to request it or not from the IRS.
If it was an inheritance, then the basis would be its value on the date of death or the alternate valuation date.
If the gift property was worth $70,000 in 1960 when it was given then $30,000 would be available as a lifetime exclusion. Another $3,000 would be the annual exclusion. That leaves $37,000 that would be subject to gift tax. What would have been the gift tax rate back then, any idea? If NO gift tax was paid, then that means that 37/70 = 53% of the property was subject to tax, but not paid. The gift was given before the unified code, but if the donor died in 2001, after the estate and gift taxes were unified, wouldn't that bring the gift back into the estate calculations? Since the 2001 value of the property was $1 million, does that mean that 53% of the $1 million would be counted against the donor's $675,000 unified credit? $675,000 - 530,000 = $140,000. Does that mean that $140,000 is left to offset the other $3 million left by the man's will at his death? Is this how the unpaid gift tax would be calculated, after the fact? If not, can you explain how it would be calculated for 2001?