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Free File State Federal Taxes

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Free File State Federal Taxes

Free file state federal taxes Publicación 4492(SP) - Introductory Material Tabla de contenidos Introducción Artículos de interés - A usted quizá le interese ver: Introducción En esta publicación se explican las disposiciones principales de la Katrina Emergency Tax Relief Act of 2005 (Ley de Alivio Tributario para Desastres Causados por el Huracán Katrina del 2005) y la Gulf Opportunity Zone Act of 2005 (Ley de la Zona de Oportunidad del Golfo del 2005). Free file state federal taxes Artículos de interés - A usted quizá le interese ver: Publicación 526 Charitable Contributions (Contribuciones Caritativas), en inglés 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts (Pérdidas Netas de Operación (NOL) para Personas Físicas, Caudales Hereditarios y Fideicomisos), en inglés 547(SP) Hechos Fortuitos, Desastres y Robos, en español 946 How to Depreciate Property (Cómo Depreciar los Bienes), en inglés Formas (e instrucciones) 4506Request for Copy of Tax Return (Solicitud de una Copia de la Declaración de Impuestos), en inglés 4506-TRequest for Transcript of Tax Return (Solicitud de un Apógrafo de la Declaración de Impuestos), en inglés 4684Casualties and Thefts (Hechos Fortuitos y Robos), en inglés 5884Work Opportunity Credit (Crédito por Oportunidad de Trabajo), en inglés 5884-ACredits for Employers Affected by Hurricane Katrina, Rita, or Wilma (Créditos para Patronos o Empleadores Afectados por el Huracán Katrina, Rita o Wilma), en inglés 8863Education Credits (Hope and Lifetime Learning Credits) (Créditos por Enseñanza Superior (Crédito Hope y Crédito Perpetuo (Vitalicio) por Aprendizaje)), en inglés 8914Exemption Amount for Taxpayers Housing Individuals Displaced by Hurricane Katrina (Cantidad de la Exención para Contribuyentes dando Alojamiento a Personas Desplazadas por el Huracán Katrina), en inglés 8915Qualified Hurricane Retirement Plan Distributions and Repayments (Distribuciones y Devoluciones (Reintegros) de Pagos Calificados de Planes de Jubilación a Causa de un Huracán), en inglés Anterior  Subir  Siguiente   Inicio   More Online Publications
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Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

South Carolina Department of Consumer Affairs

Website: South Carolina Department of Consumer Affairs

Address: South Carolina Department of Consumer Affairs
PO Box 5757
Columbia, SC 29250

Phone Number: 803-734-4200

Toll-free: 1-800-922-1594 (SC)

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

Office of the Commissioner of Banking

Website: Office of the Commissioner of Banking

Address: Office of the Commissioner of Banking
State Board of Financial Institutions
1205 Pendleton St., Suite 305
Columbia, SC 29201

Phone Number: 803-734-2001

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Department of Insurance

Website: Department of Insurance

Address: Department of Insurance
Consumer Services
PO Box 100105
Columbia, SC 29202-3105

Phone Number: 803-737-6180

Toll-free: 1-800-768-3467 (SC)

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Office of the Attorney General

Website: Office of the Attorney General

Address: Office of the Attorney General
Securities Division
PO Box 11549
Columbia, SC 29211-1549

Phone Number: 803-734-9916

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Office of Regulatory Staff

Website: Office of Regulatory Staff

Address: Office of Regulatory Staff
Consumer Services Division
1401 Main St., Suite 900
Columbia, SC 29201

Phone Number: 803-737-5230

Toll-free: 1-800-922-1531 (SC)

TTY: 1-800-334-2217 (SC)

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The Free File State Federal Taxes

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