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File State Federal Taxes Free

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File State Federal Taxes Free

File state federal taxes free Index A Assistance (see Help) C Casualty and theft losses, Casualty and Theft Losses Clean-up costs, Demolition and Clean-up Costs Copy of tax return, request for, Request for copy of tax return. File state federal taxes free Credits: Employee retention, Employee Retention Credit D Demolition costs, Demolition and Clean-up Costs Depreciation: Qualified recovery assistance property, Qualified recovery assistance property. File state federal taxes free Special allowance, Special Depreciation Allowance Disaster area: May 4, 2007 storms and tornadoes, Kansas Disaster Area Distributions: Home purchase or construction, Repayment of Qualified Distributions for the Purchase or Construction of a Main Home Qualified recovery assistance, Qualified recovery assistance distribution. File state federal taxes free Repayment of, Repayment of Qualified Recovery Assistance Distributions Taxation of, Taxation of Qualified Recovery Assistance Distributions E Eligible retirement plan, Eligible retirement plan. File state federal taxes free Employee retention credit, Employee Retention Credit F Free tax services, How To Get Tax Help H Help: How to get, How To Get Tax Help Phone number, How To Get Tax Help Special IRS assistance, How To Get Tax Help Website, How To Get Tax Help I Involuntary conversion (see Replacement period for nonrecognition of gain) IRAs and other retirement plans, IRAs and Other Retirement Plans K Kansas disaster area, Kansas Disaster Area M More information (see Tax help) N Net operating losses, Net Operating Losses P Publications (see Tax help) Q Qualified recovery assistance distribution, Qualified recovery assistance distribution. File state federal taxes free Qualified recovery assistance loss, Qualified recovery assistance loss. File state federal taxes free R Replacement period for nonrecognition of gain, Replacement Period for Nonrecognition of Gain Retirement plan, eligible, Eligible retirement plan. File state federal taxes free Retirement plans, IRAs and Other Retirement Plans S Section 179 deduction, Increased Section 179 Deduction Storms and tornadoes, Storms and Tornadoes T Tax help, How To Get Tax Help (see Help) Tax return: Request for copy, Request for copy of tax return. File state federal taxes free Request for transcript, Request for transcript of tax return. File state federal taxes free Taxpayer Advocate, Contacting your Taxpayer Advocate. File state federal taxes free Theft losses, Casualty and Theft Losses Transcript of tax return, request for, Request for transcript of tax return. File state federal taxes free TTY/TDD information, How To Get Tax Help Prev  Up     Home   More Online Publications
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    As many Arkansans face the destruction caused by the recent storms, tornadoes and floods, state and federal emergency management officials are warning of a danger lurking around the corner: Scam artists could soon appear at your door attempting to take advantage of your vulnerability as a disaster survivor.
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  • North Carolina Storm Survivors Need to Guard Against Fraud
    Survivors of the storms and tornadoes that struck North Carolina April 16 are being urged to safeguard themselves against another misfortune: disaster-related fraud. Unscrupulous people could be circulating in storm-damaged areas of North Carolina trying to get residents to pay for disaster assistance or for fraudulent repairs.
  • North Carolina Tornado Survivors: Don't be Victimized by Fraud
    Disasters bring out the best in people - and the worst. If you survived the April 16 severe storms and tornadoes, don't be victimized by scam artists who approach you in person or on the telephone.
  • Scam Artists Active After Alex Flooding
    The destruction caused by Hurricane Alex and subsequent flooding has brought out the scam artists, leaving many Texans vulnerable to fraudulent offers of help. The Federal Emergency Management Agency (FEMA) and the Texas Division of Emergency Management (TDEM) urge residents to be aware of three scams that always seem to pop up after a disaster. Texans and everyone should know the following examples by no means exhaust the possibilities.

The File State Federal Taxes Free

File state federal taxes free 13. File state federal taxes free   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. File state federal taxes free It is divided into the following sections. File state federal taxes free Cost basis. File state federal taxes free Adjusted basis. File state federal taxes free Basis other than cost. File state federal taxes free Your basis is the amount of your investment in property for tax purposes. File state federal taxes free Use the basis to figure gain or loss on the sale, exchange, or other disposition of property. File state federal taxes free Also use it to figure deductions for depreciation, amortization, depletion, and casualty losses. File state federal taxes free If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. File state federal taxes free Only the basis allocated to the business or investment use of the property can be depreciated. File state federal taxes free Your original basis in property is adjusted (increased or decreased) by certain events. File state federal taxes free For example, if you make improvements to the property, increase your basis. File state federal taxes free If you take deductions for depreciation or casualty losses, or claim certain credits, reduce your basis. File state federal taxes free Keep accurate records of all items that affect the basis of your property. File state federal taxes free For more information on keeping records, see chapter 1. File state federal taxes free 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. File state federal taxes free The cost is the amount you pay in cash, debt obligations, other property, or services. File state federal taxes free 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). File state federal taxes free In addition, the basis of real estate and business assets may include other items. File state federal taxes free Loans with low or no interest. File state federal taxes free    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. File state federal taxes free You generally have unstated interest if your interest rate is less than the applicable federal rate. File state federal taxes free   For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. File state federal taxes free Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. File state federal taxes free If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. File state federal taxes free Lump sum purchase. File state federal taxes free   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. File state federal taxes free Allocate the cost basis according to the respective fair market values (FMVs) of the land and buildings at the time of purchase. File state federal taxes free Figure the basis of each asset by multiplying the lump sum by a fraction. File state federal taxes free The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. File state federal taxes free    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. File state federal taxes free Fair market value (FMV). File state federal taxes free   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. File state federal taxes free Sales of similar property on or about the same date may be helpful in figuring the FMV of the property. File state federal taxes free Assumption of mortgage. File state federal taxes free   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. File state federal taxes free Settlement costs. File state federal taxes free   Your basis includes the settlement fees and closing costs you paid for buying the property. File state federal taxes free (A fee for buying property is a cost that must be paid even if you buy the property for cash. File state federal taxes free ) Do not include fees and costs for getting a loan on the property in your basis. File state federal taxes free   The following are some of the settlement fees or closing costs you can include in the basis of your property. File state federal taxes free Abstract fees (abstract of title fees). File state federal taxes free Charges for installing utility services. File state federal taxes free Legal fees (including fees for the title search and preparation of the sales contract and deed). File state federal taxes free Recording fees. File state federal taxes free Survey fees. File state federal taxes free Transfer taxes. File state federal taxes free Owner's title insurance. File state federal taxes free 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. File state federal taxes free   Settlement costs do not include amounts placed in escrow for the future payment of items such as taxes and insurance. File state federal taxes free   The following are some of the settlement fees and closing costs you cannot include in the basis of property. File state federal taxes free Casualty insurance premiums. File state federal taxes free Rent for occupancy of the property before closing. File state federal taxes free Charges for utilities or other services related to occupancy of the property before closing. File state federal taxes free 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. File state federal taxes free Fees for refinancing a mortgage. File state federal taxes free Real estate taxes. File state federal taxes free   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. File state federal taxes free You cannot deduct them as an expense. File state federal taxes free    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. File state federal taxes free Do not include that amount in the basis of your property. File state federal taxes free If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. File state federal taxes free Points. File state federal taxes free   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. File state federal taxes free Generally, you deduct the points over the term of the loan. File state federal taxes free For more information on how to deduct points, see chapter 23. File state federal taxes free Points on home mortgage. File state federal taxes free   Special rules may apply to points you and the seller pay when you get a mortgage to buy your main home. File state federal taxes free If certain requirements are met, you can deduct the points in full for the year in which they are paid. File state federal taxes free Reduce the basis of your home by any seller-paid points. File state federal taxes free 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. File state federal taxes free The result is the adjusted basis. File state federal taxes free Increases to Basis Increase the basis of any property by all items properly added to a capital account. File state federal taxes free Examples of items that increase basis are shown in Table 13-1. File state federal taxes free These include the items discussed below. File state federal taxes free Improvements. File state federal taxes free   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. File state federal taxes free 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. File state federal taxes free Assessments for local improvements. File state federal taxes free   Add to the basis of property assessments for improvements such as streets and sidewalks if they increase the value of the property assessed. File state federal taxes free Do not deduct them as taxes. File state federal taxes free However, you can deduct as taxes assessments for maintenance or repairs, or for meeting interest charges related to the improvements. File state federal taxes free Example. File state federal taxes free 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. File state federal taxes free Add the assessment to your property's basis. File state federal taxes free In this example, the assessment is a depreciable asset. File state federal taxes free 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. File state federal taxes free Examples of items that decrease basis are shown in Table 13-1. File state federal taxes free These include the items discussed below. File state federal taxes free Table 13-1. File state federal taxes free 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. File state federal taxes free   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. File state federal taxes free    You must increase your basis in the property by the amount you spend on repairs that restore the property to its pre-casualty condition. File state federal taxes free   For more information on casualty and theft losses, see chapter 25. File state federal taxes free Depreciation and section 179 deduction. File state federal taxes free   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. File state federal taxes free   For more information about depreciation and the section 179 deduction, see Publication 946 and the Instructions for Form 4562. File state federal taxes free Example. File state federal taxes free 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. File state federal taxes free You added an improvement to the duplex that cost $10,000. File state federal taxes free In February last year, the duplex was damaged by fire. File state federal taxes free Up to that time, you had been allowed depreciation of $23,000. File state federal taxes free You sold some salvaged material for $1,300 and collected $19,700 from your insurance company. File state federal taxes free You deducted a casualty loss of $1,000 on your income tax return for last year. File state federal taxes free You spent $19,000 of the insurance proceeds for restoration of the duplex, which was completed this year. File state federal taxes free You must use the duplex's adjusted basis after the restoration to determine depreciation for the rest of the property's recovery period. File state federal taxes free 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. File state federal taxes free Your basis in the land is its original cost of $5,000. File state federal taxes free Easements. File state federal taxes free   The amount you receive for granting an easement is generally considered to be proceeds from the sale of an interest in real property. File state federal taxes free It reduces the basis of the affected part of the property. File state federal taxes free 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. File state federal taxes free   If the gain is on a capital asset, see chapter 16 for information about how to report it. File state federal taxes free If the gain is on property used in a trade or business, see Publication 544 for information about how to report it. File state federal taxes free Exclusion of subsidies for energy conservation measures. File state federal taxes free   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. File state federal taxes free Reduce the basis of the property for which you received the subsidy by the excluded amount. File state federal taxes free For more information about this subsidy, see chapter 12. File state federal taxes free Postponed gain from sale of home. File state federal taxes free    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. File state federal taxes free For more information on the rules for the sale of a home, see chapter 15. File state federal taxes free Basis Other Than Cost There are many times when you cannot use cost as basis. File state federal taxes free In these cases, the fair market value or the adjusted basis of the property can be used. File state federal taxes free Fair market value (FMV) and adjusted basis were discussed earlier. File state federal taxes free Property Received for Services If you receive property for your services, include the FMV of the property in income. File state federal taxes free The amount you include in income becomes your basis. File state federal taxes free 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. File state federal taxes free Restricted property. File state federal taxes free   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. File state federal taxes free 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. File state federal taxes free 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). File state federal taxes free For more information, see Restricted Property in Publication 525. File state federal taxes free Bargain purchases. File state federal taxes free   A bargain purchase is a purchase of an item for less than its FMV. File state federal taxes free 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. File state federal taxes free Your basis in the property is its FMV (your purchase price plus the amount you include in income). File state federal taxes free   If the difference between your purchase price and the FMV is a qualified employee discount, do not include the difference in income. File state federal taxes free However, your basis in the property is still its FMV. File state federal taxes free See Employee Discounts in Publication 15-B. File state federal taxes free Taxable Exchanges A taxable exchange is one in which the gain is taxable or the loss is deductible. File state federal taxes free A taxable gain or deductible loss also is known as a recognized gain or loss. File state federal taxes free 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. File state federal taxes free 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. File state federal taxes free Similar or related property. File state federal taxes free   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. File state federal taxes free Decrease the basis by the following. File state federal taxes free Any loss you recognize on the involuntary conversion. File state federal taxes free Any money you receive that you do not spend on similar property. File state federal taxes free Increase the basis by the following. File state federal taxes free Any gain you recognize on the involuntary conversion. File state federal taxes free Any cost of acquiring the replacement property. File state federal taxes free Money or property not similar or related. File state federal taxes free    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. File state federal taxes free Example. File state federal taxes free The state condemned your property. File state federal taxes free The adjusted basis of the property was $26,000 and the state paid you $31,000 for it. File state federal taxes free You realized a gain of $5,000 ($31,000 − $26,000). File state federal taxes free You bought replacement property similar in use to the converted property for $29,000. File state federal taxes free You recognize a gain of $2,000 ($31,000 − $29,000), the unspent part of the payment from the state. File state federal taxes free Your unrecognized gain is $3,000, the difference between the $5,000 realized gain and the $2,000 recognized gain. File state federal taxes free 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. File state federal taxes free   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. File state federal taxes free Basis for depreciation. File state federal taxes free   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. File state federal taxes free For information, see What Is the Basis of Your Depreciable Property? in chapter 1 of Publication 946. File state federal taxes free Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. File state federal taxes free If you receive property in a nontaxable exchange, its basis is generally the same as the basis of the property you transferred. File state federal taxes free See Nontaxable Trades in chapter 14. File state federal taxes free Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. File state federal taxes free To qualify as a like-kind exchange, the property traded and the property received must be both of the following. File state federal taxes free Qualifying property. File state federal taxes free Like-kind property. File state federal taxes free The basis of the property you receive is generally the same as the adjusted basis of the property you gave up. File state federal taxes free 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. File state federal taxes free Qualifying property. File state federal taxes free   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. File state federal taxes free Like-kind property. File state federal taxes free   There must be an exchange of like-kind property. File state federal taxes free Like-kind properties are properties of the same nature or character, even if they differ in grade or quality. File state federal taxes free The exchange of real estate for real estate and personal property for similar personal property are exchanges of like-kind property. File state federal taxes free Example. File state federal taxes free You trade in an old truck used in your business with an adjusted basis of $1,700 for a new one costing $6,800. File state federal taxes free The dealer allows you $2,000 on the old truck, and you pay $4,800. File state federal taxes free This is a like-kind exchange. File state federal taxes free 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). File state federal taxes free 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). File state federal taxes free The basis of the new truck is the price you pay the dealer. File state federal taxes free Partially nontaxable exchanges. File state federal taxes free   A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. File state federal taxes free The basis of the property you receive is the same as the adjusted basis of the property you gave up, with the following adjustments. File state federal taxes free Decrease the basis by the following amounts. File state federal taxes free Any money you receive. File state federal taxes free Any loss you recognize on the exchange. File state federal taxes free Increase the basis by the following amounts. File state federal taxes free Any additional costs you incur. File state federal taxes free Any gain you recognize on the exchange. File state federal taxes free If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. File state federal taxes free Allocation of basis. File state federal taxes free   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. File state federal taxes free The rest is the basis of the like-kind property. File state federal taxes free More information. File state federal taxes free   See Like-Kind Exchanges in chapter 1 of Publication 544 for more information. File state federal taxes free Basis for depreciation. File state federal taxes free   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind exchange. File state federal taxes free For information, see What Is the Basis of Your Depreciable Property? in chapter 1 of Publication 946. File state federal taxes free 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. File state federal taxes free The same rule applies to a transfer by your former spouse that is incident to divorce. File state federal taxes free 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. File state federal taxes free If the property transferred to you is a series E, series EE, or series I U. File state federal taxes free S. File state federal taxes free savings bond, the transferor must include in income the interest accrued to the date of transfer. File state federal taxes free 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. File state federal taxes free For more information on these bonds, see chapter 7. File state federal taxes free 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. File state federal taxes free For more information about the transfer of property from a spouse, see chapter 14. File state federal taxes free 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. File state federal taxes free FMV less than donor's adjusted basis. File state federal taxes free   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. File state federal taxes free 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. File state federal taxes free 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. File state federal taxes free See Adjusted Basis , earlier. File state federal taxes free Example. File state federal taxes free You received an acre of land as a gift. File state federal taxes free At the time of the gift, the land had an FMV of $8,000. File state federal taxes free The donor's adjusted basis was $10,000. File state federal taxes free After you received the property, no events occurred to increase or decrease your basis. File state federal taxes free 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. File state federal taxes free 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. File state federal taxes free If the sales price is between $8,000 and $10,000, you have neither gain nor loss. File state federal taxes free Business property. File state federal taxes free   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. File state federal taxes free FMV equal to or greater than donor's adjusted basis. File state federal taxes free   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. File state federal taxes free Increase your basis by all or part of any gift tax paid, depending on the date of the gift, explained later. File state federal taxes free   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. File state federal taxes free See Adjusted Basis , earlier. File state federal taxes free   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. File state federal taxes free Figure the increase by multiplying the gift tax paid by a fraction. File state federal taxes free The numerator of the fraction is the net increase in value of the gift and the denominator is the amount of the gift. File state federal taxes free   The net increase in value of the gift is the FMV of the gift minus the donor's adjusted basis. File state federal taxes free 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. File state federal taxes free Example. File state federal taxes free In 2013, you received a gift of property from your mother that had an FMV of $50,000. File state federal taxes free Her adjusted basis was $20,000. File state federal taxes free The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). File state federal taxes free She paid a gift tax of $7,320 on the property. File state federal taxes free 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) × . File state federal taxes free 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. File state federal taxes free If you received a gift before 1977, your basis in the gift (the donor's adjusted basis) includes any gift tax paid on it. File state federal taxes free However, your basis cannot exceed the FMV of the gift at the time it was given to you. File state federal taxes free 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. File state federal taxes free The FMV on the alternate valuation date if the personal representative for the estate elects to use alternate valuation. File state federal taxes free 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. File state federal taxes free 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. File state federal taxes free 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. File state federal taxes free For more information, see the instructions to Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. File state federal taxes free Property inherited from a decedent who died in 2010. File state federal taxes free   If you inherited property from a decedent who died in 2010, special rules may apply. File state federal taxes free For more information, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. File state federal taxes free Community property. File state federal taxes free   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. File state federal taxes free 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. File state federal taxes free 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. File state federal taxes free Example. File state federal taxes free You and your spouse owned community property that had a basis of $80,000. File state federal taxes free When your spouse died, half the FMV of the community interest was includible in your spouse's estate. File state federal taxes free The FMV of the community interest was $100,000. File state federal taxes free The basis of your half of the property after the death of your spouse is $50,000 (half of the $100,000 FMV). File state federal taxes free The basis of the other half to your spouse's heirs is also $50,000. File state federal taxes free For more information about community property, see Publication 555, Community Property. File state federal taxes free 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. File state federal taxes free To do so, you must figure its basis for depreciation at the time of the change. File state federal taxes free An example of changing property held for personal use to business or rental use would be renting out your former personal residence. File state federal taxes free Basis for depreciation. File state federal taxes free   The basis for depreciation is the lesser of the following amounts. File state federal taxes free The FMV of the property on the date of the change. File state federal taxes free Your adjusted basis on the date of the change. File state federal taxes free Example. File state federal taxes free Several years ago, you paid $160,000 to have your house built on a lot that cost $25,000. File state federal taxes free 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. File state federal taxes free Because land is not depreciable, you include only the cost of the house when figuring the basis for depreciation. File state federal taxes free Your adjusted basis in the house when you changed its use was $178,000 ($160,000 + $20,000 − $2,000). File state federal taxes free 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. File state federal taxes free 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). File state federal taxes free Sale of property. File state federal taxes free   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. File state federal taxes free Gain. File state federal taxes free   The basis for figuring a gain is your adjusted basis in the property when you sell the property. File state federal taxes free Example. File state federal taxes free 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. File state federal taxes free Your adjusted basis for figuring gain is $165,500 ($178,000 + $25,000 (land) − $37,500). File state federal taxes free Loss. File state federal taxes free   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. File state federal taxes free Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . File state federal taxes free Example. File state federal taxes free 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. File state federal taxes free 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. File state federal taxes free Reduce that amount ($180,000) by the depreciation deductions ($37,500). File state federal taxes free The basis for loss is $142,500 ($180,000 − $37,500). File state federal taxes free 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. File state federal taxes free 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. File state federal taxes free You must adjust the basis of stocks for certain events that occur after purchase. File state federal taxes free 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. File state federal taxes free This rule applies only when the additional stock received is identical to the stock held. File state federal taxes free Also reduce your basis when you receive nontaxable distributions. File state federal taxes free They are a return of capital. File state federal taxes free Example. File state federal taxes free In 2011 you bought 100 shares of XYZ stock for $1,000 or $10 a share. File state federal taxes free In 2012 you bought 100 shares of XYZ stock for $1,600 or $16 a share. File state federal taxes free In 2013 XYZ declared a 2-for-1 stock split. File state federal taxes free You now have 200 shares of stock with a basis of $5 a share and 200 shares with a basis of $8 a share. File state federal taxes free Other basis. File state federal taxes free   There are other ways to figure the basis of stocks or bonds depending on how you acquired them. File state federal taxes free For detailed information, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. File state federal taxes free Identifying stocks or bonds sold. File state federal taxes free   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. File state federal taxes free 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. File state federal taxes free For more information about identifying securities you sell, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. File state federal taxes free Mutual fund shares. File state federal taxes free   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. File state federal taxes free For more information, see Publication 550. File state federal taxes free Bond premium. File state federal taxes free   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. File state federal taxes free See Bond Premium Amortization in chapter 3 of Publication 550 for more information. File state federal taxes free 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. File state federal taxes free Original issue discount (OID) on debt instruments. File state federal taxes free   You must increase your basis in an OID debt instrument by the OID you include in income for that instrument. File state federal taxes free See Original Issue Discount (OID) in chapter 7 and Publication 1212, Guide To Original Issue Discount (OID) Instruments. File state federal taxes free Tax-exempt obligations. File state federal taxes free    OID on tax-exempt obligations is generally not taxable. File state federal taxes free 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. File state federal taxes free The accrued OID is added to the basis of the obligation to determine your gain or loss. File state federal taxes free See chapter 4 of Publication 550. File state federal taxes free Prev  Up  Next   Home   More Online Publications