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Can I E File A 2012 Tax Return

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Can I E File A 2012 Tax Return

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The Can I E File A 2012 Tax Return

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