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State Tax Online

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State Tax Online

State tax online Publication 510 - Introductory Material Table of Contents What's New Reminders Introduction Useful Items - You may want to see: Excise Taxes Not Covered What's New Medical device excise tax. State tax online  The Affordable Care Act (the “Act”) (Public Law 111-148, amended by Public Law 111-152) imposes a 2. State tax online 3% (. State tax online 023) excise tax on the sale of certain medical devices by the manufacturer, producer, or importer of the device. State tax online The tax applies to sales of taxable medical devices after December 31, 2012. State tax online See Taxable Medical Devices in chapter 5, later. State tax online Tax on seasonal flu vaccines. State tax online  Sales of all vaccines against seasonal influenza are now subject to the section 4131 excise tax at the existing rate of $. State tax online 75 per dose of taxable vaccine. State tax online Previously, only trivalent influenza vaccines were subject to this tax. State tax online See Vaccines in chapter 5, later. State tax online Patient-centered outcomes research fee. State tax online  The Act imposes a fee on issuers of specified health insurance policies (section 4375) and plan sponsors of applicable self-insured health plans (section 4576) to help fund the Patient-Centered Outcomes Research Institute. State tax online The fee, required to be reported annually on the 2nd quarter Form 720 and paid by its due date, July 31st, is based on the average number of lives covered under the policy or plan. State tax online The fee applies to policy or plan years ending on or after October 1, 2012. State tax online See chapter 11, later. State tax online Extension of fuel tax credits. State tax online  The following section 6426 credits, previously expired on December 31, 2011, are retroactively extended. State tax online Biodiesel or renewable diesel mixture credit. State tax online Alternative fuel credit. State tax online Alternative fuel mixture credit. State tax online See Notice 2013–26 (fuel tax credits) on page 984 of I. State tax online R. State tax online B. State tax online 2013–18 at www. State tax online irs. State tax online gov/pub/irs-irbs/irb13-18. State tax online pdf; also see chapter 2, later. State tax online Alternative fuel mixture credit can be claimed on Schedule C (Form 720) only. State tax online  For alternative fuel mixtures produced after December 31, 2011, the section 6426 alternative fuel mixture credit can be claimed on Schedule C (Form 720) only, not on Form 4136, Credit for Federal Tax Paid on Fuels, or Schedule 3 (Form 8849), Claim for Refund of Excise Taxes, and only to the extent of your section 4081 taxable fuel liability for gasoline, diesel, and kerosene. State tax online See Biodiesel or Renewable Diesel Mixture Credit, Alternative Fuel Credit, and Alternative Fuel Mixture Credit in chapter 2, later. State tax online Expiration of alcohol fuel mixture credit. State tax online  The section 6426 alcohol fuel mixture credit expired after December 31, 2011. State tax online Expiration of alcohol fuels credits. State tax online  The section 40 alcohol, alcohol mixture, and small ethanol producer credits expired after December 31, 2011. State tax online Second generation biofuel producer credit and excise tax. State tax online  The section 40 cellulosic biofuel producer credit was retroactively extended to include fuel sold or used through January 2, 2013. State tax online After January 2, 2013, cellulosic biofuel is renamed second generation biofuel, which adds algae-based fuel. State tax online The second generation biofuel producer credit is for fuel sold or used after January 2, 2013, and before January 1, 2014. State tax online You are liable for an excise tax on each gallon of cellulosic or second generation biofuel at the rate you used to figure the credit if you do not use the fuel for the purposes described under Qualified Cellulosic Biofuel Production or Qualified Second Generation Biofuel Production, later. State tax online Report the tax on Form 720. State tax online See Cellulosic or Second Generation Biofuel Not Used as Fuel, later; also see Form 6478, Biofuel Producer Credit, for more information. State tax online Extension of section 40A biodiesel fuels credit. State tax online  The biodiesel fuels credit, previously expired on December 31, 2011, is retroactively extended. State tax online Future developments. State tax online  The IRS has created a page on IRS. State tax online gov that includes information about Publication 510 at www. State tax online irs. State tax online gov/pub510. State tax online Information about any future developments will be posted on that page. State tax online Reminders Publication 510 updates. State tax online  Publication 510 is not updated annually. State tax online Instead, it will be updated only when there are major changes in the tax law. State tax online Use of international air travel facilities. State tax online  Generally, the tax on the use of international air travel facilities increases annually. State tax online See the Instructions for Form 720 for the tax rate. State tax online For more information, see Air Transportation Taxes in chapter 4. State tax online Aviation fuels for use in foreign trade. State tax online  Aviation gasoline and kerosene for use in aviation are exempt from the leaking underground storage tank (LUST) tax. State tax online Arrow shafts, tax rate. State tax online  Generally, the tax on arrow shafts increases annually. State tax online See Form 720 for the tax rate. State tax online Disregarded entities and qualified subchapter S subsidiaries. State tax online  Qualified subchapter S subsidiaries (QSubs) and eligible single-owner disregarded entities are treated as separate entities for excise tax and reporting purposes. State tax online QSubs and eligible single-owner disregarded entities must pay and report excise taxes (other than IRS Nos. State tax online 31, 51, and 117), register for most excise tax activities, and claim any refunds, credits, and payments under the entity's employer identification number (EIN). State tax online These actions cannot take place under the owner's taxpayer identification number (TIN). State tax online Some QSubs and disregarded entities may already have an EIN. State tax online However, if you are unsure, please call the IRS Business and Specialty Tax line at 1-800-829-4933. State tax online Generally, QSubs and eligible single-owner disregarded entities will continue to be treated as disregarded entities for other federal tax purposes (other than employment taxes). State tax online For more information on these regulations, see Treasury Decision (T. State tax online D. State tax online ) 9356, T. State tax online D. State tax online 9462, and T. State tax online D. State tax online 9596. State tax online You can find T. State tax online D. State tax online 9356 on page 675 of Internal Revenue Bulletin (I. State tax online R. State tax online B. State tax online ) 2007-39 at  www. State tax online irs. State tax online gov/pub/irs-irbs/irb07-39. State tax online pdf;  T. State tax online D. State tax online 9462 on page 504 of I. State tax online R. State tax online B. State tax online 2009-42 at  www. State tax online irs. State tax online gov/pub/irs-irbs/irb09-42. State tax online pdf;  and T. State tax online D. State tax online 9596 on page 84 of I. State tax online R. State tax online B. State tax online 2012-30 at  www. State tax online irs. State tax online gov/pub/irs-irbs/irb12-30. State tax online pdf. State tax online Registration for certain activities. State tax online  You are required to be registered for certain excise tax activities, such as blending of gasoline, diesel fuel, or kerosene outside the bulk transfer/terminal system. State tax online See the instructions for Form 637 for the list of activities for which you must register. State tax online Also see Registration Requirements under Fuel Taxes in chapter 1 for information on registration for activities related to fuel. State tax online Each business unit that has, or is required to have, a separate employer identification number must be registered. State tax online To apply for registration, complete Form 637 and provide the information requested in its instructions. State tax online If your application is approved, you will receive a Letter of Registration showing the activities for which you are registered, the effective date of the registration, and your registration number. State tax online A copy of Form 637 is not a Letter of Registration. State tax online Photographs of missing children. State tax online  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. State tax online Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. State tax online 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. State tax online Introduction This publication covers the excise taxes for which you may be liable and which are reported on Form 720 and other forms. State tax online It also covers fuel tax credits and refunds. State tax online For information on fuel credits against income tax (the section 40 credits for the production of cellulosic biofuel and second generation biofuel, and the section 40A credit for biodiesel and renewable diesel used as fuel) see the instructions for Form 6478 and Form 8864, Biodiesel and Renewable Diesel Fuels Credit. State tax online Comments and suggestions. State tax online   We welcome your comments about this publication and your suggestions for future editions. State tax online   You can write to us at the following address: Internal Revenue Service Individual and Specialty Forms and Publications Branch SE:W:CAR:MP:T:I 1111 Constitution Ave. State tax online NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. State tax online Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. State tax online   You can email us at taxforms@irs. State tax online gov. State tax online Please put “Publications Comment” on the subject line. State tax online You can also send us comments from www. State tax online irs. State tax online gov/Forms-&-Pubs/More-Information/ and select “Comment on Tax Forms and Publications”. State tax online   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. State tax online Useful Items - You may want to see: Publication 509 Tax Calendars Form (and Instructions) 11-C Occupational Tax and Registration Return for Wagering 637 Application for Registration (For Certain Excise Tax Activities) 720 Quarterly Federal Excise Tax Return 720X Amended Quarterly Federal Excise Tax Return 730 Monthly Tax Return for Wagers 1363 Export Exemption Certificate 2290 Heavy Highway Vehicle Use Tax Return 2290(SP) Declaración del Impuesto sobre el Uso de Vehículos Pesados en las Carreteras 4136 Credit for Federal Tax Paid on Fuels 6197 Gas Guzzler Tax 6478 Biofuel Producer Credit 6627 Environmental Taxes 8849 Claim for Refund of Excise Taxes, and Schedules 1–3, 5, 6, and 8 8864 Biodiesel and Renewable Diesel Fuels Credit Information Returns    Form 720-TO, Terminal Operator Report Form 720-CS, Carrier Summary Report   See How To Get Tax Help in chapter 17 for information about ordering forms and publications. State tax online Guidance    You can find Notice 2005-4 (fuel tax guidance) on page 289 of I. State tax online R. State tax online B. State tax online 2005-2 at www. State tax online irs. State tax online gov/pub/irs-irbs/irb05-02. State tax online pdf. State tax online Notice 2005-62 (biodiesel and aviation-grade kerosene) on page 443 of I. State tax online R. State tax online B. State tax online 2005-35 at www. State tax online irs. State tax online gov/pub/irs-irbs/irb05-35. State tax online pdf. State tax online Notice 2005-80 (LUST, kerosene, claims by credit card issuers, and mechanical dye injection) on page 953 of I. State tax online R. State tax online B. State tax online 2005-46 at www. State tax online irs. State tax online gov/pub/irs-irbs/irb05-46. State tax online pdf. State tax online Notice 2006-92 (alternative fuels and alternative fuel mixtures) on page 774 of I. State tax online R. State tax online B. State tax online 2006-43 at www. State tax online irs. State tax online gov/pub/irs-irbs/irb06-43. State tax online pdf. State tax online Notice 2008-110 (biodiesel and cellulosic biofuel) on page 1298 of I. State tax online R. State tax online B. State tax online 2008-51 at www. State tax online irs. State tax online gov/pub/irs-irbs/irb08-51. State tax online pdf. State tax online Notice 2010-68 (Alaska dyed diesel exemption) on page 576 of I. State tax online R. State tax online B. State tax online 2010-44 at www. State tax online irs. State tax online gov/pub/irs-irbs/irb10-44. State tax online pdf. State tax online Notice 2012-27 (fractional aircraft ownership programs fuel surtax) on page 849 of I. State tax online R. State tax online B. State tax online 2012-17 at www. State tax online irs. State tax online gov/pub/irs-irbs/irb12-17. State tax online pdf. State tax online Notice 2013-26 (fuel tax credits) on page 984 of I. State tax online R. State tax online B. State tax online 2013-18 at www. State tax online irs. State tax online gov/pub/irs-irbs/irb13-18. State tax online pdf. State tax online T. State tax online D. State tax online 9604 and Notice 2012–77 (medical device tax) on pages 730 and 781, respectively, of I. State tax online R. State tax online B. State tax online 2012-52 at www. State tax online irs. State tax online gov/pub/irs-irbs/irb12-52. State tax online pdf. State tax online T. State tax online D. State tax online 9602 (patient-centered outcomes research fee) on page 746 of I. State tax online R. State tax online B. State tax online 2012-52 at www. State tax online irs. State tax online gov/pub/irs-irbs/irb12-52. State tax online pdf. State tax online Revenue Procedure 2012-41 (inflation adjustments) on page 539 of I. State tax online R. State tax online B. State tax online 2012-45 at www. State tax online irs. State tax online gov/pub/irs-irbs/irb12-45. State tax online pdf. State tax online T. State tax online D. State tax online 9621 (indoor tanning services tax) on page 49 of I. State tax online R. State tax online B. State tax online 2013-28 at www. State tax online irs. State tax online gov/pub/irs-irbs/irb13-28. State tax online pdf. State tax online Excise Taxes Not Covered In addition to the taxes discussed in this publication, you may have to report certain other excise taxes. State tax online For tax forms relating to alcohol, firearms, and tobacco, visit the Alcohol and Tobacco Tax and Trade Bureau website at www. State tax online ttb. State tax online gov. State tax online Heavy highway vehicle use tax. State tax online   You report the federal excise tax on the use of certain trucks, truck tractors, and buses used on public highways on Form 2290, Heavy Highway Vehicle Use Tax Return. State tax online The tax applies to highway motor vehicles with a taxable gross weight of 55,000 pounds or more. State tax online Vans, pickup trucks, panel trucks, and similar trucks generally are not subject to this tax. State tax online Note. State tax online A Spanish version (Formulario 2290(SP)) is also available. State tax online See How To Get Tax Help in chapter 17. State tax online Registration of vehicles. State tax online   Generally, you must prove that you paid your heavy highway vehicle use tax to register your taxable vehicle with your state motor vehicle department or to enter the United States in a Canadian or Mexican registered taxable vehicle. State tax online Generally, a copy of Schedule 1 (Form 2290) is stamped by the IRS and returned to you as proof of payment. State tax online    If you have questions on Form 2290, see its separate instructions, or you can call the Form 2290 call site at 1-866-699-4096 (toll free) from the United States, and 1-859-669-5733 (not toll free) from Canada and Mexico. State tax online The hours of service are 8:00 a. State tax online m. State tax online to 6:00 p. State tax online m. State tax online Eastern time. State tax online Wagering tax and occupational tax. State tax online   The information on wagering tax can be found in the instructions for Form 730, Tax on Wagering, and Form 11-C, Occupational Tax and Registration Return for Wagering. State tax online Prev  Up  Next   Home   More Online Publications
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The State Tax Online

State tax online 6. State tax online   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. State tax online Use basis to figure the gain or loss on the sale, exchange, or other disposition of property. State tax online Also use basis to figure depreciation, amortization, depletion, and casualty losses. State tax online If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. State tax online Only the basis allocated to the business or investment use of the property can be depreciated. State tax online Your original basis in property is adjusted (increased or decreased) by certain events. State tax online For example, if you make improvements to the property, increase your basis. State tax online If you take deductions for depreciation, or casualty losses, or claim certain credits, reduce your basis. State tax online Keep accurate records of all items that affect the basis of your assets. State tax online For information on keeping records, see chapter 1. State tax online 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. State tax online Cost Basis The basis of property you buy is usually its cost. State tax online Cost is the amount you pay in cash, debt obligations, other property, or services. State tax online Your cost includes amounts you pay for sales tax, freight, installation, and testing. State tax online The basis of real estate and business assets will include other items, discussed later. State tax online Basis generally does not include interest payments. State tax online However, see Carrying charges and Capitalized interest in chapter 4 of Publication 535. State tax online You also may have to capitalize (add to basis) certain other costs related to buying or producing property. State tax online Under the uniform capitalization rules, discussed later, you may have to capitalize direct costs and certain indirect costs of producing property. State tax online Loans with low or no interest. State tax online   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. State tax online You generally have unstated interest if your interest rate is less than the applicable federal rate. State tax online See the discussion of unstated interest in Publication 537, Installment Sales. State tax online Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. State tax online If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. State tax online Some of these expenses are discussed next. State tax online Lump sum purchase. State tax online   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. State tax online Allocate the cost basis according to the respective fair market values (FMVs) of the land and improvements at the time of purchase. State tax online Figure the basis of each asset by multiplying the lump sum by a fraction. State tax online The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. State tax online Fair market value (FMV). State tax online   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. State tax online Sales of similar property on or about the same date may help in figuring the FMV of the property. State tax online 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. State tax online Real estate taxes. State tax online   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. State tax online   If you reimburse the seller for taxes the seller paid for you, you generally can deduct that amount as a tax expense. State tax online Whether or not you reimburse the seller, do not include that amount in the basis of your property. State tax online Settlement costs. State tax online   Your basis includes the settlement fees and closing costs for buying the property. State tax online See Publication 551 for a detailed list of items you can and cannot include in basis. State tax online   Do not include fees and costs for getting a loan on the property. State tax online Also, do not include amounts placed in escrow for the future payment of items such as taxes and insurance. State tax online Points. State tax online   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. State tax online You may be able to deduct the points currently or over the term of the loan. State tax online For more information about deducting points, see Points in chapter 4 of Publication 535. State tax online Assumption of a mortgage. State tax online   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. State tax online Example. State tax online If you buy a farm for $100,000 cash and assume a mortgage of $400,000, your basis is $500,000. State tax online Constructing assets. State tax online   If you build property or have assets built for you, your expenses for this construction are part of your basis. State tax online 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. State tax online   In addition, if you use your own employees, farm materials, and equipment to build an asset, do not deduct the following expenses. State tax online You must capitalize them (include them in the asset's basis). State tax online Employee wages paid for the construction work, reduced by any employment credits allowed. State tax online Depreciation on equipment you own while it is used in the construction. State tax online Operating and maintenance costs for equipment used in the construction. State tax online The cost of business supplies and materials used in the construction. State tax online    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. State tax online 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. State tax online To determine the basis of these assets or separate items, there must be an allocation of basis. State tax online Group of assets acquired. State tax online   If you buy multiple assets for a lump sum, allocate the amount you pay among the assets. State tax online Use this allocation to figure your basis for depreciation and gain or loss on a later disposition of any of these assets. State tax online You and the seller may agree in the sales contract to a specific allocation of the purchase price among the assets. State tax online 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. State tax online Farming business acquired. State tax online   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. State tax online Generally, reduce the purchase price by any cash received. State tax online 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. State tax online See Trade or Business Acquired under Allocating the Basis in Publication 551 for more information. State tax online Transplanted embryo. State tax online   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. State tax online Allocate the rest of the purchase price to the basis of the calf. State tax online Neither the cost allocated to the cow nor the cost allocated to the calf is deductible as a current business expense. State tax online 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. State tax online You recover these costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. State tax online 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. State tax online 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. State tax online You produce property if you construct, build, install, manufacture, develop, improve, or create the property. State tax online You are not subject to the uniform capitalization rules if the property is produced for personal use. State tax online In a farming business, you produce property if you raise or grow any agricultural or horticultural commodity, including plants and animals. State tax online Plants. State tax online   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. State tax online Animals. State tax online   An animal produced in a farming business includes any stock, poultry or other bird, and fish or other sea life. State tax online The direct and indirect costs of producing plants or animals include preparatory costs and preproductive period costs. State tax online Preparatory costs include the acquisition costs of the seed, seedling, plant, or animal. State tax online For plants, preproductive period costs include the costs of items such as irrigation, pruning, frost protection, spraying, and harvesting. State tax online For animals, preproductive period costs include the costs of items such as feed, maintaining pasture or pen areas, breeding, veterinary services, and bedding. State tax online Exceptions. State tax online   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. State tax online   Exceptions (1) and (2) do not apply to a corporation, partnership, or tax shelter required to use an accrual method of accounting. State tax online See Accrual Method Required under Accounting Methods in chapter 2. State tax online   In addition, you can elect not to use the uniform capitalization rules for plants with a preproductive period of more than 2 years. State tax online If you make this election, special rules apply. State tax online This election cannot be made by a corporation, partnership, or tax shelter required to use an accrual method of accounting. State tax online 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. State tax online    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. State tax online See chapter 7, for additional information on depreciation. State tax online Example. State tax online You grow trees that have a preproductive period of more than 2 years. State tax online The trees produce an annual crop. State tax online You are an individual and the uniform capitalization rules apply to your farming business. State tax online You must capitalize the direct costs and an allocable part of indirect costs incurred due to the production of the trees. State tax online You are not required to capitalize the costs of producing the annual crop because its preproductive period is 2 years or less. State tax online Preproductive period of more than 2 years. State tax online   The preproductive period of plants grown in commercial quantities in the United States is based on their nationwide weighted average preproductive period. State tax online Plants producing the crops or yields shown in Table 6-1 have a nationwide weighted average preproductive period of more than 2 years. State tax online Other plants (not shown in Table 6-1) may also have a nationwide weighted average preproductive period of more than 2 years. State tax online More information. State tax online   For more information on the uniform capitalization rules that apply to property produced in a farming business, see Regulations section 1. State tax online 263A-4. State tax online Table 6-1. State tax online 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. State tax online 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. State tax online 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. State tax online Increases to Basis Increase the basis of any property by all items properly added to a capital account. State tax online These include the cost of any improvements having a useful life of more than 1 year. State tax online The following costs increase the basis of property. State tax online The cost of extending utility service lines to property. State tax online Legal fees, such as the cost of defending and perfecting title. State tax online Legal fees for seeking a decrease in an assessment levied against property to pay for local improvements. State tax online Assessments for items such as paving roads and building ditches that increase the value of the property assessed. State tax online Do not deduct these expenses as taxes. State tax online However, you can deduct as taxes amounts assessed for maintenance or repairs, or for meeting interest charges related to the improvements. State tax online 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. State tax online See chapter 7. State tax online Deducting vs. State tax online capitalizing costs. State tax online   Do not add to your basis costs you can deduct as current expenses. State tax online For example, amounts paid for incidental repairs or maintenance are deductible as business expenses and are not added to basis. State tax online However, you can elect either to deduct or to capitalize certain other costs. State tax online See chapter 7 in Publication 535. State tax online Decreases to Basis The following are some items that reduce the basis of property. State tax online Section 179 deduction. State tax online Deductions previously allowed or allowable for amortization, depreciation, and depletion. State tax online Alternative motor vehicle credit. State tax online See Form 8910. State tax online Alternative fuel vehicle refueling property credit. State tax online See Form 8911. State tax online Residential energy efficient property credits. State tax online See Form 5695. State tax online Investment credit (part or all) taken. State tax online Casualty and theft losses and insurance reimbursements. State tax online Payments you receive for granting an easement. State tax online Exclusion from income of subsidies for energy conservation measures. State tax online Certain canceled debt excluded from income. State tax online Rebates from a manufacturer or seller. State tax online Patronage dividends received from a cooperative association as a result of a purchase of property. State tax online See Patronage Dividends in chapter 3. State tax online Gas-guzzler tax. State tax online See Form 6197. State tax online Some of these items are discussed next. State tax online For a more detailed list of items that decrease basis, see section 1016 of the Internal Revenue Code and Publication 551. State tax online Depreciation and section 179 deduction. State tax online   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. State tax online For more information on these deductions, see chapter 7. State tax online Section 179 deduction. State tax online   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. State tax online Depreciation. State tax online   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. State tax online 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. State tax online If you did not take a depreciation deduction, reduce the basis by the full amount of the depreciation you could have taken. State tax online   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. State tax online   See chapter 7 for information on figuring the depreciation you should have claimed. State tax online   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. State tax online Casualty and theft losses. State tax online   If you have a casualty or theft loss, decrease the basis of the property by any insurance or other reimbursement. State tax online Also, decrease it by any deductible loss not covered by insurance. State tax online See chapter 11 for information about figuring your casualty or theft loss. State tax online   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. State tax online To make this determination, compare the repaired property to the property before the casualty. State tax online Easements. State tax online   The amount you receive for granting an easement is usually considered to be proceeds from the sale of an interest in the real property. State tax online It reduces the basis of the affected part of the property. State tax online 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. State tax online See Easements and rights-of-way in chapter 3. State tax online Exclusion from income of subsidies for energy conservation measures. State tax online   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. State tax online Reduce the basis of the property by the excluded amount. State tax online Canceled debt excluded from income. State tax online   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. State tax online A debt includes any indebtedness for which you are liable or which attaches to property you hold. State tax online   You can exclude your canceled debt from income if the debt is any of the following. State tax online Debt canceled in a bankruptcy case or when you are insolvent. State tax online Qualified farm debt. State tax online Qualified real property business debt (provided you are not a C corporation). State tax online Qualified principal residence indebtedness. State tax online Discharge of certain indebtedness of a qualified individual because of Midwestern disasters. State tax online If you exclude canceled debt described in (1) or (2), you may have to reduce the basis of your depreciable and nondepreciable property. State tax online If you exclude canceled debt described in (3), you must only reduce the basis of your depreciable property by the excluded amount. State tax online   For more information about canceled debt in a bankruptcy case, see Publication 908, Bankruptcy Tax Guide. State tax online For more information about insolvency and canceled debt that is qualified farm debt or qualified principal residence indebtedness, see chapter 3. State tax online For more information about qualified real property business debt, see Publication 334, Tax Guide for Small Business. State tax online For more information about canceled debt in Midwestern disaster areas, see Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. State tax online Basis Other Than Cost There are times when you cannot use cost as basis. State tax online In these situations, the fair market value or the adjusted basis of property may be used. State tax online Examples are discussed next. State tax online Property changed from personal to business or rental use. State tax online   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. State tax online 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. State tax online   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. State tax online   If you later sell or dispose of this property, the basis you use will depend on whether you are figuring a gain or loss. State tax online The basis for figuring a gain is your adjusted basis in the property when you sell the property. State tax online 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. State tax online Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . State tax online Property received for services. State tax online   If you receive property for services, include the property's FMV in income. State tax online The amount you include in income becomes your basis. State tax online 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. State tax online Example. State tax online George Smith is an accountant and also operates a farming business. State tax online George agreed to do some accounting work for his neighbor in exchange for a dairy cow. State tax online The accounting work and the cow are each worth $1,500. State tax online George must include $1,500 in income for his accounting services. State tax online George's basis in the cow is $1,500. State tax online Taxable Exchanges A taxable exchange is one in which the gain is taxable, or the loss is deductible. State tax online A taxable gain or deductible loss also is known as a recognized gain or loss. State tax online A taxable exchange occurs when you receive cash or get property that is not similar or related in use to the property exchanged. State tax online 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. State tax online Example. State tax online You trade a tract of farmland with an adjusted basis of $2,000 for a tractor that has an FMV of $6,000. State tax online You must report a taxable gain of $4,000 for the land. State tax online The tractor has a basis of $6,000. State tax online 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. State tax online Similar or related property. State tax online   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. State tax online However, make the following adjustments. State tax online Decrease the basis by the following amounts. State tax online Any loss you recognize on the involuntary conversion. State tax online Any money you receive that you do not spend on similar property. State tax online Increase the basis by the following amounts. State tax online Any gain you recognize on the involuntary conversion. State tax online Any cost of acquiring the replacement property. State tax online Money or property not similar or related. State tax online   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. State tax online Allocating the basis. State tax online   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. State tax online Basis for depreciation. State tax online   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. State tax online For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. State tax online For more information about involuntary conversions, see chapter 11. State tax online Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. State tax online A nontaxable gain or loss also is known as an unrecognized gain or loss. State tax online If you receive property in a nontaxable exchange, its basis is usually the same as the basis of the property you transferred. State tax online Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. State tax online 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. State tax online There must also be an exchange of like-kind property. State tax online For more information, see Like-Kind Exchanges in  chapter 8. State tax online The basis of the property you receive generally is the same as the adjusted basis of the property you gave up. State tax online Example 1. State tax online You traded a truck you used in your farming business for a new smaller truck to use in farming. State tax online The adjusted basis of the old truck was $10,000. State tax online The FMV of the new truck is $30,000. State tax online 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. State tax online Example 2. State tax online You trade a field cultivator (adjusted basis of $8,000) for a planter (FMV of $9,000). State tax online You use both the field cultivator and the planter in your farming business. State tax online The basis of the planter you receive is $8,000, the same as the field cultivator traded Exchange expenses. State tax online   Exchange expenses generally are the closing costs that you pay. State tax online They include such items as brokerage commissions, attorney fees, and deed preparation fees. State tax online Add them to the basis of the like-kind property you receive. State tax online Property plus cash. State tax online   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. State tax online Example. State tax online You trade in a truck (adjusted basis of $3,000) for another truck (FMV of $7,500) and pay $4,000. State tax online Your basis in the new truck is $7,000 (the $3,000 adjusted basis of the old truck plus the $4,000 cash). State tax online Special rules for related persons. State tax online   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. State tax online 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. State tax online Each person reports it on the tax return filed for the year in which the later disposition occurred. State tax online If this rule applies, the basis of the property received in the original exchange will be its FMV. State tax online For more information, see chapter 8. State tax online Exchange of business property. State tax online   Exchanging the property of one business for the property of another business generally is a multiple property exchange. State tax online For information on figuring basis, see Multiple Property Exchanges in chapter 1 of Publication 544. State tax online Basis for depreciation. State tax online   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind transaction. State tax online For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. State tax online Partially Nontaxable Exchanges A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. State tax online The basis of the property you receive is the same as the adjusted basis of the property you gave up with the following adjustments. State tax online Decrease the basis by the following amounts. State tax online Any money you receive. State tax online Any loss you recognize on the exchange. State tax online Increase the basis by the following amounts. State tax online Any additional costs you incur. State tax online Any gain you recognize on the exchange. State tax online If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. State tax online Example 1. State tax online You trade farmland (basis of $100,000) for another tract of farmland (FMV of $110,000) and $30,000 cash. State tax online You realize a gain of $40,000. State tax online 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). State tax online Include your gain in income (recognize gain) only to the extent of the cash received. State tax online Your basis in the land you received is figured as follows. State tax online 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. State tax online You trade a truck (adjusted basis of $22,750) for another truck (FMV of $20,000) and $10,000 cash. State tax online You realize a gain of $7,250. State tax online 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). State tax online You include all the gain in your income (recognize gain) because the gain is less than the cash you received. State tax online Your basis in the truck you received is figured as follows. State tax online 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. State tax online   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. State tax online The rest is the basis of the like-kind property. State tax online Example. State tax online You traded a tractor with an adjusted basis of $15,000 for another tractor that had an FMV of $12,500. State tax online You also received $1,000 cash and a truck that had an FMV of $3,000. State tax online The truck is unlike property. State tax online You realized a gain of $1,500. State tax online 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). State tax online 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. State tax online Your basis in the properties you received is figured as follows. State tax online 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). State tax online This is the truck's FMV. State tax online The rest ($12,500) is the basis of the tractor. State tax online 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. State tax online Example. State tax online You used a tractor on your farm for 3 years. State tax online Its adjusted basis is $22,000 and its FMV is $40,000. State tax online You are interested in a new tractor, which sells for $60,000. State tax online Ordinarily, you would trade your old tractor for the new one and pay the dealer $20,000. State tax online Your basis for depreciating the new tractor would then be $42,000 ($20,000 + $22,000, the adjusted basis of your old tractor). State tax online 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. State tax online 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). State tax online Your basis for depreciating the new tractor is $42,000, the same as if you traded the old tractor. State tax online 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. State tax online You also must know its FMV at the time it was given to you and any gift tax paid on it. State tax online FMV equal to or greater than donor's adjusted basis. State tax online   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. State tax online Increase your basis by all or part of any gift tax paid, depending on the date of the gift. State tax online   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. State tax online See Adjusted Basis , earlier. State tax online   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. State tax online Figure the increase by multiplying the gift tax paid by the following fraction. State tax online 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. State tax online 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. State tax online Example. State tax online In 2013, you received a gift of property from your mother that had an FMV of $50,000. State tax online Her adjusted basis was $20,000. State tax online The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). State tax online She paid a gift tax of $7,320. State tax online Your basis, $26,076, is figured as follows. State tax online 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) × . State tax online 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. State tax online If you received a gift before 1977, your basis in the gift (the donor's adjusted basis) includes any gift tax paid on it. State tax online However, your basis cannot exceed the FMV of the gift when it was given to you. State tax online FMV less than donor's adjusted basis. State tax online   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. State tax online Your basis for figuring gain is the donor's adjusted basis plus or minus any required adjustments to basis while you held the property. State tax online 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. State tax online (See Adjusted Basis , earlier. State tax online )   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. State tax online Example. State tax online You received farmland as a gift from your parents when they retired from farming. State tax online At the time of the gift, the land had an FMV of $80,000. State tax online Your parents' adjusted basis was $100,000. State tax online After you received the land, no events occurred that would increase or decrease your basis. State tax online 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. State tax online 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. State tax online If the sales price is between $80,000 and $100,000, you have neither gain nor loss. State tax online 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. State tax online If you then tried to figure a loss using the FMV ($80,000), you would get a $10,000 gain. State tax online Business property. State tax online   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. State tax online 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. State tax online The same rule applies to a transfer by your former spouse if the transfer is incident to divorce. State tax online 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. State tax online 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. State tax online For more information, see Property Settlements in Publication 504, Divorced or Separated Individuals. State tax online 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. State tax online If a federal estate return is filed, you can use its appraised value. State tax online The FMV on the alternate valuation date, if the personal representative for the estate elects to use alternate valuation. State tax online For information on the alternate valuation, see the Instructions for Form 706. State tax online 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. State tax online 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. State tax online Special-use valuation method. State tax online   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. State tax online If so, the executor or personal representative values the qualified real property based on its use as a farm or other closely held business. State tax online 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. State tax online The qualified heirs should be able to get the necessary value from the executor or personal representative of the estate. State tax online   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. State tax online 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. State tax online Figure all FMVs without regard to the special-use valuation. State tax online   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. State tax online 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. State tax online The tax also does not apply if you transfer the property to a member of your family and certain requirements are met. State tax online   You can elect to increase your basis in special-use valuation property if it becomes subject to the additional estate tax. State tax online 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. State tax online 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. State tax online The increase in your basis is considered to have occurred immediately before the event that resulted in the additional estate tax. State tax online   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. State tax online   For more information, see Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, Form 706-A, and the related instructions. State tax online Property inherited from a decedent who died in 2010. State tax online   If you inherited property from a decedent who died in 2010, different rules may apply. State tax online See Publication 4895, Tax Treatment of Property Acquired From a Decendent Dying in 2010, for details. State tax online 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. State tax online Partner's basis. State tax online   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. State tax online 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. State tax online For more information, see Partner's Basis for Distributed Property in Publication 541, Partnerships. State tax online Shareholder's basis. State tax online   The basis of property distributed by a corporation to a shareholder is its fair market value. State tax online For more information about corporate distributions, see Distributions to Shareholders in Publication 542, Corporations. State tax online Prev  Up  Next   Home   More Online Publications