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Free fillable forms Part Six -   Cómo Calcular los Impuestos y Créditos Los ocho capítulos de esta sección explican cómo calcular sus impuestos y cómo calcular los impuestos de determinados hijos con ingresos no derivados del trabajo de $2,000 o más. Free fillable forms Explican también créditos tributarios que, a diferencia de las deducciones, se restan directamente de los impuestos y los disminuyen, dólar por dólar. Free fillable forms El capítulo 36 trata sobre el crédito por ingreso del trabajo y el capítulo 37 abarca una amplia gama de otros créditos, como por ejemplo, el crédito por adopción. Free fillable forms Table of Contents 30. Free fillable forms   Cómo Calcular los ImpuestosIntroduction Cómo Calcular los Impuestos Impuesto Mínimo Alternativo (AMT) Impuestos Calculados por el IRS Cómo Presentar la Declaración 31. Free fillable forms   Impuesto sobre Ingresos No Derivados del Trabajo de Determinados Hijos¿Que Hay de Nuevo? Introduction Useful Items - You may want to see: Cómo Saber si se Tiene que Utilizar la Declaración del Padre o de la MadrePadres que no Presentan la Declaración Conjunta Elección de los Padres de Declarar los Intereses y Dividendos del HijoConsecuencias de Incluir los Ingresos del Hijo Cómo Calcular los Ingresos del Hijo Cómo Calcular el Impuesto Adicional Impuesto para Determinados Hijos con Ingresos No Derivados del TrabajoCómo Facilitar Información sobre los Padres (líneas A-C del Formulario 8615) Paso 1. Free fillable forms Cómo Calcular los Ingresos Netos No Derivados del Trabajo del Hijo (Parte I del Formulario 8615) Paso 2. Free fillable forms Cómo Calcular el Impuesto Provisional a la Tasa Impositiva de los Padres (Parte II del Formulario 8615) Paso 3. Free fillable forms Cómo Calcular el Impuesto del Hijo (Parte III del Formulario 8615) 32. Free fillable forms   Crédito por Gastos del Cuidado de Menores y DependientesRecordatorios Introduction Useful Items - You may want to see: Requisitos Para Reclamar el CréditoRequisitos de la Persona Calificada Requisito del Ingreso del Trabajo Requisito de Gastos Relacionados con el Trabajo Requisito de la Declaración Conjunta Requisito de Identificación del Proveedor de Cuidados Cómo Calcular el CréditoCómo Calcular el Total de los Gastos Relacionados con el Trabajo Límite del Ingreso del Trabajo Límite de Dinero Cantidad de Crédito Cómo Reclamar el CréditoCrédito tributario no reembolsable. Free fillable forms Impuestos sobre la Nómina para Empleadores de Empleados Domésticos 33. Free fillable forms   Crédito para Ancianos o Personas IncapacitadasIntroduction Useful Items - You may want to see: ¿Reúne los Requisitos del Crédito?Persona que Reúne los Requisitos Límites sobre los Ingresos Cómo Reclamar el CréditoEl Crédito Calculado por el IRS El Crédito Calculado por Usted Mismo 34. Free fillable forms   Crédito Tributario por HijosIntroduction Useful Items - You may want to see: Hijo Calificado Cantidad de CréditoLímites del Crédito Cómo Reclamar el Crédito Crédito Tributario Adicional por Hijos Cómo Completar el Anexo 8812 (Formulario 1040A o Formulario 1040)Parte I Partes II a IV 35. Free fillable forms   Créditos Tributarios por EstudiosIntroduction Useful Items - You may want to see: ¿Quién Puede Reclamar un Crédito Tributario por Estudios? Gastos de Estudios CalificadosNo se Permite Beneficio Doble Ajustes a los Gastos de Estudios Calificados 36. Free fillable forms   Crédito por Ingreso del Trabajo (EIC) Qué Hay de Nuevo Recordatorios Introduction Useful Items - You may want to see: ¿Reúne los Requisitos para el Crédito?Si se Hizo una Solicitud Indebida del Crédito en un Año Anterior Parte A. Free fillable forms Requisitos para TodosRequisito 1. Free fillable forms Tiene que Tener Ingresos Brutos Ajustados Inferiores a: Requisito 2. Free fillable forms Tiene que tener un número de Seguro Social válido Requisito 3. Free fillable forms Su Estado Civil para Efectos de la Declaración no Puede Ser Casado que Presenta la Declaración por Separado Requisito 4. Free fillable forms Tiene que Ser Ciudadano o Extranjero Residente de los Estados Unidos Durante Todo el Año Requisito 5. Free fillable forms No Puede Presentar el Formulario 2555 ni el Formulario 2555-EZ Requisito 6. Free fillable forms Tiene que Tener Ingresos de Inversiones de $3,300 o Menos Requisito 7. Free fillable forms Tiene que Haber Recibido Ingresos del Trabajo Parte B. Free fillable forms Requisitos si Tiene un Hijo CalificadoRequisito 8. Free fillable forms Su Hijo Tiene que Cumplir los Requisitos de Parentesco, Edad, Residencia y de la Declaración Conjunta Requisito 9. Free fillable forms Para Reclamar el Crédito por Ingreso del Trabajo, Sólo una Persona Puede Basarse en el Hijo Calificado de Usted Requisito 10. Free fillable forms Otro Contribuyente no Puede Reclamarlo a Usted como Hijo Calificado Parte C. Free fillable forms Requisitos si no Tiene un Hijo CalificadoRequisito 11. Free fillable forms Tiene que Tener por lo Menos 25 Años pero Menos de 65 Años Requisito 12. Free fillable forms No Puede Ser el Dependiente de Otra Persona Requisito 13. Free fillable forms Otro Contribuyente no Puede Reclamarlo a Usted como Hijo Calificado Requisito 14. Free fillable forms Tiene que Haber Vivido en los Estados Unidos durante más de la Mitad del Año Parte D. Free fillable forms Cómo Calcular y Reclamar el Crédito por Ingreso del TrabajoRequisito 15. Free fillable forms Su Ingreso del Trabajo Tiene que Ser Menos de: El IRS Puede Calcularle el Crédito por Ingreso del Trabajo Cómo Calcular Usted Mismo el Crédito por Ingreso del Trabajo EjemplosEjemplo 1. Free fillable forms Juan y Julia Martínez (Formulario 1040A) Ejemplo 2. Free fillable forms Carla Robles (Formulario 1040EZ) 37. Free fillable forms   Otros CréditosQué Hay de Nuevo Introduction Useful Items - You may want to see: Créditos no ReembolsablesCrédito por Adopción Crédito por Vehículo Motorizado Alternativo Crédito por Bienes de Reabastecimiento de Vehículos con Combustible Alternativo Crédito para Titulares de Bonos de Crédito Tributario Crédito por Impuestos Extranjeros Crédito por Intereses Hipotecarios Crédito no Reembolsable del Impuesto Mínimo de Años Anteriores Crédito por Vehículos Enchufables con Motor de Dirección Eléctrica Créditos por Energía de la Propiedad Residencial Crédito por Aportaciones a Cuentas de Ahorro para la Jubilación (Crédito del Ahorrador) Créditos ReembolsablesCrédito por el Impuesto sobre Ganancias de Capital no Distribuidas Crédito Tributario por Cobertura del Seguro Médico Crédito por Retención en Exceso del Impuesto del Seguro Social o del Impuesto de la Jubilación Ferroviaria Prev  Up  Next   Home   More Online Publications
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Free fillable forms 13. Free fillable forms   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 fillable forms It is divided into the following sections. Free fillable forms Cost basis. Free fillable forms Adjusted basis. Free fillable forms Basis other than cost. Free fillable forms Your basis is the amount of your investment in property for tax purposes. Free fillable forms Use the basis to figure gain or loss on the sale, exchange, or other disposition of property. Free fillable forms Also use it to figure deductions for depreciation, amortization, depletion, and casualty losses. Free fillable forms If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. Free fillable forms Only the basis allocated to the business or investment use of the property can be depreciated. Free fillable forms Your original basis in property is adjusted (increased or decreased) by certain events. Free fillable forms For example, if you make improvements to the property, increase your basis. Free fillable forms If you take deductions for depreciation or casualty losses, or claim certain credits, reduce your basis. Free fillable forms Keep accurate records of all items that affect the basis of your property. Free fillable forms For more information on keeping records, see chapter 1. Free fillable forms 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 fillable forms The cost is the amount you pay in cash, debt obligations, other property, or services. Free fillable forms 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 fillable forms In addition, the basis of real estate and business assets may include other items. Free fillable forms Loans with low or no interest. Free fillable forms    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 fillable forms You generally have unstated interest if your interest rate is less than the applicable federal rate. Free fillable forms   For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. Free fillable forms Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. Free fillable forms If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. Free fillable forms Lump sum purchase. Free fillable forms   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 fillable forms Allocate the cost basis according to the respective fair market values (FMVs) of the land and buildings at the time of purchase. Free fillable forms Figure the basis of each asset by multiplying the lump sum by a fraction. Free fillable forms The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. Free fillable forms    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 fillable forms Fair market value (FMV). Free fillable forms   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 fillable forms Sales of similar property on or about the same date may be helpful in figuring the FMV of the property. Free fillable forms Assumption of mortgage. Free fillable forms   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 fillable forms Settlement costs. Free fillable forms   Your basis includes the settlement fees and closing costs you paid for buying the property. Free fillable forms (A fee for buying property is a cost that must be paid even if you buy the property for cash. Free fillable forms ) Do not include fees and costs for getting a loan on the property in your basis. Free fillable forms   The following are some of the settlement fees or closing costs you can include in the basis of your property. Free fillable forms Abstract fees (abstract of title fees). Free fillable forms Charges for installing utility services. Free fillable forms Legal fees (including fees for the title search and preparation of the sales contract and deed). Free fillable forms Recording fees. Free fillable forms Survey fees. Free fillable forms Transfer taxes. Free fillable forms Owner's title insurance. Free fillable forms 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 fillable forms   Settlement costs do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Free fillable forms   The following are some of the settlement fees and closing costs you cannot include in the basis of property. Free fillable forms Casualty insurance premiums. Free fillable forms Rent for occupancy of the property before closing. Free fillable forms Charges for utilities or other services related to occupancy of the property before closing. Free fillable forms 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 fillable forms Fees for refinancing a mortgage. Free fillable forms Real estate taxes. Free fillable forms   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 fillable forms You cannot deduct them as an expense. Free fillable forms    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 fillable forms Do not include that amount in the basis of your property. Free fillable forms If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. Free fillable forms Points. Free fillable forms   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 fillable forms Generally, you deduct the points over the term of the loan. Free fillable forms For more information on how to deduct points, see chapter 23. Free fillable forms Points on home mortgage. Free fillable forms   Special rules may apply to points you and the seller pay when you get a mortgage to buy your main home. Free fillable forms If certain requirements are met, you can deduct the points in full for the year in which they are paid. Free fillable forms Reduce the basis of your home by any seller-paid points. Free fillable forms 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 fillable forms The result is the adjusted basis. Free fillable forms Increases to Basis Increase the basis of any property by all items properly added to a capital account. Free fillable forms Examples of items that increase basis are shown in Table 13-1. Free fillable forms These include the items discussed below. Free fillable forms Improvements. Free fillable forms   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 fillable forms 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 fillable forms Assessments for local improvements. Free fillable forms   Add to the basis of property assessments for improvements such as streets and sidewalks if they increase the value of the property assessed. Free fillable forms Do not deduct them as taxes. Free fillable forms However, you can deduct as taxes assessments for maintenance or repairs, or for meeting interest charges related to the improvements. Free fillable forms Example. Free fillable forms 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 fillable forms Add the assessment to your property's basis. Free fillable forms In this example, the assessment is a depreciable asset. Free fillable forms 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 fillable forms Examples of items that decrease basis are shown in Table 13-1. Free fillable forms These include the items discussed below. Free fillable forms Table 13-1. Free fillable forms 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 fillable forms   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 fillable forms    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 fillable forms   For more information on casualty and theft losses, see chapter 25. Free fillable forms Depreciation and section 179 deduction. Free fillable forms   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 fillable forms   For more information about depreciation and the section 179 deduction, see Publication 946 and the Instructions for Form 4562. Free fillable forms Example. Free fillable forms 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 fillable forms You added an improvement to the duplex that cost $10,000. Free fillable forms In February last year, the duplex was damaged by fire. Free fillable forms Up to that time, you had been allowed depreciation of $23,000. Free fillable forms You sold some salvaged material for $1,300 and collected $19,700 from your insurance company. Free fillable forms You deducted a casualty loss of $1,000 on your income tax return for last year. Free fillable forms You spent $19,000 of the insurance proceeds for restoration of the duplex, which was completed this year. Free fillable forms You must use the duplex's adjusted basis after the restoration to determine depreciation for the rest of the property's recovery period. Free fillable forms 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 fillable forms Your basis in the land is its original cost of $5,000. Free fillable forms Easements. Free fillable forms   The amount you receive for granting an easement is generally considered to be proceeds from the sale of an interest in real property. Free fillable forms It reduces the basis of the affected part of the property. Free fillable forms 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 fillable forms   If the gain is on a capital asset, see chapter 16 for information about how to report it. Free fillable forms If the gain is on property used in a trade or business, see Publication 544 for information about how to report it. Free fillable forms Exclusion of subsidies for energy conservation measures. Free fillable forms   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 fillable forms Reduce the basis of the property for which you received the subsidy by the excluded amount. Free fillable forms For more information about this subsidy, see chapter 12. Free fillable forms Postponed gain from sale of home. Free fillable forms    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 fillable forms For more information on the rules for the sale of a home, see chapter 15. Free fillable forms Basis Other Than Cost There are many times when you cannot use cost as basis. Free fillable forms In these cases, the fair market value or the adjusted basis of the property can be used. Free fillable forms Fair market value (FMV) and adjusted basis were discussed earlier. Free fillable forms Property Received for Services If you receive property for your services, include the FMV of the property in income. Free fillable forms The amount you include in income becomes your basis. Free fillable forms 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 fillable forms Restricted property. Free fillable forms   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 fillable forms 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 fillable forms 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 fillable forms For more information, see Restricted Property in Publication 525. Free fillable forms Bargain purchases. Free fillable forms   A bargain purchase is a purchase of an item for less than its FMV. Free fillable forms 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 fillable forms Your basis in the property is its FMV (your purchase price plus the amount you include in income). Free fillable forms   If the difference between your purchase price and the FMV is a qualified employee discount, do not include the difference in income. Free fillable forms However, your basis in the property is still its FMV. Free fillable forms See Employee Discounts in Publication 15-B. Free fillable forms Taxable Exchanges A taxable exchange is one in which the gain is taxable or the loss is deductible. Free fillable forms A taxable gain or deductible loss also is known as a recognized gain or loss. Free fillable forms 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 fillable forms 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 fillable forms Similar or related property. Free fillable forms   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 fillable forms Decrease the basis by the following. Free fillable forms Any loss you recognize on the involuntary conversion. Free fillable forms Any money you receive that you do not spend on similar property. Free fillable forms Increase the basis by the following. Free fillable forms Any gain you recognize on the involuntary conversion. Free fillable forms Any cost of acquiring the replacement property. Free fillable forms Money or property not similar or related. Free fillable forms    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 fillable forms Example. Free fillable forms The state condemned your property. Free fillable forms The adjusted basis of the property was $26,000 and the state paid you $31,000 for it. Free fillable forms You realized a gain of $5,000 ($31,000 − $26,000). Free fillable forms You bought replacement property similar in use to the converted property for $29,000. Free fillable forms You recognize a gain of $2,000 ($31,000 − $29,000), the unspent part of the payment from the state. Free fillable forms Your unrecognized gain is $3,000, the difference between the $5,000 realized gain and the $2,000 recognized gain. Free fillable forms 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 fillable forms   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. Free fillable forms Basis for depreciation. Free fillable forms   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. Free fillable forms For information, see What Is the Basis of Your Depreciable Property? in chapter 1 of Publication 946. Free fillable forms Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. Free fillable forms If you receive property in a nontaxable exchange, its basis is generally the same as the basis of the property you transferred. Free fillable forms See Nontaxable Trades in chapter 14. Free fillable forms Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. Free fillable forms To qualify as a like-kind exchange, the property traded and the property received must be both of the following. Free fillable forms Qualifying property. Free fillable forms Like-kind property. Free fillable forms The basis of the property you receive is generally the same as the adjusted basis of the property you gave up. Free fillable forms 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 fillable forms Qualifying property. Free fillable forms   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 fillable forms Like-kind property. Free fillable forms   There must be an exchange of like-kind property. Free fillable forms Like-kind properties are properties of the same nature or character, even if they differ in grade or quality. Free fillable forms The exchange of real estate for real estate and personal property for similar personal property are exchanges of like-kind property. Free fillable forms Example. Free fillable forms 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 fillable forms The dealer allows you $2,000 on the old truck, and you pay $4,800. Free fillable forms This is a like-kind exchange. Free fillable forms 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 fillable forms 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 fillable forms The basis of the new truck is the price you pay the dealer. Free fillable forms Partially nontaxable exchanges. Free fillable forms   A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. Free fillable forms 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 fillable forms Decrease the basis by the following amounts. Free fillable forms Any money you receive. Free fillable forms Any loss you recognize on the exchange. Free fillable forms Increase the basis by the following amounts. Free fillable forms Any additional costs you incur. Free fillable forms Any gain you recognize on the exchange. Free fillable forms If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. Free fillable forms Allocation of basis. Free fillable forms   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 fillable forms The rest is the basis of the like-kind property. Free fillable forms More information. Free fillable forms   See Like-Kind Exchanges in chapter 1 of Publication 544 for more information. Free fillable forms Basis for depreciation. Free fillable forms   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind exchange. Free fillable forms For information, see What Is the Basis of Your Depreciable Property? in chapter 1 of Publication 946. Free fillable forms 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 fillable forms The same rule applies to a transfer by your former spouse that is incident to divorce. Free fillable forms 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 fillable forms If the property transferred to you is a series E, series EE, or series I U. Free fillable forms S. Free fillable forms savings bond, the transferor must include in income the interest accrued to the date of transfer. Free fillable forms 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 fillable forms For more information on these bonds, see chapter 7. Free fillable forms 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 fillable forms For more information about the transfer of property from a spouse, see chapter 14. Free fillable forms 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 fillable forms FMV less than donor's adjusted basis. Free fillable forms   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 fillable forms 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 fillable forms 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 fillable forms See Adjusted Basis , earlier. Free fillable forms Example. Free fillable forms You received an acre of land as a gift. Free fillable forms At the time of the gift, the land had an FMV of $8,000. Free fillable forms The donor's adjusted basis was $10,000. Free fillable forms After you received the property, no events occurred to increase or decrease your basis. Free fillable forms 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 fillable forms 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 fillable forms If the sales price is between $8,000 and $10,000, you have neither gain nor loss. Free fillable forms Business property. Free fillable forms   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 fillable forms FMV equal to or greater than donor's adjusted basis. Free fillable forms   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 fillable forms Increase your basis by all or part of any gift tax paid, depending on the date of the gift, explained later. Free fillable forms   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 fillable forms See Adjusted Basis , earlier. Free fillable forms   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 fillable forms Figure the increase by multiplying the gift tax paid by a fraction. Free fillable forms The numerator of the fraction is the net increase in value of the gift and the denominator is the amount of the gift. Free fillable forms   The net increase in value of the gift is the FMV of the gift minus the donor's adjusted basis. Free fillable forms 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 fillable forms Example. Free fillable forms In 2013, you received a gift of property from your mother that had an FMV of $50,000. Free fillable forms Her adjusted basis was $20,000. Free fillable forms The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). Free fillable forms She paid a gift tax of $7,320 on the property. Free fillable forms 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 fillable forms 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 fillable forms 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 fillable forms However, your basis cannot exceed the FMV of the gift at the time it was given to you. Free fillable forms 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 fillable forms The FMV on the alternate valuation date if the personal representative for the estate elects to use alternate valuation. Free fillable forms 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 fillable forms 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 fillable forms 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 fillable forms For more information, see the instructions to Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. Free fillable forms Property inherited from a decedent who died in 2010. Free fillable forms   If you inherited property from a decedent who died in 2010, special rules may apply. Free fillable forms For more information, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. Free fillable forms Community property. Free fillable forms   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 fillable forms 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 fillable forms 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 fillable forms Example. Free fillable forms You and your spouse owned community property that had a basis of $80,000. Free fillable forms When your spouse died, half the FMV of the community interest was includible in your spouse's estate. Free fillable forms The FMV of the community interest was $100,000. Free fillable forms The basis of your half of the property after the death of your spouse is $50,000 (half of the $100,000 FMV). Free fillable forms The basis of the other half to your spouse's heirs is also $50,000. Free fillable forms For more information about community property, see Publication 555, Community Property. Free fillable forms 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 fillable forms To do so, you must figure its basis for depreciation at the time of the change. Free fillable forms An example of changing property held for personal use to business or rental use would be renting out your former personal residence. Free fillable forms Basis for depreciation. Free fillable forms   The basis for depreciation is the lesser of the following amounts. Free fillable forms The FMV of the property on the date of the change. Free fillable forms Your adjusted basis on the date of the change. Free fillable forms Example. Free fillable forms Several years ago, you paid $160,000 to have your house built on a lot that cost $25,000. Free fillable forms 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 fillable forms Because land is not depreciable, you include only the cost of the house when figuring the basis for depreciation. Free fillable forms Your adjusted basis in the house when you changed its use was $178,000 ($160,000 + $20,000 − $2,000). Free fillable forms 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 fillable forms 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 fillable forms Sale of property. Free fillable forms   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 fillable forms Gain. Free fillable forms   The basis for figuring a gain is your adjusted basis in the property when you sell the property. Free fillable forms Example. Free fillable forms 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 fillable forms Your adjusted basis for figuring gain is $165,500 ($178,000 + $25,000 (land) − $37,500). Free fillable forms Loss. Free fillable forms   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 fillable forms Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . Free fillable forms Example. Free fillable forms 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 fillable forms 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 fillable forms Reduce that amount ($180,000) by the depreciation deductions ($37,500). Free fillable forms The basis for loss is $142,500 ($180,000 − $37,500). Free fillable forms 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 fillable forms 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 fillable forms You must adjust the basis of stocks for certain events that occur after purchase. Free fillable forms 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 fillable forms This rule applies only when the additional stock received is identical to the stock held. Free fillable forms Also reduce your basis when you receive nontaxable distributions. Free fillable forms They are a return of capital. Free fillable forms Example. Free fillable forms In 2011 you bought 100 shares of XYZ stock for $1,000 or $10 a share. Free fillable forms In 2012 you bought 100 shares of XYZ stock for $1,600 or $16 a share. Free fillable forms In 2013 XYZ declared a 2-for-1 stock split. Free fillable forms 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 fillable forms Other basis. Free fillable forms   There are other ways to figure the basis of stocks or bonds depending on how you acquired them. Free fillable forms For detailed information, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. Free fillable forms Identifying stocks or bonds sold. Free fillable forms   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 fillable forms 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 fillable forms For more information about identifying securities you sell, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. Free fillable forms Mutual fund shares. Free fillable forms   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 fillable forms For more information, see Publication 550. Free fillable forms Bond premium. Free fillable forms   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 fillable forms See Bond Premium Amortization in chapter 3 of Publication 550 for more information. Free fillable forms 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 fillable forms Original issue discount (OID) on debt instruments. Free fillable forms   You must increase your basis in an OID debt instrument by the OID you include in income for that instrument. Free fillable forms See Original Issue Discount (OID) in chapter 7 and Publication 1212, Guide To Original Issue Discount (OID) Instruments. Free fillable forms Tax-exempt obligations. Free fillable forms    OID on tax-exempt obligations is generally not taxable. Free fillable forms 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 fillable forms The accrued OID is added to the basis of the obligation to determine your gain or loss. Free fillable forms See chapter 4 of Publication 550. Free fillable forms Prev  Up  Next   Home   More Online Publications