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Online 1040ez Form

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Online 1040ez Form

Online 1040ez form Publication 544 - Introductory Material Table of Contents Future Developments What's New Important Reminders IntroductionOrdering forms and publications. Online 1040ez form Tax questions. Online 1040ez form Future Developments For the latest information about developments related to Publication 544, such as legislation enacted after it was published, go to www. Online 1040ez form irs. Online 1040ez form gov/pub544. Online 1040ez form What's New Direct reporting on Schedule D. Online 1040ez form   For 2013, certain transactions may be combined and the totals reported directly on Schedule D. Online 1040ez form If you choose to do that, you do not need to include these transactions on Form 8949, Sales and Other Dispositions of Capital Assets. Online 1040ez form For additional information, see Schedule D and Form 8949 in chapter 4. Online 1040ez form Tax rate on net capital gain and qualified dividends. Online 1040ez form   The maximum tax rate of 15% on net capital gain and qualified dividends has increased to 20% for some taxpayers. Online 1040ez form See Capital Gains Tax Rates in chapter 4. Online 1040ez form Important Reminders Dispositions of U. Online 1040ez form S. Online 1040ez form real property interests by foreign persons. Online 1040ez form  If you are a foreign person or firm and you sell or otherwise dispose of a U. Online 1040ez form S. Online 1040ez form real property interest, the buyer (or other transferee) may have to withhold income tax on the amount you receive for the property (including cash, the fair market value of other property, and any assumed liability). Online 1040ez form Corporations, partnerships, trusts, and estates also may have to withhold on certain U. Online 1040ez form S. Online 1040ez form real property interests they distribute to you. Online 1040ez form You must report these dispositions and distributions and any income tax withheld on your U. Online 1040ez form S. Online 1040ez form income tax return. Online 1040ez form For more information on dispositions of U. Online 1040ez form S. Online 1040ez form real property interests, see Publication 519, U. Online 1040ez form S. Online 1040ez form Tax Guide for Aliens. Online 1040ez form Also see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. Online 1040ez form Foreign source income. Online 1040ez form  If you are a U. Online 1040ez form S. Online 1040ez form citizen with income from dispositions of property outside the United States (foreign income), you must report all such income on your tax return unless it is exempt from U. Online 1040ez form S. Online 1040ez form law. Online 1040ez form This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payor. Online 1040ez form Photographs of missing children. Online 1040ez form  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Online 1040ez form Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Online 1040ez form You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Online 1040ez form Introduction You dispose of property when any of the following occurs. Online 1040ez form You sell property. Online 1040ez form You exchange property for other property. Online 1040ez form Your property is condemned or disposed of under threat of condemnation. Online 1040ez form Your property is repossessed. Online 1040ez form You abandon property. Online 1040ez form You give property away. Online 1040ez form This publication explains the tax rules that apply when you dispose of property. Online 1040ez form It discusses the following topics. Online 1040ez form How to figure a gain or loss. Online 1040ez form Whether your gain or loss is ordinary or capital. Online 1040ez form How to treat your gain or loss when you dispose of business property. Online 1040ez form How to report a gain or loss. Online 1040ez form This publication also explains whether your gain is taxable or your loss is deductible. Online 1040ez form This publication does not discuss certain transactions covered in other IRS publications. Online 1040ez form These include the following. Online 1040ez form Most transactions involving stocks, bonds, options, forward and futures contracts, and similar investments. Online 1040ez form See chapter 4 of Publication 550, Investment Income and Expenses. Online 1040ez form Sale of your main home. Online 1040ez form See Publication 523, Selling Your Home. Online 1040ez form Installment sales. Online 1040ez form See Publication 537, Installment Sales. Online 1040ez form Transfers of property at death. Online 1040ez form See Publication 559, Survivors, Executors, and Administrators. Online 1040ez form Forms to file. Online 1040ez form   When you dispose of property, you usually will have to file one or more of the following forms. Online 1040ez form Schedule D, Capital Gains and Losses. Online 1040ez form Form 4797, Sales of Business Property. Online 1040ez form Form 8824, Like-Kind Exchanges. Online 1040ez form Form 8949, Sales and Other Dispositions of Capital Assets. Online 1040ez form    Although the discussions in this publication may at times refer mainly to individuals, many of the rules discussed also apply to taxpayers other than individuals. Online 1040ez form However, the rules for property held for personal use usually will not apply to taxpayers other than individuals. Online 1040ez form Comments and suggestions. Online 1040ez form   We welcome your comments about this publication and your suggestions for future editions. Online 1040ez form   You can send your comments to the following address. Online 1040ez form Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Online 1040ez form NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Online 1040ez form Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Online 1040ez form You can also send us comments from www. Online 1040ez form irs. Online 1040ez form gov/formspubs/. Online 1040ez form Click on “More Information ” and then on “Give us feedback. Online 1040ez form ” Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products. Online 1040ez form Ordering forms and publications. Online 1040ez form   Visit www. Online 1040ez form irs. Online 1040ez form gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Online 1040ez form Internal Revenue Service 1201 N. Online 1040ez form Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Online 1040ez form   If you have a tax question, check the information available on IRS. Online 1040ez form gov or call 1-800-829-1040. Online 1040ez form We cannot answer tax questions sent to either of the above addresses. Online 1040ez form Prev  Up  Next   Home   More Online Publications
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Look for Warning Signs

Look for these warning signs to avoid fraud:

  • Someone you don't know asks you to send money or money orders to claim a prize, lottery, credit card, loan, or other valuable offer.
  • Someone you don't know offers you the chance to receive a credit card, loan, prize, lottery, or other valuable item, but asks you for personal data to claim it.
  • An unknown caller claiming to be a lawyer or in law enforcement offers to help you get your money back (for a fee).
  • The deal is only good "for today" or a short period of time.
  • The seller offers "free gifts" in return for a minimum effort or a fee.
  • A "repair person" suddenly finds a dangerous defect in your car or home.
  • You are given little or no time to read a contract.
  • A sale item is suddenly unavailable but a "much better item" is available for slightly more money.
  • Someone is trying to scare you into purchasing credit protection plans.
  • The solicitation looks like a government document and suggests contest winnings or unclaimed assets are yours for a small fee. (The government doesn't solicit money from citizens.)
  • You are asked for your bank account or credit card number.

Quick Tips for Avoiding Fraud

  • Don't give out personal information. Be suspicious of anyone you don't know who asks for your Social Security number, credit card and bank account details, date of birth, etc.
  • Don't be intimidated. Be suspicious of calls or e-mails that want you to provide or verify personal information immediately. Tell them you're not interested and hang up or don't reply to the e-mail.
  • Monitor your accounts. Review bank and credit card statements carefully. Report unauthorized transactions to your financial institution immediately.
  • Use a shredder. Tear or shred credit offers you receive in the mail, bank statements, insurance forms and other papers with personal information.

Fraud Alert

Be on the lookout for these common scams:

  • Fake Check Scams- You discover the check is worthless after you've deposited it and wired money back to the crook.
  • Sweetheart Swindles- Criminals befriend you in online chat rooms or dating sites, then request money as a favor or for accident or travel expenses.
  • Auctions- Beware of fraudulent sellers and bogus merchandise.
  • Lotteries- Don't fall for foreign lotteries; they're illegal to play and may be a scam.
  • Advance Fee Loans and Credit- It's illegal for telemarketers to charge a fee in advance for help getting a loan.

The Online 1040ez Form

Online 1040ez form 13. Online 1040ez form   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. Online 1040ez form It is divided into the following sections. Online 1040ez form Cost basis. Online 1040ez form Adjusted basis. Online 1040ez form Basis other than cost. Online 1040ez form Your basis is the amount of your investment in property for tax purposes. Online 1040ez form Use the basis to figure gain or loss on the sale, exchange, or other disposition of property. Online 1040ez form Also use it to figure deductions for depreciation, amortization, depletion, and casualty losses. Online 1040ez form If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. Online 1040ez form Only the basis allocated to the business or investment use of the property can be depreciated. Online 1040ez form Your original basis in property is adjusted (increased or decreased) by certain events. Online 1040ez form For example, if you make improvements to the property, increase your basis. Online 1040ez form If you take deductions for depreciation or casualty losses, or claim certain credits, reduce your basis. Online 1040ez form Keep accurate records of all items that affect the basis of your property. Online 1040ez form For more information on keeping records, see chapter 1. Online 1040ez form 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. Online 1040ez form The cost is the amount you pay in cash, debt obligations, other property, or services. Online 1040ez form 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). Online 1040ez form In addition, the basis of real estate and business assets may include other items. Online 1040ez form Loans with low or no interest. Online 1040ez form    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. Online 1040ez form You generally have unstated interest if your interest rate is less than the applicable federal rate. Online 1040ez form   For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. Online 1040ez form Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. Online 1040ez form If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. Online 1040ez form Lump sum purchase. Online 1040ez form   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. Online 1040ez form Allocate the cost basis according to the respective fair market values (FMVs) of the land and buildings at the time of purchase. Online 1040ez form Figure the basis of each asset by multiplying the lump sum by a fraction. Online 1040ez form The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. Online 1040ez form    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. Online 1040ez form Fair market value (FMV). Online 1040ez form   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. Online 1040ez form Sales of similar property on or about the same date may be helpful in figuring the FMV of the property. Online 1040ez form Assumption of mortgage. Online 1040ez form   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. Online 1040ez form Settlement costs. Online 1040ez form   Your basis includes the settlement fees and closing costs you paid for buying the property. Online 1040ez form (A fee for buying property is a cost that must be paid even if you buy the property for cash. Online 1040ez form ) Do not include fees and costs for getting a loan on the property in your basis. Online 1040ez form   The following are some of the settlement fees or closing costs you can include in the basis of your property. Online 1040ez form Abstract fees (abstract of title fees). Online 1040ez form Charges for installing utility services. Online 1040ez form Legal fees (including fees for the title search and preparation of the sales contract and deed). Online 1040ez form Recording fees. Online 1040ez form Survey fees. Online 1040ez form Transfer taxes. Online 1040ez form Owner's title insurance. Online 1040ez form 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. Online 1040ez form   Settlement costs do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Online 1040ez form   The following are some of the settlement fees and closing costs you cannot include in the basis of property. Online 1040ez form Casualty insurance premiums. Online 1040ez form Rent for occupancy of the property before closing. Online 1040ez form Charges for utilities or other services related to occupancy of the property before closing. Online 1040ez form 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. Online 1040ez form Fees for refinancing a mortgage. Online 1040ez form Real estate taxes. Online 1040ez form   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. Online 1040ez form You cannot deduct them as an expense. Online 1040ez form    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. Online 1040ez form Do not include that amount in the basis of your property. Online 1040ez form If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. Online 1040ez form Points. Online 1040ez form   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. Online 1040ez form Generally, you deduct the points over the term of the loan. Online 1040ez form For more information on how to deduct points, see chapter 23. Online 1040ez form Points on home mortgage. Online 1040ez form   Special rules may apply to points you and the seller pay when you get a mortgage to buy your main home. Online 1040ez form If certain requirements are met, you can deduct the points in full for the year in which they are paid. Online 1040ez form Reduce the basis of your home by any seller-paid points. Online 1040ez form 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. Online 1040ez form The result is the adjusted basis. Online 1040ez form Increases to Basis Increase the basis of any property by all items properly added to a capital account. Online 1040ez form Examples of items that increase basis are shown in Table 13-1. Online 1040ez form These include the items discussed below. Online 1040ez form Improvements. Online 1040ez form   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. Online 1040ez form 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. Online 1040ez form Assessments for local improvements. Online 1040ez form   Add to the basis of property assessments for improvements such as streets and sidewalks if they increase the value of the property assessed. Online 1040ez form Do not deduct them as taxes. Online 1040ez form However, you can deduct as taxes assessments for maintenance or repairs, or for meeting interest charges related to the improvements. Online 1040ez form Example. Online 1040ez form 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. Online 1040ez form Add the assessment to your property's basis. Online 1040ez form In this example, the assessment is a depreciable asset. Online 1040ez form 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. Online 1040ez form Examples of items that decrease basis are shown in Table 13-1. Online 1040ez form These include the items discussed below. Online 1040ez form Table 13-1. Online 1040ez form 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. Online 1040ez form   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. Online 1040ez form    You must increase your basis in the property by the amount you spend on repairs that restore the property to its pre-casualty condition. Online 1040ez form   For more information on casualty and theft losses, see chapter 25. Online 1040ez form Depreciation and section 179 deduction. Online 1040ez form   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. Online 1040ez form   For more information about depreciation and the section 179 deduction, see Publication 946 and the Instructions for Form 4562. Online 1040ez form Example. Online 1040ez form 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. Online 1040ez form You added an improvement to the duplex that cost $10,000. Online 1040ez form In February last year, the duplex was damaged by fire. Online 1040ez form Up to that time, you had been allowed depreciation of $23,000. Online 1040ez form You sold some salvaged material for $1,300 and collected $19,700 from your insurance company. Online 1040ez form You deducted a casualty loss of $1,000 on your income tax return for last year. Online 1040ez form You spent $19,000 of the insurance proceeds for restoration of the duplex, which was completed this year. Online 1040ez form You must use the duplex's adjusted basis after the restoration to determine depreciation for the rest of the property's recovery period. Online 1040ez form 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. Online 1040ez form Your basis in the land is its original cost of $5,000. Online 1040ez form Easements. Online 1040ez form   The amount you receive for granting an easement is generally considered to be proceeds from the sale of an interest in real property. Online 1040ez form It reduces the basis of the affected part of the property. Online 1040ez form 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. Online 1040ez form   If the gain is on a capital asset, see chapter 16 for information about how to report it. Online 1040ez form If the gain is on property used in a trade or business, see Publication 544 for information about how to report it. Online 1040ez form Exclusion of subsidies for energy conservation measures. Online 1040ez form   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. Online 1040ez form Reduce the basis of the property for which you received the subsidy by the excluded amount. Online 1040ez form For more information about this subsidy, see chapter 12. Online 1040ez form Postponed gain from sale of home. Online 1040ez form    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. Online 1040ez form For more information on the rules for the sale of a home, see chapter 15. Online 1040ez form Basis Other Than Cost There are many times when you cannot use cost as basis. Online 1040ez form In these cases, the fair market value or the adjusted basis of the property can be used. Online 1040ez form Fair market value (FMV) and adjusted basis were discussed earlier. Online 1040ez form Property Received for Services If you receive property for your services, include the FMV of the property in income. Online 1040ez form The amount you include in income becomes your basis. Online 1040ez form 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. Online 1040ez form Restricted property. Online 1040ez form   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. Online 1040ez form 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. Online 1040ez form 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). Online 1040ez form For more information, see Restricted Property in Publication 525. Online 1040ez form Bargain purchases. Online 1040ez form   A bargain purchase is a purchase of an item for less than its FMV. Online 1040ez form 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. Online 1040ez form Your basis in the property is its FMV (your purchase price plus the amount you include in income). Online 1040ez form   If the difference between your purchase price and the FMV is a qualified employee discount, do not include the difference in income. Online 1040ez form However, your basis in the property is still its FMV. Online 1040ez form See Employee Discounts in Publication 15-B. Online 1040ez form Taxable Exchanges A taxable exchange is one in which the gain is taxable or the loss is deductible. Online 1040ez form A taxable gain or deductible loss also is known as a recognized gain or loss. Online 1040ez form 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. Online 1040ez form 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. Online 1040ez form Similar or related property. Online 1040ez form   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. Online 1040ez form Decrease the basis by the following. Online 1040ez form Any loss you recognize on the involuntary conversion. Online 1040ez form Any money you receive that you do not spend on similar property. Online 1040ez form Increase the basis by the following. Online 1040ez form Any gain you recognize on the involuntary conversion. Online 1040ez form Any cost of acquiring the replacement property. Online 1040ez form Money or property not similar or related. Online 1040ez form    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. Online 1040ez form Example. Online 1040ez form The state condemned your property. Online 1040ez form The adjusted basis of the property was $26,000 and the state paid you $31,000 for it. Online 1040ez form You realized a gain of $5,000 ($31,000 − $26,000). Online 1040ez form You bought replacement property similar in use to the converted property for $29,000. Online 1040ez form You recognize a gain of $2,000 ($31,000 − $29,000), the unspent part of the payment from the state. Online 1040ez form Your unrecognized gain is $3,000, the difference between the $5,000 realized gain and the $2,000 recognized gain. Online 1040ez form 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. Online 1040ez form   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. Online 1040ez form Basis for depreciation. Online 1040ez form   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. Online 1040ez form For information, see What Is the Basis of Your Depreciable Property? in chapter 1 of Publication 946. Online 1040ez form Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. Online 1040ez form If you receive property in a nontaxable exchange, its basis is generally the same as the basis of the property you transferred. Online 1040ez form See Nontaxable Trades in chapter 14. Online 1040ez form Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. Online 1040ez form To qualify as a like-kind exchange, the property traded and the property received must be both of the following. Online 1040ez form Qualifying property. Online 1040ez form Like-kind property. Online 1040ez form The basis of the property you receive is generally the same as the adjusted basis of the property you gave up. Online 1040ez form 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. Online 1040ez form Qualifying property. Online 1040ez form   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. Online 1040ez form Like-kind property. Online 1040ez form   There must be an exchange of like-kind property. Online 1040ez form Like-kind properties are properties of the same nature or character, even if they differ in grade or quality. Online 1040ez form The exchange of real estate for real estate and personal property for similar personal property are exchanges of like-kind property. Online 1040ez form Example. Online 1040ez form You trade in an old truck used in your business with an adjusted basis of $1,700 for a new one costing $6,800. Online 1040ez form The dealer allows you $2,000 on the old truck, and you pay $4,800. Online 1040ez form This is a like-kind exchange. Online 1040ez form 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). Online 1040ez form 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). Online 1040ez form The basis of the new truck is the price you pay the dealer. Online 1040ez form Partially nontaxable exchanges. Online 1040ez form   A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. Online 1040ez form The basis of the property you receive is the same as the adjusted basis of the property you gave up, with the following adjustments. Online 1040ez form Decrease the basis by the following amounts. Online 1040ez form Any money you receive. Online 1040ez form Any loss you recognize on the exchange. Online 1040ez form Increase the basis by the following amounts. Online 1040ez form Any additional costs you incur. Online 1040ez form Any gain you recognize on the exchange. Online 1040ez form If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. Online 1040ez form Allocation of basis. Online 1040ez form   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. Online 1040ez form The rest is the basis of the like-kind property. Online 1040ez form More information. Online 1040ez form   See Like-Kind Exchanges in chapter 1 of Publication 544 for more information. Online 1040ez form Basis for depreciation. Online 1040ez form   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind exchange. Online 1040ez form For information, see What Is the Basis of Your Depreciable Property? in chapter 1 of Publication 946. Online 1040ez form 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. Online 1040ez form The same rule applies to a transfer by your former spouse that is incident to divorce. Online 1040ez form 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. Online 1040ez form If the property transferred to you is a series E, series EE, or series I U. Online 1040ez form S. Online 1040ez form savings bond, the transferor must include in income the interest accrued to the date of transfer. Online 1040ez form 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. Online 1040ez form For more information on these bonds, see chapter 7. Online 1040ez form 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. Online 1040ez form For more information about the transfer of property from a spouse, see chapter 14. Online 1040ez form 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. Online 1040ez form FMV less than donor's adjusted basis. Online 1040ez form   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. Online 1040ez form 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. Online 1040ez form 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. Online 1040ez form See Adjusted Basis , earlier. Online 1040ez form Example. Online 1040ez form You received an acre of land as a gift. Online 1040ez form At the time of the gift, the land had an FMV of $8,000. Online 1040ez form The donor's adjusted basis was $10,000. Online 1040ez form After you received the property, no events occurred to increase or decrease your basis. Online 1040ez form 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. Online 1040ez form 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. Online 1040ez form If the sales price is between $8,000 and $10,000, you have neither gain nor loss. Online 1040ez form Business property. Online 1040ez form   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. Online 1040ez form FMV equal to or greater than donor's adjusted basis. Online 1040ez form   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. Online 1040ez form Increase your basis by all or part of any gift tax paid, depending on the date of the gift, explained later. Online 1040ez form   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. Online 1040ez form See Adjusted Basis , earlier. Online 1040ez form   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. Online 1040ez form Figure the increase by multiplying the gift tax paid by a fraction. Online 1040ez form The numerator of the fraction is the net increase in value of the gift and the denominator is the amount of the gift. Online 1040ez form   The net increase in value of the gift is the FMV of the gift minus the donor's adjusted basis. Online 1040ez form 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. Online 1040ez form Example. Online 1040ez form In 2013, you received a gift of property from your mother that had an FMV of $50,000. Online 1040ez form Her adjusted basis was $20,000. Online 1040ez form The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). Online 1040ez form She paid a gift tax of $7,320 on the property. Online 1040ez form 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) × . Online 1040ez form 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. Online 1040ez form If you received a gift before 1977, your basis in the gift (the donor's adjusted basis) includes any gift tax paid on it. Online 1040ez form However, your basis cannot exceed the FMV of the gift at the time it was given to you. Online 1040ez form 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. Online 1040ez form The FMV on the alternate valuation date if the personal representative for the estate elects to use alternate valuation. Online 1040ez form 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. Online 1040ez form 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. Online 1040ez form 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. Online 1040ez form For more information, see the instructions to Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. Online 1040ez form Property inherited from a decedent who died in 2010. Online 1040ez form   If you inherited property from a decedent who died in 2010, special rules may apply. Online 1040ez form For more information, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. Online 1040ez form Community property. Online 1040ez form   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. Online 1040ez form 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. Online 1040ez form 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. Online 1040ez form Example. Online 1040ez form You and your spouse owned community property that had a basis of $80,000. Online 1040ez form When your spouse died, half the FMV of the community interest was includible in your spouse's estate. Online 1040ez form The FMV of the community interest was $100,000. Online 1040ez form The basis of your half of the property after the death of your spouse is $50,000 (half of the $100,000 FMV). Online 1040ez form The basis of the other half to your spouse's heirs is also $50,000. Online 1040ez form For more information about community property, see Publication 555, Community Property. Online 1040ez form 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. Online 1040ez form To do so, you must figure its basis for depreciation at the time of the change. Online 1040ez form An example of changing property held for personal use to business or rental use would be renting out your former personal residence. Online 1040ez form Basis for depreciation. Online 1040ez form   The basis for depreciation is the lesser of the following amounts. Online 1040ez form The FMV of the property on the date of the change. Online 1040ez form Your adjusted basis on the date of the change. Online 1040ez form Example. Online 1040ez form Several years ago, you paid $160,000 to have your house built on a lot that cost $25,000. Online 1040ez form 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. Online 1040ez form Because land is not depreciable, you include only the cost of the house when figuring the basis for depreciation. Online 1040ez form Your adjusted basis in the house when you changed its use was $178,000 ($160,000 + $20,000 − $2,000). Online 1040ez form 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. Online 1040ez form 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). Online 1040ez form Sale of property. Online 1040ez form   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. Online 1040ez form Gain. Online 1040ez form   The basis for figuring a gain is your adjusted basis in the property when you sell the property. Online 1040ez form Example. Online 1040ez form 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. Online 1040ez form Your adjusted basis for figuring gain is $165,500 ($178,000 + $25,000 (land) − $37,500). Online 1040ez form Loss. Online 1040ez form   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. Online 1040ez form Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . Online 1040ez form Example. Online 1040ez form 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. Online 1040ez form 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. Online 1040ez form Reduce that amount ($180,000) by the depreciation deductions ($37,500). Online 1040ez form The basis for loss is $142,500 ($180,000 − $37,500). Online 1040ez form 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. Online 1040ez form 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. Online 1040ez form You must adjust the basis of stocks for certain events that occur after purchase. Online 1040ez form 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. Online 1040ez form This rule applies only when the additional stock received is identical to the stock held. Online 1040ez form Also reduce your basis when you receive nontaxable distributions. Online 1040ez form They are a return of capital. Online 1040ez form Example. Online 1040ez form In 2011 you bought 100 shares of XYZ stock for $1,000 or $10 a share. Online 1040ez form In 2012 you bought 100 shares of XYZ stock for $1,600 or $16 a share. Online 1040ez form In 2013 XYZ declared a 2-for-1 stock split. Online 1040ez form You now have 200 shares of stock with a basis of $5 a share and 200 shares with a basis of $8 a share. Online 1040ez form Other basis. Online 1040ez form   There are other ways to figure the basis of stocks or bonds depending on how you acquired them. Online 1040ez form For detailed information, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. Online 1040ez form Identifying stocks or bonds sold. Online 1040ez form   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. Online 1040ez form 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. Online 1040ez form For more information about identifying securities you sell, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. Online 1040ez form Mutual fund shares. Online 1040ez form   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. Online 1040ez form For more information, see Publication 550. Online 1040ez form Bond premium. Online 1040ez form   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. Online 1040ez form See Bond Premium Amortization in chapter 3 of Publication 550 for more information. Online 1040ez form 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. Online 1040ez form Original issue discount (OID) on debt instruments. Online 1040ez form   You must increase your basis in an OID debt instrument by the OID you include in income for that instrument. Online 1040ez form See Original Issue Discount (OID) in chapter 7 and Publication 1212, Guide To Original Issue Discount (OID) Instruments. Online 1040ez form Tax-exempt obligations. Online 1040ez form    OID on tax-exempt obligations is generally not taxable. Online 1040ez form 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. Online 1040ez form The accrued OID is added to the basis of the obligation to determine your gain or loss. Online 1040ez form See chapter 4 of Publication 550. Online 1040ez form Prev  Up  Next   Home   More Online Publications