File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

Free Turbo Tax

Download 2010 Tax FormsH And R Block Free Tax PreparationFilling Out 1040xHow Do I Do My 2010 Taxes1040 Ez FormVita Tax Locations 2012Tax Forms For College Students1040ez Tax Form And BookletH&r Block's Free FileTax Act 2011 Return2011 Income TaxFiling State Income Tax ReturnClaim Social Security Income TaxesTaxact 2010 ReturnFree 2010 Tax Software DownloadHow To File Prior Year Tax ReturnsH&r Block Online1040ez Form 2011Where Do I Send My 2012 Tax ReturnIrs Forms 1040ez InstructionsIrs Free File Tax ReturnWhere To File State Taxes2012 Federal And State Tax FormsFile My State Taxes Online FreeIrs Form 1040ez1040x Amended Tax Return Form1040nr Online FilingFree Online 1040ez FilingTaxes 2009Non Resident State Tax ReturnAmended Tax Return 2013Tax Planning Us 1040aHow To File State Tax2012 Income Tax FormHr Block Tax CutFree Tax Calculator 2012How To Refile Your TaxesDownload State Tax FormsFile State TaxCan I Efile 1040nr

Free Turbo Tax

Free turbo tax Publication 972 - Additional Material Prev  Up  Next   Home   More Online Publications
Español

Tribal Governments

Official information and services from the U.S. government

The Free Turbo Tax

Free turbo tax 6. Free turbo tax   Basis of Assets Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Cost BasisReal Property Allocating the Basis Uniform Capitalization Rules Adjusted BasisIncreases to Basis Decreases to Basis Basis Other Than CostTaxable Exchanges Involuntary Conversions Nontaxable Exchanges Property Received as a Gift Property Transferred From a Spouse Inherited Property Property Distributed From a Partnership or Corporation Introduction Your basis is the amount of your investment in property for tax purposes. Free turbo tax Use basis to figure the gain or loss on the sale, exchange, or other disposition of property. Free turbo tax Also use basis to figure depreciation, amortization, depletion, and casualty losses. Free turbo tax If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. Free turbo tax Only the basis allocated to the business or investment use of the property can be depreciated. Free turbo tax Your original basis in property is adjusted (increased or decreased) by certain events. Free turbo tax For example, if you make improvements to the property, increase your basis. Free turbo tax If you take deductions for depreciation, or casualty losses, or claim certain credits, reduce your basis. Free turbo tax Keep accurate records of all items that affect the basis of your assets. Free turbo tax For information on keeping records, see chapter 1. Free turbo tax Topics - This chapter discusses: Cost basis Adjusted basis Basis other than cost Useful Items - You may want to see: Publication 535 Business Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 946 How To Depreciate Property See chapter 16 for information about getting publications and forms. Free turbo tax Cost Basis The basis of property you buy is usually its cost. Free turbo tax Cost is the amount you pay in cash, debt obligations, other property, or services. Free turbo tax Your cost includes amounts you pay for sales tax, freight, installation, and testing. Free turbo tax The basis of real estate and business assets will include other items, discussed later. Free turbo tax Basis generally does not include interest payments. Free turbo tax However, see Carrying charges and Capitalized interest in chapter 4 of Publication 535. Free turbo tax You also may have to capitalize (add to basis) certain other costs related to buying or producing property. Free turbo tax Under the uniform capitalization rules, discussed later, you may have to capitalize direct costs and certain indirect costs of producing property. Free turbo tax Loans with low or no interest. Free turbo tax   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 the amount considered to be unstated interest. Free turbo tax You generally have unstated interest if your interest rate is less than the applicable federal rate. Free turbo tax See the discussion of unstated interest in Publication 537, Installment Sales. Free turbo tax Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. Free turbo tax If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. Free turbo tax Some of these expenses are discussed next. Free turbo tax Lump sum purchase. Free turbo tax   If you buy improvements, such as buildings, and the land on which they stand for a lump sum, allocate your cost basis between the land and improvements. Free turbo tax Allocate the cost basis according to the respective fair market values (FMVs) of the land and improvements at the time of purchase. Free turbo tax Figure the basis of each asset by multiplying the lump sum by a fraction. Free turbo tax The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. Free turbo tax Fair market value (FMV). Free turbo tax   FMV is the price at which 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 necessary facts. Free turbo tax Sales of similar property on or about the same date may help in figuring the FMV of the property. Free turbo tax If you are not certain of the FMV of the land and improvements, you can allocate the basis according to their assessed values for real estate tax purposes. Free turbo tax Real estate taxes. Free turbo tax   If you pay the 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 turbo tax   If you reimburse the seller for taxes the seller paid for you, you generally can deduct that amount as a tax expense. Free turbo tax Whether or not you reimburse the seller, do not include that amount in the basis of your property. Free turbo tax Settlement costs. Free turbo tax   Your basis includes the settlement fees and closing costs for buying the property. Free turbo tax See Publication 551 for a detailed list of items you can and cannot include in basis. Free turbo tax   Do not include fees and costs for getting a loan on the property. Free turbo tax Also, do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Free turbo tax Points. Free turbo tax   If you pay points to get a loan (including a mortgage, second mortgage, or line-of-credit), do not add the points to the basis of the related property. Free turbo tax You may be able to deduct the points currently or over the term of the loan. Free turbo tax For more information about deducting points, see Points in chapter 4 of Publication 535. Free turbo tax Assumption of a mortgage. Free turbo tax   If you buy property and assume (or buy the property subject to) an existing mortgage, your basis includes the amount you pay for the property plus the amount you owe on the mortgage. Free turbo tax Example. Free turbo tax If you buy a farm for $100,000 cash and assume a mortgage of $400,000, your basis is $500,000. Free turbo tax Constructing assets. Free turbo tax   If you build property or have assets built for you, your expenses for this construction are part of your basis. Free turbo tax Some of these expenses include the following costs: Land, Labor and materials, Architect's fees, Building permit charges, Payments to contractors, Payments for rental equipment, and Inspection fees. Free turbo tax   In addition, if you use your own employees, farm materials, and equipment to build an asset, do not deduct the following expenses. Free turbo tax You must capitalize them (include them in the asset's basis). Free turbo tax Employee wages paid for the construction work, reduced by any employment credits allowed. Free turbo tax Depreciation on equipment you own while it is used in the construction. Free turbo tax Operating and maintenance costs for equipment used in the construction. Free turbo tax The cost of business supplies and materials used in the construction. Free turbo tax    Do not include the value of your own labor, or any other labor you did not pay for, in the basis of any property you construct. Free turbo tax Allocating the Basis In some instances, the rules for determining basis apply to a group of assets acquired in the same transaction or to property that consists of separate items. Free turbo tax To determine the basis of these assets or separate items, there must be an allocation of basis. Free turbo tax Group of assets acquired. Free turbo tax   If you buy multiple assets for a lump sum, allocate the amount you pay among the assets. Free turbo tax Use this allocation to figure your basis for depreciation and gain or loss on a later disposition of any of these assets. Free turbo tax You and the seller may agree in the sales contract to a specific allocation of the purchase price among the assets. Free turbo tax If this allocation is based on the value of each asset and you and the seller have adverse tax interests, the allocation generally will be accepted. Free turbo tax Farming business acquired. Free turbo tax   If you buy a group of assets that makes up a farming business, there are special rules you must use to allocate the purchase price among the assets. Free turbo tax Generally, reduce the purchase price by any cash received. Free turbo tax Allocate the remaining purchase price to the other business assets received in proportion to (but not more than) their FMV and in a certain order. Free turbo tax See Trade or Business Acquired under Allocating the Basis in Publication 551 for more information. Free turbo tax Transplanted embryo. Free turbo tax   If you buy a cow that is pregnant with a transplanted embryo, allocate to the basis of the cow the part of the purchase price equal to the FMV of the cow without the implant. Free turbo tax Allocate the rest of the purchase price to the basis of the calf. Free turbo tax Neither the cost allocated to the cow nor the cost allocated to the calf is deductible as a current business expense. Free turbo tax Uniform Capitalization Rules Under the uniform capitalization rules, you must include certain direct and indirect costs in the basis of property you produce or in your inventory costs, rather than claim them as a current deduction. Free turbo tax You recover these costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Free turbo tax Generally, you are subject to the uniform capitalization rules if you do any of the following: Produce real or tangible personal property, or Acquire property for resale. Free turbo tax However, this rule does not apply to personal property if your average annual gross receipts for the 3-tax-year period ending with the year preceding the current tax year are $10 million or less. Free turbo tax You produce property if you construct, build, install, manufacture, develop, improve, or create the property. Free turbo tax You are not subject to the uniform capitalization rules if the property is produced for personal use. Free turbo tax In a farming business, you produce property if you raise or grow any agricultural or horticultural commodity, including plants and animals. Free turbo tax Plants. Free turbo tax   A plant produced in a farming business includes the following items: A fruit, nut, or other crop-bearing tree; An ornamental tree; A vine; A bush; Sod; and The crop or yield of a plant that will have more than one crop or yield. Free turbo tax Animals. Free turbo tax   An animal produced in a farming business includes any stock, poultry or other bird, and fish or other sea life. Free turbo tax The direct and indirect costs of producing plants or animals include preparatory costs and preproductive period costs. Free turbo tax Preparatory costs include the acquisition costs of the seed, seedling, plant, or animal. Free turbo tax For plants, preproductive period costs include the costs of items such as irrigation, pruning, frost protection, spraying, and harvesting. Free turbo tax For animals, preproductive period costs include the costs of items such as feed, maintaining pasture or pen areas, breeding, veterinary services, and bedding. Free turbo tax Exceptions. Free turbo tax   In a farming business, the uniform capitalization rules do not apply to: Any animal, Any plant with a preproductive period of 2 years or less, or Any costs of replanting certain plants lost or damaged due to casualty. Free turbo tax   Exceptions (1) and (2) do not apply to a corporation, partnership, or tax shelter required to use an accrual method of accounting. Free turbo tax See Accrual Method Required under Accounting Methods in chapter 2. Free turbo tax   In addition, you can elect not to use the uniform capitalization rules for plants with a preproductive period of more than 2 years. Free turbo tax If you make this election, special rules apply. Free turbo tax This election cannot be made by a corporation, partnership, or tax shelter required to use an accrual method of accounting. Free turbo tax This election also does not apply to any costs incurred for the planting, cultivation, maintenance, or development of any citrus or almond grove (or any part thereof) within the first 4 years the trees were planted. Free turbo tax    If you elect not to use the uniform capitalization rules, you must use the alternative depreciation system for all property used in any of your farming businesses and placed in service in any tax year during which the election is in effect. Free turbo tax See chapter 7, for additional information on depreciation. Free turbo tax Example. Free turbo tax You grow trees that have a preproductive period of more than 2 years. Free turbo tax The trees produce an annual crop. Free turbo tax You are an individual and the uniform capitalization rules apply to your farming business. Free turbo tax You must capitalize the direct costs and an allocable part of indirect costs incurred due to the production of the trees. Free turbo tax You are not required to capitalize the costs of producing the annual crop because its preproductive period is 2 years or less. Free turbo tax Preproductive period of more than 2 years. Free turbo tax   The preproductive period of plants grown in commercial quantities in the United States is based on their nationwide weighted average preproductive period. Free turbo tax Plants producing the crops or yields shown in Table 6-1 have a nationwide weighted average preproductive period of more than 2 years. Free turbo tax Other plants (not shown in Table 6-1) may also have a nationwide weighted average preproductive period of more than 2 years. Free turbo tax More information. Free turbo tax   For more information on the uniform capitalization rules that apply to property produced in a farming business, see Regulations section 1. Free turbo tax 263A-4. Free turbo tax Table 6-1. Free turbo tax Plants With a Preproductive Period of More Than 2 Years Plants producing the following crops or yields have a nationwide weighted average preproductive period of more than 2 years. Free turbo tax Almonds Apples Apricots Avocados Blueberries Cherries Chestnuts Coffee beans Currants Dates Figs Grapefruit Grapes Guavas Kiwifruit Kumquats Lemons Limes Macadamia nuts Mangoes Nectarines Olives Oranges Peaches Pears Pecans Persimmons Pistachio nuts Plums Pomegranates Prunes Tangelos Tangerines Tangors Walnuts 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 to the cost basis or basis other than cost (discussed later) of the property. Free turbo tax The adjustments to the original basis are increases or decreases to the cost basis or other basis which result in the adjusted basis of the property. Free turbo tax Increases to Basis Increase the basis of any property by all items properly added to a capital account. Free turbo tax These include the cost of any improvements having a useful life of more than 1 year. Free turbo tax The following costs increase the basis of property. Free turbo tax The cost of extending utility service lines to property. Free turbo tax Legal fees, such as the cost of defending and perfecting title. Free turbo tax Legal fees for seeking a decrease in an assessment levied against property to pay for local improvements. Free turbo tax Assessments for items such as paving roads and building ditches that increase the value of the property assessed. Free turbo tax Do not deduct these expenses as taxes. Free turbo tax However, you can deduct as taxes amounts assessed for maintenance or repairs, or for meeting interest charges related to the improvements. Free turbo tax If you make additions or improvements to business property, depreciate the basis of each addition or improvement as separate depreciable property using the rules that would apply to the original property if you had placed it in service at the same time you placed the addition or improvement in service. Free turbo tax See chapter 7. Free turbo tax Deducting vs. Free turbo tax capitalizing costs. Free turbo tax   Do not add to your basis costs you can deduct as current expenses. Free turbo tax For example, amounts paid for incidental repairs or maintenance are deductible as business expenses and are not added to basis. Free turbo tax However, you can elect either to deduct or to capitalize certain other costs. Free turbo tax See chapter 7 in Publication 535. Free turbo tax Decreases to Basis The following are some items that reduce the basis of property. Free turbo tax Section 179 deduction. Free turbo tax Deductions previously allowed or allowable for amortization, depreciation, and depletion. Free turbo tax Alternative motor vehicle credit. Free turbo tax See Form 8910. Free turbo tax Alternative fuel vehicle refueling property credit. Free turbo tax See Form 8911. Free turbo tax Residential energy efficient property credits. Free turbo tax See Form 5695. Free turbo tax Investment credit (part or all) taken. Free turbo tax Casualty and theft losses and insurance reimbursements. Free turbo tax Payments you receive for granting an easement. Free turbo tax Exclusion from income of subsidies for energy conservation measures. Free turbo tax Certain canceled debt excluded from income. Free turbo tax Rebates from a manufacturer or seller. Free turbo tax Patronage dividends received from a cooperative association as a result of a purchase of property. Free turbo tax See Patronage Dividends in chapter 3. Free turbo tax Gas-guzzler tax. Free turbo tax See Form 6197. Free turbo tax Some of these items are discussed next. Free turbo tax For a more detailed list of items that decrease basis, see section 1016 of the Internal Revenue Code and Publication 551. Free turbo tax Depreciation and section 179 deduction. Free turbo tax   The adjustments you must make to the basis of the property if you take the section 179 deduction or depreciate the property are explained next. Free turbo tax For more information on these deductions, see chapter 7. Free turbo tax Section 179 deduction. Free turbo tax   If you take the section 179 expense deduction for all or part of the cost of qualifying business property, decrease the basis of the property by the deduction. Free turbo tax Depreciation. Free turbo tax   Decrease the basis of property by the depreciation you deducted or could have deducted on your tax returns under the method of depreciation you chose. Free turbo tax If you took less depreciation than you could have under the method chosen, decrease the basis by the amount you could have taken under that method. Free turbo tax If you did not take a depreciation deduction, reduce the basis by the full amount of the depreciation you could have taken. Free turbo tax   If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted plus the part of the excess depreciation you deducted that actually reduced your tax liability for any year. Free turbo tax   See chapter 7 for information on figuring the depreciation you should have claimed. Free turbo tax   In decreasing your basis for depreciation, take into account the amount deducted on your tax returns as depreciation and any depreciation you must capitalize under the uniform capitalization rules. Free turbo tax Casualty and theft losses. Free turbo tax   If you have a casualty or theft loss, decrease the basis of the property by any insurance or other reimbursement. Free turbo tax Also, decrease it by any deductible loss not covered by insurance. Free turbo tax See chapter 11 for information about figuring your casualty or theft loss. Free turbo tax   You must increase your basis in the property by the amount you spend on clean-up costs (such as debris removal) and repairs that restore the property to its pre-casualty condition. Free turbo tax To make this determination, compare the repaired property to the property before the casualty. Free turbo tax Easements. Free turbo tax   The amount you receive for granting an easement is usually considered to be proceeds from the sale of an interest in the real property. Free turbo tax It reduces the basis of the affected part of the property. Free turbo tax 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 turbo tax See Easements and rights-of-way in chapter 3. Free turbo tax Exclusion from income of subsidies for energy conservation measures. Free turbo tax   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 turbo tax Reduce the basis of the property by the excluded amount. Free turbo tax Canceled debt excluded from income. Free turbo tax   If a debt you owe is canceled or forgiven, other than as a gift or bequest, you generally must include the canceled amount in your gross income for tax purposes. Free turbo tax A debt includes any indebtedness for which you are liable or which attaches to property you hold. Free turbo tax   You can exclude your canceled debt from income if the debt is any of the following. Free turbo tax Debt canceled in a bankruptcy case or when you are insolvent. Free turbo tax Qualified farm debt. Free turbo tax Qualified real property business debt (provided you are not a C corporation). Free turbo tax Qualified principal residence indebtedness. Free turbo tax Discharge of certain indebtedness of a qualified individual because of Midwestern disasters. Free turbo tax If you exclude canceled debt described in (1) or (2), you may have to reduce the basis of your depreciable and nondepreciable property. Free turbo tax If you exclude canceled debt described in (3), you must only reduce the basis of your depreciable property by the excluded amount. Free turbo tax   For more information about canceled debt in a bankruptcy case, see Publication 908, Bankruptcy Tax Guide. Free turbo tax For more information about insolvency and canceled debt that is qualified farm debt or qualified principal residence indebtedness, see chapter 3. Free turbo tax For more information about qualified real property business debt, see Publication 334, Tax Guide for Small Business. Free turbo tax For more information about canceled debt in Midwestern disaster areas, see Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. Free turbo tax Basis Other Than Cost There are times when you cannot use cost as basis. Free turbo tax In these situations, the fair market value or the adjusted basis of property may be used. Free turbo tax Examples are discussed next. Free turbo tax Property changed from personal to business or rental use. Free turbo tax   When you hold property for personal use and then change it to business use or use it to produce rent, you must figure its basis for depreciation. Free turbo tax An example of changing property from personal to business use would be changing the use of your pickup truck that you originally purchased for your personal use to use in your farming business. Free turbo tax   The basis for depreciation is the lesser of: The FMV of the property on the date of the change, or Your adjusted basis on the date of the change. Free turbo tax   If you later sell or dispose of this property, the basis you use will depend on whether you are figuring a gain or loss. Free turbo tax The basis for figuring a gain is your adjusted basis in the property when you sell the property. Free turbo tax 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 turbo tax Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . Free turbo tax Property received for services. Free turbo tax   If you receive property for services, include the property's FMV in income. Free turbo tax The amount you include in income becomes your basis. Free turbo tax 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 turbo tax Example. Free turbo tax George Smith is an accountant and also operates a farming business. Free turbo tax George agreed to do some accounting work for his neighbor in exchange for a dairy cow. Free turbo tax The accounting work and the cow are each worth $1,500. Free turbo tax George must include $1,500 in income for his accounting services. Free turbo tax George's basis in the cow is $1,500. Free turbo tax Taxable Exchanges A taxable exchange is one in which the gain is taxable, or the loss is deductible. Free turbo tax A taxable gain or deductible loss also is known as a recognized gain or loss. Free turbo tax A taxable exchange occurs when you receive cash or get property that is not similar or related in use to the property exchanged. Free turbo tax 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 turbo tax Example. Free turbo tax You trade a tract of farmland with an adjusted basis of $2,000 for a tractor that has an FMV of $6,000. Free turbo tax You must report a taxable gain of $4,000 for the land. Free turbo tax The tractor has a basis of $6,000. Free turbo tax Involuntary Conversions If you receive property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, figure the basis of the replacement property you receive using the basis of the converted property. Free turbo tax Similar or related property. Free turbo tax   If the replacement property is similar or related in service or use to the converted property, the replacement property's basis is the same as the old property's basis on the date of the conversion. Free turbo tax However, make the following adjustments. Free turbo tax Decrease the basis by the following amounts. Free turbo tax Any loss you recognize on the involuntary conversion. Free turbo tax Any money you receive that you do not spend on similar property. Free turbo tax Increase the basis by the following amounts. Free turbo tax Any gain you recognize on the involuntary conversion. Free turbo tax Any cost of acquiring the replacement property. Free turbo tax Money or property not similar or related. Free turbo tax   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 involuntary conversion. Free turbo tax Allocating the basis. Free turbo tax   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. Free turbo tax Basis for depreciation. Free turbo tax   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. Free turbo tax For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. Free turbo tax For more information about involuntary conversions, see chapter 11. Free turbo tax Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. Free turbo tax A nontaxable gain or loss also is known as an unrecognized gain or loss. Free turbo tax If you receive property in a nontaxable exchange, its basis is usually the same as the basis of the property you transferred. Free turbo tax Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. Free turbo tax For an exchange to qualify as a like-kind exchange, you must hold for business or investment purposes both the property you transfer and the property you receive. Free turbo tax There must also be an exchange of like-kind property. Free turbo tax For more information, see Like-Kind Exchanges in  chapter 8. Free turbo tax The basis of the property you receive generally is the same as the adjusted basis of the property you gave up. Free turbo tax Example 1. Free turbo tax You traded a truck you used in your farming business for a new smaller truck to use in farming. Free turbo tax The adjusted basis of the old truck was $10,000. Free turbo tax The FMV of the new truck is $30,000. Free turbo tax Because this is a nontaxable exchange, you do not recognize any gain, and your basis in the new truck is $10,000, the same as the adjusted basis of the truck you traded. Free turbo tax Example 2. Free turbo tax You trade a field cultivator (adjusted basis of $8,000) for a planter (FMV of $9,000). Free turbo tax You use both the field cultivator and the planter in your farming business. Free turbo tax The basis of the planter you receive is $8,000, the same as the field cultivator traded Exchange expenses. Free turbo tax   Exchange expenses generally are the closing costs that you pay. Free turbo tax They include such items as brokerage commissions, attorney fees, and deed preparation fees. Free turbo tax Add them to the basis of the like-kind property you receive. Free turbo tax Property plus cash. Free turbo tax   If you trade property in a like-kind exchange and also pay money, the basis of the property you receive is the adjusted basis of the property you gave up plus the money you paid. Free turbo tax Example. Free turbo tax You trade in a truck (adjusted basis of $3,000) for another truck (FMV of $7,500) and pay $4,000. Free turbo tax Your basis in the new truck is $7,000 (the $3,000 adjusted basis of the old truck plus the $4,000 cash). Free turbo tax Special rules for related persons. Free turbo tax   If a like-kind exchange takes place directly or indirectly between related persons and either party disposes of the property within 2 years after the exchange, the exchange no longer qualifies for like-kind exchange treatment. Free turbo tax Each person must report any gain or loss not recognized on the original exchange unless the loss is not deductible under the related party rules. Free turbo tax Each person reports it on the tax return filed for the year in which the later disposition occurred. Free turbo tax If this rule applies, the basis of the property received in the original exchange will be its FMV. Free turbo tax For more information, see chapter 8. Free turbo tax Exchange of business property. Free turbo tax   Exchanging the property of one business for the property of another business generally is a multiple property exchange. Free turbo tax For information on figuring basis, see Multiple Property Exchanges in chapter 1 of Publication 544. Free turbo tax Basis for depreciation. Free turbo tax   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind transaction. Free turbo tax For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. Free turbo tax Partially Nontaxable Exchanges A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. Free turbo tax 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 turbo tax Decrease the basis by the following amounts. Free turbo tax Any money you receive. Free turbo tax Any loss you recognize on the exchange. Free turbo tax Increase the basis by the following amounts. Free turbo tax Any additional costs you incur. Free turbo tax Any gain you recognize on the exchange. Free turbo tax If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. Free turbo tax Example 1. Free turbo tax You trade farmland (basis of $100,000) for another tract of farmland (FMV of $110,000) and $30,000 cash. Free turbo tax You realize a gain of $40,000. Free turbo tax This is the FMV of the land received plus the cash minus the basis of the land you traded ($110,000 + $30,000 − $100,000). Free turbo tax Include your gain in income (recognize gain) only to the extent of the cash received. Free turbo tax Your basis in the land you received is figured as follows. Free turbo tax Basis of land traded $100,000 Minus: Cash received (adjustment 1(a)) − 30,000   $70,000 Plus: Gain recognized (adjustment 2(b)) + 30,000 Basis of land received $100,000 Example 2. Free turbo tax You trade a truck (adjusted basis of $22,750) for another truck (FMV of $20,000) and $10,000 cash. Free turbo tax You realize a gain of $7,250. Free turbo tax This is the FMV of the truck received plus the cash minus the adjusted basis of the truck you traded ($20,000 + $10,000 − $22,750). Free turbo tax You include all the gain in your income (recognize gain) because the gain is less than the cash you received. Free turbo tax Your basis in the truck you received is figured as follows. Free turbo tax Adjusted basis of truck traded $22,750 Minus: Cash received (adjustment 1(a)) −10,000   $12,750 Plus: Gain recognized (adjustment 2(b)) + 7,250 Basis of truck received $20,000 Allocation of basis. Free turbo tax   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 turbo tax The rest is the basis of the like-kind property. Free turbo tax Example. Free turbo tax You traded a tractor with an adjusted basis of $15,000 for another tractor that had an FMV of $12,500. Free turbo tax You also received $1,000 cash and a truck that had an FMV of $3,000. Free turbo tax The truck is unlike property. Free turbo tax You realized a gain of $1,500. Free turbo tax This is the FMV of the tractor received plus the FMV of the truck received plus the cash minus the adjusted basis of the tractor you traded ($12,500 + $3,000 + $1,000 − $15,000). Free turbo tax You include in income (recognize) all $1,500 of the gain because it is less than the FMV of the unlike property plus the cash received. Free turbo tax Your basis in the properties you received is figured as follows. Free turbo tax Adjusted basis of old tractor $15,000 Minus: Cash received (adjustment 1(a)) − 1,000   $14,000 Plus: Gain recognized (adjustment 2(b)) + 1,500 Total basis of properties received $15,500 Allocate the total basis of $15,500 first to the unlike property—the truck ($3,000). Free turbo tax This is the truck's FMV. Free turbo tax The rest ($12,500) is the basis of the tractor. Free turbo tax Sale and Purchase If you sell property and buy similar property in two mutually dependent transactions, you may have to treat the sale and purchase as a single nontaxable exchange. Free turbo tax Example. Free turbo tax You used a tractor on your farm for 3 years. Free turbo tax Its adjusted basis is $22,000 and its FMV is $40,000. Free turbo tax You are interested in a new tractor, which sells for $60,000. Free turbo tax Ordinarily, you would trade your old tractor for the new one and pay the dealer $20,000. Free turbo tax Your basis for depreciating the new tractor would then be $42,000 ($20,000 + $22,000, the adjusted basis of your old tractor). Free turbo tax However, you want a higher basis for depreciating the new tractor, so you agree to pay the dealer $60,000 for the new tractor if he will pay you $40,000 for your old tractor. Free turbo tax Because the two transactions are dependent on each other, you are treated as having exchanged your old tractor for the new one and paid $20,000 ($60,000 − $40,000). Free turbo tax Your basis for depreciating the new tractor is $42,000, the same as if you traded the old tractor. Free turbo tax Property Received as a Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined earlier) to the donor just before it was given to you. Free turbo tax You also must know its FMV at the time it was given to you and any gift tax paid on it. Free turbo tax FMV equal to or greater than donor's adjusted basis. Free turbo tax   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 when you received the gift. Free turbo tax Increase your basis by all or part of any gift tax paid, depending on the date of the gift. Free turbo tax   Also, for figuring gain or loss from a sale or other disposition of the property, 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 turbo tax See Adjusted Basis , earlier. Free turbo tax   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 turbo tax Figure the increase by multiplying the gift tax paid by the following fraction. Free turbo tax Net increase in value of the gift Amount of the gift   The net increase in value of the gift is the FMV of the gift minus the donor's adjusted basis. Free turbo tax 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 turbo tax Example. Free turbo tax In 2013, you received a gift of property from your mother that had an FMV of $50,000. Free turbo tax Her adjusted basis was $20,000. Free turbo tax The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). Free turbo tax She paid a gift tax of $7,320. Free turbo tax Your basis, $26,076, is figured as follows. Free turbo tax 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 turbo tax 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 turbo tax 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 turbo tax However, your basis cannot exceed the FMV of the gift when it was given to you. Free turbo tax FMV less than donor's adjusted basis. Free turbo tax   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 turbo tax Your basis for figuring gain is the donor's adjusted basis plus or minus any required adjustments to basis while you held the property. Free turbo tax 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 turbo tax (See Adjusted Basis , earlier. Free turbo tax )   If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and get a gain, you have neither gain nor loss on the sale or other disposition of the property. Free turbo tax Example. Free turbo tax You received farmland as a gift from your parents when they retired from farming. Free turbo tax At the time of the gift, the land had an FMV of $80,000. Free turbo tax Your parents' adjusted basis was $100,000. Free turbo tax After you received the land, no events occurred that would increase or decrease your basis. Free turbo tax If you sell the land for $120,000, you will have a $20,000 gain because you must use the donor's adjusted basis at the time of the gift ($100,000) as your basis to figure a gain. Free turbo tax If you sell the land for $70,000, you will have a $10,000 loss because you must use the FMV at the time of the gift ($80,000) as your basis to figure a loss. Free turbo tax If the sales price is between $80,000 and $100,000, you have neither gain nor loss. Free turbo tax For instance, if the sales price was $90,000 and you tried to figure a gain using the donor's adjusted basis ($100,000), you would get a $10,000 loss. Free turbo tax If you then tried to figure a loss using the FMV ($80,000), you would get a $10,000 gain. Free turbo tax Business property. Free turbo tax   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 turbo tax 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 turbo tax The same rule applies to a transfer by your former spouse if the transfer is incident to divorce. Free turbo tax 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 turbo tax 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 turbo tax For more information, see Property Settlements in Publication 504, Divorced or Separated Individuals. Free turbo tax 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 turbo tax If a federal estate return is filed, you can use its appraised value. Free turbo tax The FMV on the alternate valuation date, if the personal representative for the estate elects to use alternate valuation. Free turbo tax For information on the alternate valuation, see the Instructions for Form 706. Free turbo tax The decedent's adjusted basis in land to the extent of the value that is excluded from the decedent's taxable estate as a qualified conservation easement. Free turbo tax 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 turbo tax Special-use valuation method. Free turbo tax   Under certain conditions, when a person dies, the executor or personal representative of that person's estate may elect to value qualified real property at other than its FMV. Free turbo tax If so, the executor or personal representative values the qualified real property based on its use as a farm or other closely held business. Free turbo tax If the executor or personal representative elects this method of valuation for estate tax purposes, this value is the basis of the property for the qualified heirs. Free turbo tax The qualified heirs should be able to get the necessary value from the executor or personal representative of the estate. Free turbo tax   If you are a qualified heir who received special-use valuation property, increase your basis by any gain recognized by the estate or trust because of post-death appreciation. Free turbo tax Post-death appreciation is the property's FMV on the date of distribution minus the property's FMV either on the date of the individual's death or on the alternate valuation date. Free turbo tax Figure all FMVs without regard to the special-use valuation. Free turbo tax   You may be liable for an additional estate tax if, within 10 years after the death of the decedent, you transfer the property or the property stops being used as a farm. Free turbo tax This tax does not apply if you dispose of the property in a like-kind exchange or in an involuntary conversion in which all of the proceeds are reinvested in qualified replacement property. Free turbo tax The tax also does not apply if you transfer the property to a member of your family and certain requirements are met. Free turbo tax   You can elect to increase your basis in special-use valuation property if it becomes subject to the additional estate tax. Free turbo tax To increase your basis, you must make an irrevocable election and pay interest on the additional estate tax figured from the date 9 months after the decedent's death until the date of payment of the additional estate tax. Free turbo tax If you meet these requirements, increase your basis in the property to its FMV on the date of the decedent's death or the alternate valuation date. Free turbo tax The increase in your basis is considered to have occurred immediately before the event that resulted in the additional estate tax. Free turbo tax   You make the election by filing, with Form 706-A, United States Additional Estate Tax Return, a statement that: Contains your (and the estate's) name, address, and taxpayer identification number; Identifies the election as an election under section 1016(c) of the Internal Revenue Code; Specifies the property for which you are making the election; and Provides any additional information required by the Form 706-A instructions. Free turbo tax   For more information, see Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, Form 706-A, and the related instructions. Free turbo tax Property inherited from a decedent who died in 2010. Free turbo tax   If you inherited property from a decedent who died in 2010, different rules may apply. Free turbo tax See Publication 4895, Tax Treatment of Property Acquired From a Decendent Dying in 2010, for details. Free turbo tax Property Distributed From a Partnership or Corporation The following rules apply to determine a partner's basis and a shareholder's basis in property distributed respectively from a partnership to the partner with respect to the partner's interest in the partnership and from a corporation to the shareholder with respect to the shareholder's ownership of stock in the corporation. Free turbo tax Partner's basis. Free turbo tax   Unless there is a complete liquidation of a partner's interest, the basis of property (other than money) distributed by a partnership to the partner is its adjusted basis to the partnership immediately before the distribution. Free turbo tax However, the basis of the property to the partner cannot be more than the adjusted basis of his or her interest in the partnership reduced by any money received in the same transaction. Free turbo tax For more information, see Partner's Basis for Distributed Property in Publication 541, Partnerships. Free turbo tax Shareholder's basis. Free turbo tax   The basis of property distributed by a corporation to a shareholder is its fair market value. Free turbo tax For more information about corporate distributions, see Distributions to Shareholders in Publication 542, Corporations. Free turbo tax Prev  Up  Next   Home   More Online Publications