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Federal Tax Form 2011

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Federal Tax Form 2011

Federal tax form 2011 Index A Activities not for profit, Hobby Expenses Adjustments to gross income Armed forces reservists' travel expenses, Armed Forces reservists traveling more than 100 miles from home. Federal tax form 2011 Performing artists, Performing Artists State or local government officials paid on fee basis, Officials Paid on a Fee Basis Unlawful discrimination claims, Unlawful discrimination claims. Federal tax form 2011 Administrative fees IRA trustees, Trustee's Administrative Fees for IRA Adoption expenses, Adoption Expenses Amortizable bond premium, Amortizable Premium on Taxable Bonds, More information. Federal tax form 2011 Appraisal fees, Appraisal Fees Armed forces Military uniforms, Military uniforms. Federal tax form 2011 Reservists, travel expenses, Armed Forces reservists traveling more than 100 miles from home. Federal tax form 2011 Assistance (see Tax help) B Bad debts, Business Bad Debt Bank accounts Check-writing fees, Check-Writing Fees on Personal Account Losses on deposits, Loss on Deposits Bonds Amortizable premium, Amortizable Premium on Taxable Bonds Breach of contract Damages, Damages for Breach of Employment Contract Bribes, List of Nondeductible Expenses Burial expenses, List of Nondeductible Expenses Business expenses (see Employee business expenses) Business gifts, Gift expenses. Federal tax form 2011 C Campaign contributions, Lobbying and political activities. Federal tax form 2011 , Political Contributions Campaign expenses, Campaign Expenses Capital expenditures, Capital Expenses Casualty losses, Casualty and Theft Losses, Casualty and Theft Losses of Income-Producing Property Cell phones, Depreciation on Computers Chambers of Commerce dues, Lobbying and political activities. Federal tax form 2011 Check-writing fees, Check-Writing Fees on Personal Account Claim of right repayments, Repayments Under Claim of Right Clerical help, deductibility of, Clerical Help and Office Rent Clothes Protective, Protective clothing. Federal tax form 2011 Work, Work Clothes and Uniforms Club dues, Club Dues Commissions, Commissions Commuting expenses, Commuting Expenses Computers Depreciation, Depreciation on Computers, Depreciation on Home Computer, Excess Deductions of an Estate Convenience fees, Credit or Debit Card Convenience Fees Criminal prosecutions Travel expenses for federal staff, Federal crime investigation and prosecution. Federal tax form 2011 D Damages Breach of employment contract, Damages for Breach of Employment Contract Deposits Losses on, Loss on Deposits Depreciation Computers, Depreciation on Computers, Depreciation on Home Computer, Excess Deductions of an Estate Disabilities, persons with Work-related expenses, Impairment-Related Work Expenses Dividends Fees to collect, Fees To Collect Interest and Dividends Service charges on reinvestment plans, Service Charges on Dividend Reinvestment Plans Dues, Dues to Chambers of Commerce and Professional Societies (see also Expenses) (see also Fees) Chambers of Commerce, Dues to Chambers of Commerce and Professional Societies Club, Club Dues Lobbying, Dues used for lobbying. Federal tax form 2011 Professional societies, Dues to Chambers of Commerce and Professional Societies Union, Union Dues and Expenses E Education, Educator Expenses, Education Expenses During Unemployment Education expenses, Work-Related Education, More information. Federal tax form 2011 Employee business expenses Form 2106 and Form 2106-EZ, Form 2106 and Form 2106-EZ. Federal tax form 2011 Performing artists, Performing Artists Unreimbursed, Unreimbursed Employee Expenses Employment Agency fees, Employment and outplacement agency fees. Federal tax form 2011 Breach of contract, Damages for Breach of Employment Contract Entertainers and musicians (see Performing artists) Entertainment expenses, Meals and entertainment. Federal tax form 2011 Estates Federal estate tax, Federal Estate Tax on Income in Respect of a Decedent Expenses, Dues to Chambers of Commerce and Professional Societies, Education Expenses During Unemployment (see also Dues) (see also Fees) Adoption, Adoption Expenses Campaign, Campaign Expenses Capital, Capital Expenses Commuting, Commuting Expenses Education Work-related, Work-Related Education Educator, Educator Expenses Qualified, Qualified expenses. Federal tax form 2011 Educator Expenses, Eligible educator. Federal tax form 2011 Employee business (see Employee business expenses) Entertainment, Meals and entertainment. Federal tax form 2011 Funeral and burial, List of Nondeductible Expenses Gifts, Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging, Gift expenses. Federal tax form 2011 Health spa, Health Spa Expenses Hobby, Hobby Expenses Home office, Home Office Impairment-related, Impairment-Related Work Expenses Investment, Investment Fees and Expenses, Investment-Related Seminars Job search, Job Search Expenses Legal (see Legal expenses) Local lodging, Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging Meals, Meals and entertainment. Federal tax form 2011 , Lunches With Co-workers Meals and entertainment, Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging Nondeductible, Nondeductible Expenses Over limit, educator, Educator expenses over limit. Federal tax form 2011 Personal, Nondeductible Expenses Production of income, Other Expenses Professional promotion, Professional Reputation Tax-exempt income, Tax-Exempt Income Expenses Travel and transportation, Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging Travel as education, Travel as education. Federal tax form 2011 F Federal estate tax, Federal Estate Tax on Income in Respect of a Decedent Fees, Dues to Chambers of Commerce and Professional Societies (see also Dues) (see also Expenses) Appraisal, Appraisal Fees Check-writing, Check-Writing Fees on Personal Account Employment and outplacement agency, Employment and outplacement agency fees. Federal tax form 2011 Investment, Fees To Collect Interest and Dividends, Investment Fees and Expenses IRA trustee, Trustee's Administrative Fees for IRA Legal (see Legal expenses) License, Licenses and Regulatory Fees Professional accreditation, Professional Accreditation Fees Fines, Fines or Penalties Form 2106 Employee business expenses, Form 2106 and Form 2106-EZ. Federal tax form 2011 Form 2106-EZ Employee business expenses, Form 2106 and Form 2106-EZ. Federal tax form 2011 Form 4562 Depreciation and amortization, Reporting your depreciation deduction. Federal tax form 2011 , Depreciation. Federal tax form 2011 , Computer used in a home office. Federal tax form 2011 Free tax services, Free help with your tax return. Federal tax form 2011 Funeral expenses, List of Nondeductible Expenses G Gambling winnings and losses, Gambling Losses Up to the Amount of Gambling Winnings Government employees Federal criminal investigation and prosecution travel expenses, Federal crime investigation and prosecution. Federal tax form 2011 State or local government officials paid on fee basis, Officials Paid on a Fee Basis H Health spa, Health Spa Expenses Help (see Tax help) Hobbies, Hobby Expenses Home Security system, Home Security System Telephone service, Residential Telephone Service Home office Computers, Computer used in a home office. Federal tax form 2011 Expenses, Home Office Principal place of business, Principal place of business. Federal tax form 2011 Travel and transportation expenses, Home office. Federal tax form 2011 I Impairment-related work expenses, Impairment-Related Work Expenses Income aid payment, Repayment of Income Aid Payment Income in respect of decedent Estate tax, Federal Estate Tax on Income in Respect of a Decedent Individual retirement arrangements (IRAs) Trustees' fees, Trustee's Administrative Fees for IRA Insurance Business liability, Business Liability Insurance Life insurance, Life Insurance Premiums Malpractice, Unreimbursed Employee Expenses Personal disability, List of Nondeductible Expenses Interest income Fees to collect, Fees To Collect Interest and Dividends Investments Annuity, unrecovered investment in, Unrecovered Investment in Annuity Deposits, losses on, Loss on Deposits Fees and expenses, Investment Fees and Expenses Seminars, Investment-Related Seminars Itemized deductions Deductions not subject to 2% limit, Deductions Not Subject to the 2% Limit Deductions subject to 2% limit, Introduction, Deductions Subject to the 2% Limit How to report, How To Report J Job search, Job Search Expenses, Travel and transportation expenses. Federal tax form 2011 K Kickbacks, List of Nondeductible Expenses L Legal expenses Job-related, Legal Fees Personal, Personal Legal Expenses Political campaigns, Legal fees. Federal tax form 2011 Production of income, Legal Expenses Unlawful discrimination claims, Legal Expenses Licenses Fees, Licenses and Regulatory Fees Life insurance, Life Insurance Premiums Lobbying, Lobbying and political activities. Federal tax form 2011 , Lobbying Expenses, Exceptions. Federal tax form 2011 Local transportation, Local transportation expenses. Federal tax form 2011 Losses Casualties and thefts, Casualty and Theft Losses, Casualty and Theft Losses of Income-Producing Property Deposits, Loss on Deposits Gambling, Gambling Losses Up to the Amount of Gambling Winnings IRA, Loss on IRA Mislaid cash or property, Lost or Mislaid Cash or Property Partnership, Loss From Other Activities From Schedule K-1 (Form 1065-B), Box 2 Roth IRA, Loss on IRA M Mail carriers, rural, Rural Mail Carriers' Vehicle Expenses Malpractice insurance, Unreimbursed Employee Expenses Meal and lodging expenses, Meals and entertainment. Federal tax form 2011 Lunches with coworkers, Lunches With Co-workers Working late, Meals While Working Late Medical examinations, Unreimbursed Employee Expenses Mileage rate, What's New Missing children, photographs of, Reminders Mutual funds Indirect deductions, Indirect Deductions of Pass-Through Entities N Nondeductible expenses, Nondeductible Expenses, Wristwatches Not-for-profit activities, Hobby Expenses O Occupational taxes, Occupational Taxes Office Home (see Home office) Rent, Clerical Help and Office Rent Outplacement agency fees, Employment and outplacement agency fees. Federal tax form 2011 P Partnerships Indirect deductions, Indirect Deductions of Pass-Through Entities Pass-through entities, Indirect Deductions of Pass-Through Entities Passport expense, Unreimbursed Employee Expenses Penalties, Fines or Penalties Performing artists, Performing Artists Work clothes, Work Clothes and Uniforms Personal expenses, Nondeductible Expenses, Wristwatches Political contributions, Lobbying and political activities. Federal tax form 2011 , Political Contributions Campaign expenses, Campaign Expenses Ponzi-type investment schemes, Losses From Ponzi-type Investment Schemes Postal workers, Rural Mail Carriers' Vehicle Expenses Production of income expenses, Other Expenses, Loss on IRA Professional accreditation fees, Professional Accreditation Fees Professional journals, Unreimbursed Employee Expenses Professional reputation and marketing, Professional Reputation Professional societies dues, Lobbying and political activities. Federal tax form 2011 Prosecution travel expenses, Federal crime investigation and prosecution. Federal tax form 2011 Protective clothing, Protective clothing. Federal tax form 2011 Publications (see Tax help) R Recordkeeping requirements Computer used for home and business, Depreciation on Computers Deductions, to verify, Introduction Gambling winnings and losses, Gambling Losses Up to the Amount of Gambling Winnings Home office, Home Office Relief fund contributions, Relief Fund Contributions Rent Office, Clerical Help and Office Rent Safe deposit box, Safe Deposit Box Rent Repayments Claim of right, Repayments Under Claim of Right Income, Repayments of Income Income aid payments, Unreimbursed Employee Expenses Social Security benefits, Repayments of Social Security Benefits Reporting requirements Armed Forces reservists, Armed Forces reservists. Federal tax form 2011 Computer used in a home office, Computer used in a home office. Federal tax form 2011 Depreciation, Depreciation. Federal tax form 2011 Form 2106 and Form 2106-EZ, Form 2106 and Form 2106-EZ. Federal tax form 2011 Impairment-related work expenses, Impairment-related work expenses. Federal tax form 2011 Itemized deductions, How To Report Tax preparation fees, Tax preparation fees. Federal tax form 2011 Research expenses, Research Expenses of a College Professor Résumé, Résumé. Federal tax form 2011 Rural mail carriers, Rural Mail Carriers' Vehicle Expenses S S corporations Indirect deductions, Indirect Deductions of Pass-Through Entities Safe deposit box, Safe Deposit Box Rent Security systems, home, Home Security System Seminars, investment-related, Investment-Related Seminars Service charges on dividend reinvestment plans, Service Charges on Dividend Reinvestment Plans Social Security repayments, Repayments of Social Security Benefits State or local governments Officials paid on fee basis, Officials Paid on a Fee Basis Stockholders' meeting expenses, Stockholders' Meetings T Tax help, How To Get Tax Help Tax-exempt income expenses, Tax-Exempt Income Expenses Taxes Estate tax, Federal Estate Tax on Income in Respect of a Decedent Occupational, Occupational Taxes Telephones Cell phone, Depreciation on Computers Residential service, Residential Telephone Service Theft losses, Casualty and Theft Losses, Casualty and Theft Losses of Income-Producing Property Tools, Tools Used in Your Work Travel and transportation expenses, Local lodging. Federal tax form 2011 , Additional information. Federal tax form 2011 Another individual, paid by taxpayer, Travel Expenses for Another Individual Armed forces reservists, Armed Forces reservists traveling more than 100 miles from home. Federal tax form 2011 Commuting, Commuting Expenses Criminal investigations and prosecutions, Federal crime investigation and prosecution. Federal tax form 2011 Education, Travel as education. Federal tax form 2011 Indefinite work assignments, Indefinite work assignment. Federal tax form 2011 Job search, Travel and transportation expenses. Federal tax form 2011 Local transportation, Local transportation expenses. Federal tax form 2011 Research, Research Expenses of a College Professor Temporary work assignments, Temporary work assignment. Federal tax form 2011 Trustees IRA administrative fees, Trustee's Administrative Fees for IRA TTY/TDD information, How To Get Tax Help U Unemployment and education expenses, Education Expenses During Unemployment Unemployment benefit fund contributions, Voluntary Unemployment Benefit Fund Contributions Uniforms, military, Military uniforms. Federal tax form 2011 Union dues, Union Dues and Expenses Unreimbursed employee expenses, Unreimbursed Employee Expenses, Military uniforms. Federal tax form 2011 W Wagering winnings and losses, Gambling Losses Up to the Amount of Gambling Winnings Work Clothes and uniforms, Work Clothes and Uniforms Impairment-related expenses, Impairment-Related Work Expenses Supplies, Unreimbursed Employee Expenses Tools, Unreimbursed Employee Expenses, Tools Used in Your Work Travel and transportation expenses, Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging Wristwatches, List of Nondeductible Expenses, Wristwatches Prev  Up     Home   More Online Publications
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The Federal Tax Form 2011

Federal tax form 2011 13. Federal tax form 2011   Basis of Property Table of Contents Introduction Useful Items - You may want to see: Cost BasisReal Property Adjusted BasisIncreases to Basis Decreases to Basis Basis Other Than CostProperty Received for Services Taxable Exchanges Involuntary Conversions Nontaxable Exchanges Property Transferred From a Spouse Property Received as a Gift Inherited Property Property Changed From Personal to Business or Rental Use Stocks and Bonds Introduction This chapter discusses how to figure your basis in property. Federal tax form 2011 It is divided into the following sections. Federal tax form 2011 Cost basis. Federal tax form 2011 Adjusted basis. Federal tax form 2011 Basis other than cost. Federal tax form 2011 Your basis is the amount of your investment in property for tax purposes. Federal tax form 2011 Use the basis to figure gain or loss on the sale, exchange, or other disposition of property. Federal tax form 2011 Also use it to figure deductions for depreciation, amortization, depletion, and casualty losses. Federal tax form 2011 If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. Federal tax form 2011 Only the basis allocated to the business or investment use of the property can be depreciated. Federal tax form 2011 Your original basis in property is adjusted (increased or decreased) by certain events. Federal tax form 2011 For example, if you make improvements to the property, increase your basis. Federal tax form 2011 If you take deductions for depreciation or casualty losses, or claim certain credits, reduce your basis. Federal tax form 2011 Keep accurate records of all items that affect the basis of your property. Federal tax form 2011 For more information on keeping records, see chapter 1. Federal tax form 2011 Useful Items - You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 525 Taxable and Nontaxable Income 535 Business Expenses 537 Installment Sales 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 551 Basis of Assets 946 How To Depreciate Property Cost Basis The basis of property you buy is usually its cost. Federal tax form 2011 The cost is the amount you pay in cash, debt obligations, other property, or services. Federal tax form 2011 Your cost also includes amounts you pay for the following items: Sales tax, Freight, Installation and testing, Excise taxes, Legal and accounting fees (when they must be capitalized), Revenue stamps, Recording fees, and Real estate taxes (if you assume liability for the seller). Federal tax form 2011 In addition, the basis of real estate and business assets may include other items. Federal tax form 2011 Loans with low or no interest. Federal tax form 2011    If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price minus any amount considered to be unstated interest. Federal tax form 2011 You generally have unstated interest if your interest rate is less than the applicable federal rate. Federal tax form 2011   For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. Federal tax form 2011 Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. Federal tax form 2011 If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. Federal tax form 2011 Lump sum purchase. Federal tax form 2011   If you buy buildings and the land on which they stand for a lump sum, allocate the cost basis among the land and the buildings. Federal tax form 2011 Allocate the cost basis according to the respective fair market values (FMVs) of the land and buildings at the time of purchase. Federal tax form 2011 Figure the basis of each asset by multiplying the lump sum by a fraction. Federal tax form 2011 The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. Federal tax form 2011    If you are not certain of the FMVs of the land and buildings, you can allocate the basis according to their assessed values for real estate tax purposes. Federal tax form 2011 Fair market value (FMV). Federal tax form 2011   FMV is the price at which the property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the necessary facts. Federal tax form 2011 Sales of similar property on or about the same date may be helpful in figuring the FMV of the property. Federal tax form 2011 Assumption of mortgage. Federal tax form 2011   If you buy property and assume (or buy the property subject to) an existing mortgage on the property, your basis includes the amount you pay for the property plus the amount to be paid on the mortgage. Federal tax form 2011 Settlement costs. Federal tax form 2011   Your basis includes the settlement fees and closing costs you paid for buying the property. Federal tax form 2011 (A fee for buying property is a cost that must be paid even if you buy the property for cash. Federal tax form 2011 ) Do not include fees and costs for getting a loan on the property in your basis. Federal tax form 2011   The following are some of the settlement fees or closing costs you can include in the basis of your property. Federal tax form 2011 Abstract fees (abstract of title fees). Federal tax form 2011 Charges for installing utility services. Federal tax form 2011 Legal fees (including fees for the title search and preparation of the sales contract and deed). Federal tax form 2011 Recording fees. Federal tax form 2011 Survey fees. Federal tax form 2011 Transfer taxes. Federal tax form 2011 Owner's title insurance. Federal tax form 2011 Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. Federal tax form 2011   Settlement costs do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Federal tax form 2011   The following are some of the settlement fees and closing costs you cannot include in the basis of property. Federal tax form 2011 Casualty insurance premiums. Federal tax form 2011 Rent for occupancy of the property before closing. Federal tax form 2011 Charges for utilities or other services related to occupancy of the property before closing. Federal tax form 2011 Charges connected with getting a loan, such as points (discount points, loan origination fees), mortgage insurance premiums, loan assumption fees, cost of a credit report, and fees for an appraisal required by a lender. Federal tax form 2011 Fees for refinancing a mortgage. Federal tax form 2011 Real estate taxes. Federal tax form 2011   If you pay real estate taxes the seller owed on real property you bought, and the seller did not reimburse you, treat those taxes as part of your basis. Federal tax form 2011 You cannot deduct them as an expense. Federal tax form 2011    If you reimburse the seller for taxes the seller paid for you, you can usually deduct that amount as an expense in the year of purchase. Federal tax form 2011 Do not include that amount in the basis of your property. Federal tax form 2011 If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. Federal tax form 2011 Points. Federal tax form 2011   If you pay points to get a loan (including a mortgage, second mortgage, line of credit, or a home equity loan), do not add the points to the basis of the related property. Federal tax form 2011 Generally, you deduct the points over the term of the loan. Federal tax form 2011 For more information on how to deduct points, see chapter 23. Federal tax form 2011 Points on home mortgage. Federal tax form 2011   Special rules may apply to points you and the seller pay when you get a mortgage to buy your main home. Federal tax form 2011 If certain requirements are met, you can deduct the points in full for the year in which they are paid. Federal tax form 2011 Reduce the basis of your home by any seller-paid points. Federal tax form 2011 Adjusted Basis Before figuring gain or loss on a sale, exchange, or other disposition of property or figuring allowable depreciation, depletion, or amortization, you must usually make certain adjustments (increases and decreases) to the cost basis or basis other than cost (discussed later) of the property. Federal tax form 2011 The result is the adjusted basis. Federal tax form 2011 Increases to Basis Increase the basis of any property by all items properly added to a capital account. Federal tax form 2011 Examples of items that increase basis are shown in Table 13-1. Federal tax form 2011 These include the items discussed below. Federal tax form 2011 Improvements. Federal tax form 2011   Add to your basis in property the cost of improvements having a useful life of more than 1 year, that increase the value of the property, lengthen its life, or adapt it to a different use. Federal tax form 2011 For example, improvements include putting a recreation room in your unfinished basement, adding another bathroom or bedroom, putting up a fence, putting in new plumbing or wiring, installing a new roof, or paving your driveway. Federal tax form 2011 Assessments for local improvements. Federal tax form 2011   Add to the basis of property assessments for improvements such as streets and sidewalks if they increase the value of the property assessed. Federal tax form 2011 Do not deduct them as taxes. Federal tax form 2011 However, you can deduct as taxes assessments for maintenance or repairs, or for meeting interest charges related to the improvements. Federal tax form 2011 Example. Federal tax form 2011 Your city changes the street in front of your store into an enclosed pedestrian mall and assesses you and other affected property owners for the cost of the conversion. Federal tax form 2011 Add the assessment to your property's basis. Federal tax form 2011 In this example, the assessment is a depreciable asset. Federal tax form 2011 Decreases to Basis Decrease the basis of any property by all items that represent a return of capital for the period during which you held the property. Federal tax form 2011 Examples of items that decrease basis are shown in Table 13-1. Federal tax form 2011 These include the items discussed below. Federal tax form 2011 Table 13-1. Federal tax form 2011 Examples of Adjustments to Basis Increases to Basis Decreases to Basis • Capital improvements: • Exclusion from income of   Putting an addition on your home subsidies for energy conservation   Replacing an entire roof measures   Paving your driveway     Installing central air conditioning • Casualty or theft loss deductions   Rewiring your home and insurance reimbursements       • Assessments for local improvements:     Water connections     Extending utility service lines to the property • Postponed gain from the sale of a home   Sidewalks • Alternative motor vehicle credit  (Form 8910)   Roads       • Alternative fuel vehicle refueling     property credit (Form 8911)           • Residential energy credits (Form 5695)       • Casualty losses: • Depreciation and section 179 deduction   Restoring damaged property     • Nontaxable corporate distributions • Legal fees:     Cost of defending and perfecting a title • Certain canceled debt excluded from   Fees for getting a reduction of an assessment income     • Zoning costs • Easements           • Adoption tax benefits Casualty and theft losses. Federal tax form 2011   If you have a casualty or theft loss, decrease the basis in your property by any insurance proceeds or other reimbursement and by any deductible loss not covered by insurance. Federal tax form 2011    You must increase your basis in the property by the amount you spend on repairs that restore the property to its pre-casualty condition. Federal tax form 2011   For more information on casualty and theft losses, see chapter 25. Federal tax form 2011 Depreciation and section 179 deduction. Federal tax form 2011   Decrease the basis of your qualifying business property by any section 179 deduction you take and the depreciation you deducted, or could have deducted (including any special depreciation allowance), on your tax returns under the method of depreciation you selected. Federal tax form 2011   For more information about depreciation and the section 179 deduction, see Publication 946 and the Instructions for Form 4562. Federal tax form 2011 Example. Federal tax form 2011 You owned a duplex used as rental property that cost you $40,000, of which $35,000 was allocated to the building and $5,000 to the land. Federal tax form 2011 You added an improvement to the duplex that cost $10,000. Federal tax form 2011 In February last year, the duplex was damaged by fire. Federal tax form 2011 Up to that time, you had been allowed depreciation of $23,000. Federal tax form 2011 You sold some salvaged material for $1,300 and collected $19,700 from your insurance company. Federal tax form 2011 You deducted a casualty loss of $1,000 on your income tax return for last year. Federal tax form 2011 You spent $19,000 of the insurance proceeds for restoration of the duplex, which was completed this year. Federal tax form 2011 You must use the duplex's adjusted basis after the restoration to determine depreciation for the rest of the property's recovery period. Federal tax form 2011 Figure the adjusted basis of the duplex as follows: Original cost of duplex $35,000 Addition to duplex 10,000 Total cost of duplex $45,000 Minus: Depreciation 23,000 Adjusted basis before casualty $22,000 Minus: Insurance proceeds $19,700     Deducted casualty loss 1,000     Salvage proceeds 1,300 22,000 Adjusted basis after casualty $-0- Add: Cost of restoring duplex 19,000 Adjusted basis after restoration $19,000 Note. Federal tax form 2011 Your basis in the land is its original cost of $5,000. Federal tax form 2011 Easements. Federal tax form 2011   The amount you receive for granting an easement is generally considered to be proceeds from the sale of an interest in real property. Federal tax form 2011 It reduces the basis of the affected part of the property. Federal tax form 2011 If the amount received is more than the basis of the part of the property affected by the easement, reduce your basis in that part to zero and treat the excess as a recognized gain. Federal tax form 2011   If the gain is on a capital asset, see chapter 16 for information about how to report it. Federal tax form 2011 If the gain is on property used in a trade or business, see Publication 544 for information about how to report it. Federal tax form 2011 Exclusion of subsidies for energy conservation measures. Federal tax form 2011   You can exclude from gross income any subsidy you received from a public utility company for the purchase or installation of an energy conservation measure for a dwelling unit. Federal tax form 2011 Reduce the basis of the property for which you received the subsidy by the excluded amount. Federal tax form 2011 For more information about this subsidy, see chapter 12. Federal tax form 2011 Postponed gain from sale of home. Federal tax form 2011    If you postponed gain from the sale of your main home under rules in effect before May 7, 1997, you must reduce the basis of the home you acquired as a replacement by the amount of the postponed gain. Federal tax form 2011 For more information on the rules for the sale of a home, see chapter 15. Federal tax form 2011 Basis Other Than Cost There are many times when you cannot use cost as basis. Federal tax form 2011 In these cases, the fair market value or the adjusted basis of the property can be used. Federal tax form 2011 Fair market value (FMV) and adjusted basis were discussed earlier. Federal tax form 2011 Property Received for Services If you receive property for your services, include the FMV of the property in income. Federal tax form 2011 The amount you include in income becomes your basis. Federal tax form 2011 If the services were performed for a price agreed on beforehand, it will be accepted as the FMV of the property if there is no evidence to the contrary. Federal tax form 2011 Restricted property. Federal tax form 2011   If you receive property for your services and the property is subject to certain restrictions, your basis in the property is its FMV when it becomes substantially vested. Federal tax form 2011 However, this rule does not apply if you make an election to include in income the FMV of the property at the time it is transferred to you, less any amount you paid for it. Federal tax form 2011 Property is substantially vested when it is transferable or when it is not subject to a substantial risk of forfeiture (you do not have a good chance of losing it). Federal tax form 2011 For more information, see Restricted Property in Publication 525. Federal tax form 2011 Bargain purchases. Federal tax form 2011   A bargain purchase is a purchase of an item for less than its FMV. Federal tax form 2011 If, as compensation for services, you buy goods or other property at less than FMV, include the difference between the purchase price and the property's FMV in your income. Federal tax form 2011 Your basis in the property is its FMV (your purchase price plus the amount you include in income). Federal tax form 2011   If the difference between your purchase price and the FMV is a qualified employee discount, do not include the difference in income. Federal tax form 2011 However, your basis in the property is still its FMV. Federal tax form 2011 See Employee Discounts in Publication 15-B. Federal tax form 2011 Taxable Exchanges A taxable exchange is one in which the gain is taxable or the loss is deductible. Federal tax form 2011 A taxable gain or deductible loss also is known as a recognized gain or loss. Federal tax form 2011 If you receive property in exchange for other property in a taxable exchange, the basis of the property you receive is usually its FMV at the time of the exchange. Federal tax form 2011 Involuntary Conversions If you receive replacement property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, figure the basis of the replacement property using the basis of the converted property. Federal tax form 2011 Similar or related property. Federal tax form 2011   If you receive replacement property similar or related in service or use to the converted property, the replacement property's basis is the same as the converted property's basis on the date of the conversion, with the following adjustments. Federal tax form 2011 Decrease the basis by the following. Federal tax form 2011 Any loss you recognize on the involuntary conversion. Federal tax form 2011 Any money you receive that you do not spend on similar property. Federal tax form 2011 Increase the basis by the following. Federal tax form 2011 Any gain you recognize on the involuntary conversion. Federal tax form 2011 Any cost of acquiring the replacement property. Federal tax form 2011 Money or property not similar or related. Federal tax form 2011    If you receive money or property not similar or related in service or use to the converted property, and you buy replacement property similar or related in service or use to the converted property, the basis of the replacement property is its cost decreased by the gain not recognized on the conversion. Federal tax form 2011 Example. Federal tax form 2011 The state condemned your property. Federal tax form 2011 The adjusted basis of the property was $26,000 and the state paid you $31,000 for it. Federal tax form 2011 You realized a gain of $5,000 ($31,000 − $26,000). Federal tax form 2011 You bought replacement property similar in use to the converted property for $29,000. Federal tax form 2011 You recognize a gain of $2,000 ($31,000 − $29,000), the unspent part of the payment from the state. Federal tax form 2011 Your unrecognized gain is $3,000, the difference between the $5,000 realized gain and the $2,000 recognized gain. Federal tax form 2011 The basis of the replacement property is figured as follows: Cost of replacement property $29,000 Minus: Gain not recognized 3,000 Basis of replacement property $26,000 Allocating the basis. Federal tax form 2011   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. Federal tax form 2011 Basis for depreciation. Federal tax form 2011   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. Federal tax form 2011 For information, see What Is the Basis of Your Depreciable Property? in chapter 1 of Publication 946. Federal tax form 2011 Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. Federal tax form 2011 If you receive property in a nontaxable exchange, its basis is generally the same as the basis of the property you transferred. Federal tax form 2011 See Nontaxable Trades in chapter 14. Federal tax form 2011 Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. Federal tax form 2011 To qualify as a like-kind exchange, the property traded and the property received must be both of the following. Federal tax form 2011 Qualifying property. Federal tax form 2011 Like-kind property. Federal tax form 2011 The basis of the property you receive is generally the same as the adjusted basis of the property you gave up. Federal tax form 2011 If you trade property in a like-kind exchange and also pay money, the basis of the property received is the adjusted basis of the property you gave up increased by the money you paid. Federal tax form 2011 Qualifying property. Federal tax form 2011   In a like-kind exchange, you must hold for investment or for productive use in your trade or business both the property you give up and the property you receive. Federal tax form 2011 Like-kind property. Federal tax form 2011   There must be an exchange of like-kind property. Federal tax form 2011 Like-kind properties are properties of the same nature or character, even if they differ in grade or quality. Federal tax form 2011 The exchange of real estate for real estate and personal property for similar personal property are exchanges of like-kind property. Federal tax form 2011 Example. Federal tax form 2011 You trade in an old truck used in your business with an adjusted basis of $1,700 for a new one costing $6,800. Federal tax form 2011 The dealer allows you $2,000 on the old truck, and you pay $4,800. Federal tax form 2011 This is a like-kind exchange. Federal tax form 2011 The basis of the new truck is $6,500 (the adjusted basis of the old one, $1,700, plus the amount you paid, $4,800). Federal tax form 2011 If you sell your old truck to a third party for $2,000 instead of trading it in and then buy a new one from the dealer, you have a taxable gain of $300 on the sale (the $2,000 sale price minus the $1,700 adjusted basis). Federal tax form 2011 The basis of the new truck is the price you pay the dealer. Federal tax form 2011 Partially nontaxable exchanges. Federal tax form 2011   A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. Federal tax form 2011 The basis of the property you receive is the same as the adjusted basis of the property you gave up, with the following adjustments. Federal tax form 2011 Decrease the basis by the following amounts. Federal tax form 2011 Any money you receive. Federal tax form 2011 Any loss you recognize on the exchange. Federal tax form 2011 Increase the basis by the following amounts. Federal tax form 2011 Any additional costs you incur. Federal tax form 2011 Any gain you recognize on the exchange. Federal tax form 2011 If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. Federal tax form 2011 Allocation of basis. Federal tax form 2011   If you receive like-kind and unlike properties in the exchange, allocate the basis first to the unlike property, other than money, up to its FMV on the date of the exchange. Federal tax form 2011 The rest is the basis of the like-kind property. Federal tax form 2011 More information. Federal tax form 2011   See Like-Kind Exchanges in chapter 1 of Publication 544 for more information. Federal tax form 2011 Basis for depreciation. Federal tax form 2011   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind exchange. Federal tax form 2011 For information, see What Is the Basis of Your Depreciable Property? in chapter 1 of Publication 946. Federal tax form 2011 Property Transferred From a Spouse The basis of property transferred to you or transferred in trust for your benefit by your spouse is the same as your spouse's adjusted basis. Federal tax form 2011 The same rule applies to a transfer by your former spouse that is incident to divorce. Federal tax form 2011 However, for property transferred in trust, adjust your basis for any gain recognized by your spouse or former spouse if the liabilities assumed, plus the liabilities to which the property is subject, are more than the adjusted basis of the property transferred. Federal tax form 2011 If the property transferred to you is a series E, series EE, or series I U. Federal tax form 2011 S. Federal tax form 2011 savings bond, the transferor must include in income the interest accrued to the date of transfer. Federal tax form 2011 Your basis in the bond immediately after the transfer is equal to the transferor's basis increased by the interest income includible in the transferor's income. Federal tax form 2011 For more information on these bonds, see chapter 7. Federal tax form 2011 At the time of the transfer, the transferor must give you the records needed to determine the adjusted basis and holding period of the property as of the date of the transfer. Federal tax form 2011 For more information about the transfer of property from a spouse, see chapter 14. Federal tax form 2011 Property Received as a Gift To figure the basis of property you receive as a gift, you must know its adjusted basis to the donor just before it was given to you, its FMV at the time it was given to you, and any gift tax paid on it. Federal tax form 2011 FMV less than donor's adjusted basis. Federal tax form 2011   If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. Federal tax form 2011 Your basis for figuring gain is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you held the property. Federal tax form 2011 Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustments to basis while you held the property. Federal tax form 2011 See Adjusted Basis , earlier. Federal tax form 2011 Example. Federal tax form 2011 You received an acre of land as a gift. Federal tax form 2011 At the time of the gift, the land had an FMV of $8,000. Federal tax form 2011 The donor's adjusted basis was $10,000. Federal tax form 2011 After you received the property, no events occurred to increase or decrease your basis. Federal tax form 2011 If you later sell the property for $12,000, you will have a $2,000 gain because you must use the donor's adjusted basis at the time of the gift ($10,000) as your basis to figure gain. Federal tax form 2011 If you sell the property for $7,000, you will have a $1,000 loss because you must use the FMV at the time of the gift ($8,000) as your basis to figure loss. Federal tax form 2011 If the sales price is between $8,000 and $10,000, you have neither gain nor loss. Federal tax form 2011 Business property. Federal tax form 2011   If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deductions is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property. Federal tax form 2011 FMV equal to or greater than donor's adjusted basis. Federal tax form 2011   If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift. Federal tax form 2011 Increase your basis by all or part of any gift tax paid, depending on the date of the gift, explained later. Federal tax form 2011   Also, for figuring gain or loss from a sale or other disposition or for figuring depreciation, depletion, or amortization deductions on business property, you must increase or decrease your basis (the donor's adjusted basis) by any required adjustments to basis while you held the property. Federal tax form 2011 See Adjusted Basis , earlier. Federal tax form 2011   If you received a gift during the tax year, increase your basis in the gift (the donor's adjusted basis) by the part of the gift tax paid on it due to the net increase in value of the gift. Federal tax form 2011 Figure the increase by multiplying the gift tax paid by a fraction. Federal tax form 2011 The numerator of the fraction is the net increase in value of the gift and the denominator is the amount of the gift. Federal tax form 2011   The net increase in value of the gift is the FMV of the gift minus the donor's adjusted basis. Federal tax form 2011 The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Federal tax form 2011 Example. Federal tax form 2011 In 2013, you received a gift of property from your mother that had an FMV of $50,000. Federal tax form 2011 Her adjusted basis was $20,000. Federal tax form 2011 The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). Federal tax form 2011 She paid a gift tax of $7,320 on the property. Federal tax form 2011 Your basis is $26,076, figured as follows: Fair market value $50,000 Minus: Adjusted basis −20,000 Net increase in value $30,000     Gift tax paid $7,320 Multiplied by ($30,000 ÷ $36,000) × . Federal tax form 2011 83 Gift tax due to net increase in value $6,076 Adjusted basis of property to your mother +20,000 Your basis in the property $26,076 Note. Federal tax form 2011 If you received a gift before 1977, your basis in the gift (the donor's adjusted basis) includes any gift tax paid on it. Federal tax form 2011 However, your basis cannot exceed the FMV of the gift at the time it was given to you. Federal tax form 2011 Inherited Property Your basis in property you inherited from a decedent, who died before January 1, 2010, or after December 31, 2010, is generally one of the following: The FMV of the property at the date of the decedent's death. Federal tax form 2011 The FMV on the alternate valuation date if the personal representative for the estate elects to use alternate valuation. Federal tax form 2011 The value under the special-use valuation method for real property used in farming or a closely held business if elected for estate tax purposes. Federal tax form 2011 The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement. Federal tax form 2011 If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes. Federal tax form 2011 For more information, see the instructions to Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. Federal tax form 2011 Property inherited from a decedent who died in 2010. Federal tax form 2011   If you inherited property from a decedent who died in 2010, special rules may apply. Federal tax form 2011 For more information, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. Federal tax form 2011 Community property. Federal tax form 2011   In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), husband and wife are each usually considered to own half the community property. Federal tax form 2011 When either spouse dies, the total value of the community property, even the part belonging to the surviving spouse, generally becomes the basis of the entire property. Federal tax form 2011 For this rule to apply, at least half the value of the community property interest must be includible in the decedent's gross estate, whether or not the estate must file a return. Federal tax form 2011 Example. Federal tax form 2011 You and your spouse owned community property that had a basis of $80,000. Federal tax form 2011 When your spouse died, half the FMV of the community interest was includible in your spouse's estate. Federal tax form 2011 The FMV of the community interest was $100,000. Federal tax form 2011 The basis of your half of the property after the death of your spouse is $50,000 (half of the $100,000 FMV). Federal tax form 2011 The basis of the other half to your spouse's heirs is also $50,000. Federal tax form 2011 For more information about community property, see Publication 555, Community Property. Federal tax form 2011 Property Changed From Personal to Business or Rental Use If you hold property for personal use and then change it to business use or use it to produce rent, you can begin to depreciate the property at the time of the change. Federal tax form 2011 To do so, you must figure its basis for depreciation at the time of the change. Federal tax form 2011 An example of changing property held for personal use to business or rental use would be renting out your former personal residence. Federal tax form 2011 Basis for depreciation. Federal tax form 2011   The basis for depreciation is the lesser of the following amounts. Federal tax form 2011 The FMV of the property on the date of the change. Federal tax form 2011 Your adjusted basis on the date of the change. Federal tax form 2011 Example. Federal tax form 2011 Several years ago, you paid $160,000 to have your house built on a lot that cost $25,000. Federal tax form 2011 You paid $20,000 for permanent improvements to the house and claimed a $2,000 casualty loss deduction for damage to the house before changing the property to rental use last year. Federal tax form 2011 Because land is not depreciable, you include only the cost of the house when figuring the basis for depreciation. Federal tax form 2011 Your adjusted basis in the house when you changed its use was $178,000 ($160,000 + $20,000 − $2,000). Federal tax form 2011 On the same date, your property had an FMV of $180,000, of which $15,000 was for the land and $165,000 was for the house. Federal tax form 2011 The basis for figuring depreciation on the house is its FMV on the date of the change ($165,000) because it is less than your adjusted basis ($178,000). Federal tax form 2011 Sale of property. Federal tax form 2011   If you later sell or dispose of property changed to business or rental use, the basis you use will depend on whether you are figuring gain or loss. Federal tax form 2011 Gain. Federal tax form 2011   The basis for figuring a gain is your adjusted basis in the property when you sell the property. Federal tax form 2011 Example. Federal tax form 2011 Assume the same facts as in the previous example except that you sell the property at a gain after being allowed depreciation deductions of $37,500. Federal tax form 2011 Your adjusted basis for figuring gain is $165,500 ($178,000 + $25,000 (land) − $37,500). Federal tax form 2011 Loss. Federal tax form 2011   Figure the basis for a loss starting with the smaller of your adjusted basis or the FMV of the property at the time of the change to business or rental use. Federal tax form 2011 Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . Federal tax form 2011 Example. Federal tax form 2011 Assume the same facts as in the previous example, except that you sell the property at a loss after being allowed depreciation deductions of $37,500. Federal tax form 2011 In this case, you would start with the FMV on the date of the change to rental use ($180,000), because it is less than the adjusted basis of $203,000 ($178,000 + $25,000 (land)) on that date. Federal tax form 2011 Reduce that amount ($180,000) by the depreciation deductions ($37,500). Federal tax form 2011 The basis for loss is $142,500 ($180,000 − $37,500). Federal tax form 2011 Stocks and Bonds The basis of stocks or bonds you buy generally is the purchase price plus any costs of purchase, such as commissions and recording or transfer fees. Federal tax form 2011 If you get stocks or bonds other than by purchase, your basis is usually determined by the FMV or the previous owner's adjusted basis, as discussed earlier. Federal tax form 2011 You must adjust the basis of stocks for certain events that occur after purchase. Federal tax form 2011 For example, if you receive additional stock from nontaxable stock dividends or stock splits, reduce your basis for each share of stock by dividing the adjusted basis of the old stock by the number of shares of old and new stock. Federal tax form 2011 This rule applies only when the additional stock received is identical to the stock held. Federal tax form 2011 Also reduce your basis when you receive nontaxable distributions. Federal tax form 2011 They are a return of capital. Federal tax form 2011 Example. Federal tax form 2011 In 2011 you bought 100 shares of XYZ stock for $1,000 or $10 a share. Federal tax form 2011 In 2012 you bought 100 shares of XYZ stock for $1,600 or $16 a share. Federal tax form 2011 In 2013 XYZ declared a 2-for-1 stock split. Federal tax form 2011 You now have 200 shares of stock with a basis of $5 a share and 200 shares with a basis of $8 a share. Federal tax form 2011 Other basis. Federal tax form 2011   There are other ways to figure the basis of stocks or bonds depending on how you acquired them. Federal tax form 2011 For detailed information, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. Federal tax form 2011 Identifying stocks or bonds sold. Federal tax form 2011   If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stocks or bonds. Federal tax form 2011 If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. Federal tax form 2011 For more information about identifying securities you sell, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. Federal tax form 2011 Mutual fund shares. Federal tax form 2011   If you sell mutual fund shares you acquired at various times and prices and left on deposit in an account kept by a custodian or agent, you can elect to use an average basis. Federal tax form 2011 For more information, see Publication 550. Federal tax form 2011 Bond premium. Federal tax form 2011   If you buy a taxable bond at a premium and elect to amortize the premium, reduce the basis of the bond by the amortized premium you deduct each year. Federal tax form 2011 See Bond Premium Amortization in chapter 3 of Publication 550 for more information. Federal tax form 2011 Although you cannot deduct the premium on a tax-exempt bond, you must amortize the premium each year and reduce your basis in the bond by the amortized amount. Federal tax form 2011 Original issue discount (OID) on debt instruments. Federal tax form 2011   You must increase your basis in an OID debt instrument by the OID you include in income for that instrument. Federal tax form 2011 See Original Issue Discount (OID) in chapter 7 and Publication 1212, Guide To Original Issue Discount (OID) Instruments. Federal tax form 2011 Tax-exempt obligations. Federal tax form 2011    OID on tax-exempt obligations is generally not taxable. Federal tax form 2011 However, when you dispose of a tax-exempt obligation issued after September 3, 1982, and acquired after March 1, 1984, you must accrue OID on the obligation to determine its adjusted basis. Federal tax form 2011 The accrued OID is added to the basis of the obligation to determine your gain or loss. Federal tax form 2011 See chapter 4 of Publication 550. Federal tax form 2011 Prev  Up  Next   Home   More Online Publications