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2011 Turbo Tax Software

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2011 Turbo Tax Software

2011 turbo tax software 14. 2011 turbo tax software   Excise Taxes Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Fuels Used in FarmingBuyer of fuel, including undyed diesel fuel or undyed kerosene. 2011 turbo tax software Undyed diesel fuel, undyed kerosene, and Other Fuels (including alternative fuel). 2011 turbo tax software Custom application of fertilizer and pesticide. 2011 turbo tax software Fuel not used for farming. 2011 turbo tax software Dyed Diesel Fuel and Dyed Kerosene Fuels Used in Off-Highway Business Use Fuels Used for Household Purposes or Other Than as a Fuel for Propulsion Engines How To Claim a Credit or RefundCredit only. 2011 turbo tax software Claiming a Credit Claiming a Refund Including the Credit or Refund in Income Introduction You may be eligible to claim a credit on your income tax return for the federal excise tax on certain fuels. 2011 turbo tax software You may also be eligible to claim a quarterly refund of the fuel taxes during the year, instead of waiting to claim a credit on your income tax return. 2011 turbo tax software Whether you can claim a credit or refund depends on whether the fuel was taxed and the purpose (nontaxable use) for which you used the fuel. 2011 turbo tax software The nontaxable uses of fuel for which a farmer may claim a credit or refund are generally the following. 2011 turbo tax software Use on a farm for farming purposes. 2011 turbo tax software Off-highway business use. 2011 turbo tax software Uses other than as a fuel in a propulsion engine, such as home use. 2011 turbo tax software Table 14-1 presents an overview of credits and refunds that may be claimed for fuels used for the nontaxable uses listed above. 2011 turbo tax software See Publication 510, Excise Taxes, for more information. 2011 turbo tax software Topics - This chapter discusses: Fuels used in farming Dyed diesel fuel and dyed kerosene Fuels used in off-highway business use Fuels used for household purposes How to claim a credit or refund Including the credit or refund in income Useful Items - You may want to see: Publication 510 Excise Taxes Form (and Instructions) 720 Quarterly Federal Excise Tax Return 4136 Credit for Federal Tax Paid on Fuels 8849 Claim for Refund of Excise Taxes See chapter 16 for information about getting publications and forms. 2011 turbo tax software Fuels Used in Farming Owners, operators, and tenants of farms and certain other persons may be eligible to claim a credit or refund of excise taxes on fuel used in the trade or business of farming, when used on a farm in the United States for farming purposes. 2011 turbo tax software See Table 14-1 for a list of available fuel tax credits and refunds. 2011 turbo tax software Fuel is used on a farm for farming purposes only if used in carrying on a trade or business of farming, on a farm in the United States, and for farming purposes. 2011 turbo tax software Farm. 2011 turbo tax software   A farm includes livestock, dairy, fish, poultry, fruit, fur-bearing animals, and truck farms, orchards, plantations, ranches, nurseries, ranges, and feed yards for finishing cattle. 2011 turbo tax software It also includes structures such as greenhouses used primarily for raising agricultural or horticultural commodities. 2011 turbo tax software A fish farm is an area where fish are grown or raised and not merely caught or harvested. 2011 turbo tax software Table 14-1. 2011 turbo tax software Fuel Tax Credits and Refunds at a Glance Use this table to see if you can take a credit or refund for a nontaxable use of the fuel listed. 2011 turbo tax software Fuel Used On a Farm for Farming Purposes Off-Highway Business Use Household Use or Use Other Than as a Fuel1 Gasoline Credit only Credit or refund None Aviation gasoline Credit only None None Undyed diesel fuel and undyed kerosene Credit or refund Credit or refund2 Credit or refund2 Kerosene for use in aviation Credit or refund None None Dyed diesel fuel and dyed kerosene None None None Other Fuels (including alternative fuels)3 Credit or refund Credit or refund None 1For a use other than as fuel in a propulsion engine. 2011 turbo tax software 2Applies to undyed kerosene not sold from a blocked pump or, under certain circumstances, for blending with undyed diesel fuel to be used for heating purposes. 2011 turbo tax software See Reg. 2011 turbo tax software 48. 2011 turbo tax software 6427-10 (b)(1) for the definition of a blocked pump. 2011 turbo tax software 3Other Fuels means any liquid except gas oil, fuel oil, or any product taxable under Internal Revenue Code section 4081. 2011 turbo tax software It includes the alternative fuels: liquefied petroleum gas (LPG),“P” Series fuels, compressed natural gas (CNG), liquefied hydrogen, any liquid fuel derived from coal (including peat) through the Fischer-Tropsch process, liquid fuel derived from biomass, liquid natural gas (LNG), liquefied gas derived from biomass, and compressed gas derived from biomass. 2011 turbo tax software Farming purposes. 2011 turbo tax software   As the owner, tenant, or operator and the ultimate purchaser of fuel that you purchased, you use the fuel on a farm for farming purposes if you use it in any of the following ways. 2011 turbo tax software To cultivate the soil or to raise or harvest any agricultural or horticultural commodity. 2011 turbo tax software To raise, shear, feed, care for, train, or manage livestock, bees, poultry, fur-bearing animals, or wildlife. 2011 turbo tax software To operate, manage, conserve, improve, or maintain your farm and its tools and equipment. 2011 turbo tax software To handle, dry, pack, grade, or store any raw agricultural or horticultural commodity. 2011 turbo tax software For this use to qualify, you must have produced more than half the commodity so treated during the tax year. 2011 turbo tax software The more-than-one-half test applies separately to each commodity. 2011 turbo tax software Commodity means a single raw product. 2011 turbo tax software For example, apples and peaches are two separate commodities. 2011 turbo tax software To plant, cultivate, care for, or cut trees or to prepare (other than sawing logs into lumber, chipping, or other milling) trees for market, but only if these activities are incidental to your farming operations. 2011 turbo tax software Your tree operations are incidental only if they are minor in nature when compared to the total farming operations. 2011 turbo tax software   If any other person, such as a neighbor or custom operator (independent contractor), performs a service for you on your farm for any of the purposes included in list items (1) or (2), above, you are considered to be the ultimate purchaser who used the fuel on a farm for farming purposes. 2011 turbo tax software Therefore, you can still claim the credit or refund for the fuel so used. 2011 turbo tax software However, see Custom application of fertilizer and pesticide, later. 2011 turbo tax software If the other person performs any other services for you on your farm for purposes not included in list items (1) or (2) above, no one can claim the credit or refund for fuel used on your farm for those other services. 2011 turbo tax software Buyer of fuel, including undyed diesel fuel or undyed kerosene. 2011 turbo tax software   If doubt exists whether the owner, tenant, or operator of the farm bought the fuel, determine who actually bore the cost of the fuel. 2011 turbo tax software For example, if the owner of a farm and his or her tenant equally share the cost of gasoline used on the farm, each can claim a credit for the tax on half the fuel used. 2011 turbo tax software Undyed diesel fuel, undyed kerosene, and Other Fuels (including alternative fuel). 2011 turbo tax software   Usually, the farmer is the only person who can make a claim for credit or refund for the tax on undyed diesel fuel, undyed kerosene, or other fuels (including alternative fuel) used for farming purposes. 2011 turbo tax software However, see Custom application of fertilizer and pesticide, next. 2011 turbo tax software Also see Dyed Diesel Fuel and Dyed Kerosene, later. 2011 turbo tax software Example. 2011 turbo tax software Farm owner Haleigh Blue hired custom operator Tyler Steele to cultivate the soil on her farm. 2011 turbo tax software Tyler used 200 gallons of undyed diesel fuel that he purchased to perform the work on Haleigh's farm. 2011 turbo tax software In addition, Haleigh hired contractor Lee Brown to pack and store her apple crop. 2011 turbo tax software Lee bought 25 gallons of undyed diesel fuel to use in packing the apples. 2011 turbo tax software Haleigh can claim the credit for the 200 gallons of undyed diesel fuel used by Tyler on her farm because it qualifies as fuel used on the farm for farming purposes. 2011 turbo tax software No one can claim a credit for the 25 gallons used by Lee because that fuel was not used for a farming purpose included in list items (1) or (2), above. 2011 turbo tax software In the above example, both Tyler Steele and Lee Brown could have purchased dyed (untaxed) diesel fuel for their tasks. 2011 turbo tax software Custom application of fertilizer and pesticide. 2011 turbo tax software   Fuel used on a farm for farming purposes includes fuel used in the application (including aerial application) of fertilizer, pesticides, or other substances. 2011 turbo tax software Generally, the applicator is treated as having used the fuel on a farm for farming purposes. 2011 turbo tax software For applicators using highway vehicles, only the fuel used on the farm is exempt. 2011 turbo tax software Fuel used traveling on the highway to and from the farm is taxable. 2011 turbo tax software Fuel used by an aerial applicator for the direct flight between the airfield and one or more farms is treated as used for a farming purpose. 2011 turbo tax software For aviation gasoline, the aerial applicator makes the claim as the ultimate purchaser. 2011 turbo tax software For kerosene used in aviation, the ultimate purchaser may make the claim or waive the right to make the claim to the registered ultimate vendor. 2011 turbo tax software A sample waiver is included as Model Waiver L in the appendix of Publication 510. 2011 turbo tax software A registered ultimate vendor is the person who sells undyed diesel fuel, undyed kerosene, or kerosene for use in aviation to the user (ultimate purchaser) of the fuel for use on a farm for farming purposes. 2011 turbo tax software To claim a credit or refund of tax, the ultimate vendor must be registered with the Internal Revenue Service at the time the claim is made. 2011 turbo tax software However, registered ultimate vendors cannot make claims for undyed diesel fuel and undyed kerosene sold for use on a farm for farming purposes. 2011 turbo tax software Fuel not used for farming. 2011 turbo tax software   You do not use fuel on a farm for farming purposes when you use it in any of the following ways. 2011 turbo tax software Off the farm, such as on the highway or in noncommercial aviation, even if the fuel is used in transporting livestock, feed, crops, or equipment. 2011 turbo tax software For personal use, such as lawn mowing. 2011 turbo tax software In processing, packaging, freezing, or canning operations. 2011 turbo tax software In processing crude gum into gum spirits of turpentine or gum resin or in processing maple sap into maple syrup or maple sugar. 2011 turbo tax software All-terrain vehicles (ATVs). 2011 turbo tax software   Fuel used in ATVs on a farm for farming purposes, discussed earlier, is eligible for a credit or refund of excise taxes on the fuel. 2011 turbo tax software Fuel used in ATVs for nonfarming purposes is not eligible for a credit or refund of the taxes. 2011 turbo tax software If ATVs are used both for farming and nonfarming purposes, only that portion of the fuel used for farming purposes is eligible for the credit or refund. 2011 turbo tax software Dyed Diesel Fuel and Dyed Kerosene If you purchase dyed diesel fuel or dyed kerosene for a nontaxable use, you must use it only on a farm for farming purposes or for other nontaxable purposes. 2011 turbo tax software For example, you should not use dyed diesel fuel in a truck that is used both on the farm for farming purposes and on the highway, even though the highway use is in connection with farm business. 2011 turbo tax software Excise tax applies to the fuel used by the truck on the highways. 2011 turbo tax software In this situation, undyed (taxed) fuel should be purchased for the truck. 2011 turbo tax software You should keep fuel records of the use of the truck on the farm for farming purposes, and for other uses. 2011 turbo tax software You may be eligible for a credit or refund for the excise tax on fuel used on the farm for farming purposes. 2011 turbo tax software Penalty. 2011 turbo tax software   A penalty is imposed on any person who knowingly uses, sells, or alters dyed diesel fuel or dyed kerosene for any purpose other than a nontaxable use. 2011 turbo tax software The penalty is the greater of $1,000 or $10 per gallon of the dyed diesel fuel or dyed kerosene involved. 2011 turbo tax software After the first violation, the $1,000 portion of the penalty increases depending on the number of violations. 2011 turbo tax software For more information on this penalty, see Publication 510. 2011 turbo tax software Fuels Used in Off-Highway Business Use You may be eligible to claim a credit or refund for the excise tax on fuel used in an off-highway business use. 2011 turbo tax software Off-highway business use. 2011 turbo tax software   This is any use of fuel in a trade or business or in an income-producing activity. 2011 turbo tax software The use must not be in a highway vehicle registered or required to be registered for use on public highways. 2011 turbo tax software Off-highway business use generally does not include any use in a recreational motorboat. 2011 turbo tax software Examples. 2011 turbo tax software   Off-highway business use includes the use of fuels in a trade or business in any of the following ways. 2011 turbo tax software In stationary machines such as generators, compressors, power saws, and similar equipment; For cleaning ; and In forklift trucks, bulldozers, and earthmovers. 2011 turbo tax software   Off-highway nonbusiness (taxable) use of fuel includes: use in minibikes, snowmobiles, power lawn mowers, chain saws, and other yard equipment. 2011 turbo tax software For more information, see Publication 510. 2011 turbo tax software Fuels Used for Household Purposes or Other Than as a Fuel for Propulsion Engines You may be eligible to claim a credit or refund for the excise tax on undyed diesel fuel or kerosene used for home heating, lighting, and cooking. 2011 turbo tax software This also applies to diesel fuel and kerosene used in a home generator to produce electricity for home use. 2011 turbo tax software Home use of a fuel does not include use in a propulsion engine and it is not considered an off-highway business use. 2011 turbo tax software How To Claim a Credit or Refund You may be able to claim a credit or refund of the excise tax on fuels you use for nontaxable uses. 2011 turbo tax software The basic rules for claiming credits and refunds are listed in Table 14-2 . 2011 turbo tax software Table 14-2. 2011 turbo tax software Claiming a Credit or Refund of Excise Taxes This table gives the basic rules for claiming a credit or refund of excise taxes on fuels used for a nontaxable use. 2011 turbo tax software   Credit Refund Which form to use Form 4136, Credit for Federal Tax Paid on Fuels Form 8849, Claim for Refund of Excise Taxes, and Schedule 1 (Form 8849), Nontaxable Use of Fuels Type of form Annual Quarterly When to file With your income tax return By the last day of the quarter following the last quarter included in the claim Amount of tax Any amount $750 or more1 1You may carry over an amount less than $750 to the next quarter. 2011 turbo tax software Keep at your principal place of business all records needed to enable the IRS to verify that you are the person entitled to claim a credit or refund and the amount you claimed. 2011 turbo tax software You do not have to use any special form, but the records should establish the following information. 2011 turbo tax software The total number of gallons bought and used during the period covered by your claim. 2011 turbo tax software The dates of the purchases. 2011 turbo tax software The names and addresses of suppliers and amounts bought from each during the period covered by your claim. 2011 turbo tax software The nontaxable use for which you used the fuel. 2011 turbo tax software The number of gallons used for each nontaxable use. 2011 turbo tax software It is important that your records separately show the number of gallons used for each nontaxable use that qualifies as a claim. 2011 turbo tax software For more information about recordkeeping, see Publication 583, Starting a Business and Keeping Records. 2011 turbo tax software Credit or refund. 2011 turbo tax software   A credit is an amount that reduces the tax on your income tax return when you file it at the end of the year. 2011 turbo tax software If you meet certain requirements, you may claim a refund during the year instead of waiting until you file your income tax return. 2011 turbo tax software Credit only. 2011 turbo tax software   You can claim the following taxes only as a credit on your income tax return. 2011 turbo tax software Tax on gasoline and aviation gasoline you used on a farm for farming purposes. 2011 turbo tax software Tax on fuels (including undyed diesel fuel or undyed kerosene) you used for nontaxable uses if the total for the tax year is less than $750. 2011 turbo tax software Tax on fuel you did not include in any claim for refund previously filed for any quarter of the tax year. 2011 turbo tax software Claiming a Credit You make a claim for a fuel tax credit on Form 4136 and attach it to your income tax return. 2011 turbo tax software Do not claim a credit for any excise tax for which you have filed a refund claim. 2011 turbo tax software How to claim a credit. 2011 turbo tax software   How you claim a credit depends on whether you are an individual, partnership, corporation, S corporation, trust, or farmers' cooperative association. 2011 turbo tax software Individuals. 2011 turbo tax software   You claim the credit on the “Credit for federal tax on fuels” line of your Form 1040. 2011 turbo tax software If you would not otherwise have to file an income tax return, you must do so to get a fuel tax credit. 2011 turbo tax software Partnership. 2011 turbo tax software   Partnerships (other than electing large partnerships) claim the credit by including a statement on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. 2011 turbo tax software , showing each partner's share of the number of gallons of each fuel sold or used for a nontaxable use, the type of use, and the applicable credit per gallon. 2011 turbo tax software Each partner claims the credit on his or her income tax return for the partner's share of the fuel used by the partnership. 2011 turbo tax software An electing large partnership can claim the credit on the “Other payments” line of Form 1065-B, U. 2011 turbo tax software S. 2011 turbo tax software Return of Income for Electing Large Partnerships. 2011 turbo tax software Other entities. 2011 turbo tax software   Corporations, S corporations, farmers' cooperative associations, and trusts make the claim on the appropriate line of their income tax return. 2011 turbo tax software When to claim a credit. 2011 turbo tax software   You can claim a fuel tax credit on your income tax return for the year you used the fuel. 2011 turbo tax software You may be able to make a fuel tax claim on an amended income tax return for the year you used the fuel. 2011 turbo tax software A claim for credit or refund of an overpayment must generally be filed within the later of: Three years from the date the original return was filed, or Two years from the date the tax was paid. 2011 turbo tax software Claiming a Refund Generally, you may claim a refund of excise taxes on Form 8849. 2011 turbo tax software Complete and attach to Form 8849 the appropriate Form 8849 schedule(s). 2011 turbo tax software The instructions for Form 8849 and the separate instructions for each schedule explain the requirements for making a claim for refund. 2011 turbo tax software If you file Form 720, you can use its Schedule C for your refund claims for the quarter. 2011 turbo tax software See the Instructions for Form 720. 2011 turbo tax software Do not claim a refund on Form 8849 for any amount for which you have filed or will file a claim on Form 720 or Form 4136. 2011 turbo tax software You may file a claim for refund for any quarter of your tax year for which you can claim $750 or more. 2011 turbo tax software This amount is the excise tax on all fuels used for a nontaxable use during that quarter or any prior quarter (for which no other claim has been filed) during the tax year. 2011 turbo tax software If you cannot claim at least $750 at the end of a quarter, you carry the amount over to the next quarter of your tax year to determine if you can claim at least $750 for that quarter. 2011 turbo tax software If you cannot claim at least $750 at the end of the fourth quarter of your tax year, you must claim a credit on your income tax return using Form 4136. 2011 turbo tax software Only one claim can be filed for a quarter. 2011 turbo tax software You cannot claim a refund for excise tax on gasoline and aviation gasoline used on a farm for farming purposes. 2011 turbo tax software You must claim a credit on your income tax return for the tax. 2011 turbo tax software How to file a quarterly claim. 2011 turbo tax software   File the claim for refund by filling out Schedule 1 (Form 8849) and attaching it to Form 8849. 2011 turbo tax software Send it to the address shown in the instructions. 2011 turbo tax software If you file Form 720, you can use its Schedule C for your refund claims. 2011 turbo tax software See the Instructions for Form 720. 2011 turbo tax software When to file a quarterly claim. 2011 turbo tax software   You must file a quarterly claim by the last day of the first quarter following the last quarter included in the claim. 2011 turbo tax software If you do not file a timely refund claim for the fourth quarter of your tax year, you will have to claim a credit for that amount on your income tax return, as discussed earlier. 2011 turbo tax software    In most situations, the amount claimed as a credit or refund will be less than the amount deducted as fuel tax expense because the Leaking Underground Storage Tank (LUST) tax of $0. 2011 turbo tax software 001 per gallon is generally not subject to credit or refund. 2011 turbo tax software Including the Credit or Refund in Income Include any credit or refund of excise taxes on fuels in your gross income if you claimed the total cost of the fuel (including the excise taxes) as an expense deduction that reduced your income tax liability. 2011 turbo tax software Which year you include a credit or refund in gross income depends on whether you use the cash or an accrual method of accounting. 2011 turbo tax software Cash method. 2011 turbo tax software   If you use the cash method and file a claim for refund, include the refund amount in gross income for the tax year in which you receive the refund. 2011 turbo tax software If you claim a credit on your income tax return, include the credit amount in gross income for the tax year in which you file Form 4136. 2011 turbo tax software If you file an amended return and claim a credit, include the credit amount in gross income for the tax year in which you receive the credit. 2011 turbo tax software Example. 2011 turbo tax software Sharon Brown, a farmer who uses the cash method, filed her 2012 Form 1040 on March 3, 2013. 2011 turbo tax software On her Schedule F, she deducted the total cost of gasoline (including $110 of excise taxes) used on the farm for farming purposes. 2011 turbo tax software Then, on Form 4136, she claimed the $110 as a credit. 2011 turbo tax software Sharon reports the $110 as other income on line 8b of her 2013 Schedule F. 2011 turbo tax software Accrual method. 2011 turbo tax software   If you use an accrual method, include the amount of credit or refund in gross income for the tax year in which you used the fuels. 2011 turbo tax software It does not matter whether you filed for a quarterly refund or claimed the entire amount as a credit. 2011 turbo tax software Example. 2011 turbo tax software Patty Green, a farmer who uses the accrual method, files her 2012 Form 1040 on April 15, 2013. 2011 turbo tax software On Schedule F, she deducts the total cost of gasoline (including $155 of excise taxes) she used on the farm for farming purposes during 2012. 2011 turbo tax software On Form 4136, Patty claims the $155 as a credit. 2011 turbo tax software She reports the $155 as other income on line 8b of her 2012 Schedule F. 2011 turbo tax software Prev  Up  Next   Home   More Online Publications
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Alivio Tributario en Situaciones de Desastre para Personas y Negocios

English

Las provisiones especiales de impuesto podrían ayudar a los contribuyentes a recuperarse financieramente del impacto de un desastre, especialmente si el Presidente de los Estados Unidos declara su localidad como una Zona de Desastre. Dependiendo de las circunstancias, el IRS puede otorgar tiempo adicional para presentar la declaración federal y pagar los impuestos. Tanto los individuos como los negocios dentro de una zona designada por el Presidente como Zona de Desastre pueden obtener su reembolso más rápido reclamando las pérdidas relacionadas con el desastre en su declaración de impuestos para el año anterior, presentando una declaración enmendada.

 


Pérdidas por hechos fortuitos, desastres y robo, Tema Tributario 515
Cómo Reconstruir Sus Registros

 


Para mayor información:

Agencia Federal para el Manejo de Emergencias (FEMA)
GobiernoUSA.gov sobre Desastres y Emergencias&quot&gtInformación de GobiernoUSA.gov sobre Desastres y Emergencias

 


Publicaciones:

Publicación 547(SPP Hechos Fortuitos, Desastres y Robos
Publicación 584(SP) Registro de Pérdidas por Hechos Fortuitos (Imprevistos), Desastres y Robos (Propiedad de Uso Personal)
Publicación 3067 (SP) - Asistencia del IRS en Desastres
Publicación 1600(SP) Ayuda del IRS para contribuyentes afectados por desastres y pérdidas
Publicación 4492SP - Información para los Contribuyentes Afectados por los Huracanes Katrina, Rita y Wilma

 

 

Page Last Reviewed or Updated: 02-Dec-2013

The 2011 Turbo Tax Software

2011 turbo tax software 6. 2011 turbo tax software   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. 2011 turbo tax software Use basis to figure the gain or loss on the sale, exchange, or other disposition of property. 2011 turbo tax software Also use basis to figure depreciation, amortization, depletion, and casualty losses. 2011 turbo tax software If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. 2011 turbo tax software Only the basis allocated to the business or investment use of the property can be depreciated. 2011 turbo tax software Your original basis in property is adjusted (increased or decreased) by certain events. 2011 turbo tax software For example, if you make improvements to the property, increase your basis. 2011 turbo tax software If you take deductions for depreciation, or casualty losses, or claim certain credits, reduce your basis. 2011 turbo tax software Keep accurate records of all items that affect the basis of your assets. 2011 turbo tax software For information on keeping records, see chapter 1. 2011 turbo tax software 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. 2011 turbo tax software Cost Basis The basis of property you buy is usually its cost. 2011 turbo tax software Cost is the amount you pay in cash, debt obligations, other property, or services. 2011 turbo tax software Your cost includes amounts you pay for sales tax, freight, installation, and testing. 2011 turbo tax software The basis of real estate and business assets will include other items, discussed later. 2011 turbo tax software Basis generally does not include interest payments. 2011 turbo tax software However, see Carrying charges and Capitalized interest in chapter 4 of Publication 535. 2011 turbo tax software You also may have to capitalize (add to basis) certain other costs related to buying or producing property. 2011 turbo tax software Under the uniform capitalization rules, discussed later, you may have to capitalize direct costs and certain indirect costs of producing property. 2011 turbo tax software Loans with low or no interest. 2011 turbo tax software   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. 2011 turbo tax software You generally have unstated interest if your interest rate is less than the applicable federal rate. 2011 turbo tax software See the discussion of unstated interest in Publication 537, Installment Sales. 2011 turbo tax software Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. 2011 turbo tax software If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. 2011 turbo tax software Some of these expenses are discussed next. 2011 turbo tax software Lump sum purchase. 2011 turbo tax software   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. 2011 turbo tax software Allocate the cost basis according to the respective fair market values (FMVs) of the land and improvements at the time of purchase. 2011 turbo tax software Figure the basis of each asset by multiplying the lump sum by a fraction. 2011 turbo tax software The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. 2011 turbo tax software Fair market value (FMV). 2011 turbo tax software   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. 2011 turbo tax software Sales of similar property on or about the same date may help in figuring the FMV of the property. 2011 turbo tax software 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. 2011 turbo tax software Real estate taxes. 2011 turbo tax software   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. 2011 turbo tax software   If you reimburse the seller for taxes the seller paid for you, you generally can deduct that amount as a tax expense. 2011 turbo tax software Whether or not you reimburse the seller, do not include that amount in the basis of your property. 2011 turbo tax software Settlement costs. 2011 turbo tax software   Your basis includes the settlement fees and closing costs for buying the property. 2011 turbo tax software See Publication 551 for a detailed list of items you can and cannot include in basis. 2011 turbo tax software   Do not include fees and costs for getting a loan on the property. 2011 turbo tax software Also, do not include amounts placed in escrow for the future payment of items such as taxes and insurance. 2011 turbo tax software Points. 2011 turbo tax software   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. 2011 turbo tax software You may be able to deduct the points currently or over the term of the loan. 2011 turbo tax software For more information about deducting points, see Points in chapter 4 of Publication 535. 2011 turbo tax software Assumption of a mortgage. 2011 turbo tax software   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. 2011 turbo tax software Example. 2011 turbo tax software If you buy a farm for $100,000 cash and assume a mortgage of $400,000, your basis is $500,000. 2011 turbo tax software Constructing assets. 2011 turbo tax software   If you build property or have assets built for you, your expenses for this construction are part of your basis. 2011 turbo tax software 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. 2011 turbo tax software   In addition, if you use your own employees, farm materials, and equipment to build an asset, do not deduct the following expenses. 2011 turbo tax software You must capitalize them (include them in the asset's basis). 2011 turbo tax software Employee wages paid for the construction work, reduced by any employment credits allowed. 2011 turbo tax software Depreciation on equipment you own while it is used in the construction. 2011 turbo tax software Operating and maintenance costs for equipment used in the construction. 2011 turbo tax software The cost of business supplies and materials used in the construction. 2011 turbo tax software    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. 2011 turbo tax software 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. 2011 turbo tax software To determine the basis of these assets or separate items, there must be an allocation of basis. 2011 turbo tax software Group of assets acquired. 2011 turbo tax software   If you buy multiple assets for a lump sum, allocate the amount you pay among the assets. 2011 turbo tax software Use this allocation to figure your basis for depreciation and gain or loss on a later disposition of any of these assets. 2011 turbo tax software You and the seller may agree in the sales contract to a specific allocation of the purchase price among the assets. 2011 turbo tax software 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. 2011 turbo tax software Farming business acquired. 2011 turbo tax software   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. 2011 turbo tax software Generally, reduce the purchase price by any cash received. 2011 turbo tax software 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. 2011 turbo tax software See Trade or Business Acquired under Allocating the Basis in Publication 551 for more information. 2011 turbo tax software Transplanted embryo. 2011 turbo tax software   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. 2011 turbo tax software Allocate the rest of the purchase price to the basis of the calf. 2011 turbo tax software Neither the cost allocated to the cow nor the cost allocated to the calf is deductible as a current business expense. 2011 turbo tax software 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. 2011 turbo tax software You recover these costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. 2011 turbo tax software 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. 2011 turbo tax software 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. 2011 turbo tax software You produce property if you construct, build, install, manufacture, develop, improve, or create the property. 2011 turbo tax software You are not subject to the uniform capitalization rules if the property is produced for personal use. 2011 turbo tax software In a farming business, you produce property if you raise or grow any agricultural or horticultural commodity, including plants and animals. 2011 turbo tax software Plants. 2011 turbo tax software   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. 2011 turbo tax software Animals. 2011 turbo tax software   An animal produced in a farming business includes any stock, poultry or other bird, and fish or other sea life. 2011 turbo tax software The direct and indirect costs of producing plants or animals include preparatory costs and preproductive period costs. 2011 turbo tax software Preparatory costs include the acquisition costs of the seed, seedling, plant, or animal. 2011 turbo tax software For plants, preproductive period costs include the costs of items such as irrigation, pruning, frost protection, spraying, and harvesting. 2011 turbo tax software For animals, preproductive period costs include the costs of items such as feed, maintaining pasture or pen areas, breeding, veterinary services, and bedding. 2011 turbo tax software Exceptions. 2011 turbo tax software   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. 2011 turbo tax software   Exceptions (1) and (2) do not apply to a corporation, partnership, or tax shelter required to use an accrual method of accounting. 2011 turbo tax software See Accrual Method Required under Accounting Methods in chapter 2. 2011 turbo tax software   In addition, you can elect not to use the uniform capitalization rules for plants with a preproductive period of more than 2 years. 2011 turbo tax software If you make this election, special rules apply. 2011 turbo tax software This election cannot be made by a corporation, partnership, or tax shelter required to use an accrual method of accounting. 2011 turbo tax software 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. 2011 turbo tax software    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. 2011 turbo tax software See chapter 7, for additional information on depreciation. 2011 turbo tax software Example. 2011 turbo tax software You grow trees that have a preproductive period of more than 2 years. 2011 turbo tax software The trees produce an annual crop. 2011 turbo tax software You are an individual and the uniform capitalization rules apply to your farming business. 2011 turbo tax software You must capitalize the direct costs and an allocable part of indirect costs incurred due to the production of the trees. 2011 turbo tax software You are not required to capitalize the costs of producing the annual crop because its preproductive period is 2 years or less. 2011 turbo tax software Preproductive period of more than 2 years. 2011 turbo tax software   The preproductive period of plants grown in commercial quantities in the United States is based on their nationwide weighted average preproductive period. 2011 turbo tax software Plants producing the crops or yields shown in Table 6-1 have a nationwide weighted average preproductive period of more than 2 years. 2011 turbo tax software Other plants (not shown in Table 6-1) may also have a nationwide weighted average preproductive period of more than 2 years. 2011 turbo tax software More information. 2011 turbo tax software   For more information on the uniform capitalization rules that apply to property produced in a farming business, see Regulations section 1. 2011 turbo tax software 263A-4. 2011 turbo tax software Table 6-1. 2011 turbo tax software 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. 2011 turbo tax software 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. 2011 turbo tax software 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. 2011 turbo tax software Increases to Basis Increase the basis of any property by all items properly added to a capital account. 2011 turbo tax software These include the cost of any improvements having a useful life of more than 1 year. 2011 turbo tax software The following costs increase the basis of property. 2011 turbo tax software The cost of extending utility service lines to property. 2011 turbo tax software Legal fees, such as the cost of defending and perfecting title. 2011 turbo tax software Legal fees for seeking a decrease in an assessment levied against property to pay for local improvements. 2011 turbo tax software Assessments for items such as paving roads and building ditches that increase the value of the property assessed. 2011 turbo tax software Do not deduct these expenses as taxes. 2011 turbo tax software However, you can deduct as taxes amounts assessed for maintenance or repairs, or for meeting interest charges related to the improvements. 2011 turbo tax software 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. 2011 turbo tax software See chapter 7. 2011 turbo tax software Deducting vs. 2011 turbo tax software capitalizing costs. 2011 turbo tax software   Do not add to your basis costs you can deduct as current expenses. 2011 turbo tax software For example, amounts paid for incidental repairs or maintenance are deductible as business expenses and are not added to basis. 2011 turbo tax software However, you can elect either to deduct or to capitalize certain other costs. 2011 turbo tax software See chapter 7 in Publication 535. 2011 turbo tax software Decreases to Basis The following are some items that reduce the basis of property. 2011 turbo tax software Section 179 deduction. 2011 turbo tax software Deductions previously allowed or allowable for amortization, depreciation, and depletion. 2011 turbo tax software Alternative motor vehicle credit. 2011 turbo tax software See Form 8910. 2011 turbo tax software Alternative fuel vehicle refueling property credit. 2011 turbo tax software See Form 8911. 2011 turbo tax software Residential energy efficient property credits. 2011 turbo tax software See Form 5695. 2011 turbo tax software Investment credit (part or all) taken. 2011 turbo tax software Casualty and theft losses and insurance reimbursements. 2011 turbo tax software Payments you receive for granting an easement. 2011 turbo tax software Exclusion from income of subsidies for energy conservation measures. 2011 turbo tax software Certain canceled debt excluded from income. 2011 turbo tax software Rebates from a manufacturer or seller. 2011 turbo tax software Patronage dividends received from a cooperative association as a result of a purchase of property. 2011 turbo tax software See Patronage Dividends in chapter 3. 2011 turbo tax software Gas-guzzler tax. 2011 turbo tax software See Form 6197. 2011 turbo tax software Some of these items are discussed next. 2011 turbo tax software For a more detailed list of items that decrease basis, see section 1016 of the Internal Revenue Code and Publication 551. 2011 turbo tax software Depreciation and section 179 deduction. 2011 turbo tax software   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. 2011 turbo tax software For more information on these deductions, see chapter 7. 2011 turbo tax software Section 179 deduction. 2011 turbo tax software   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. 2011 turbo tax software Depreciation. 2011 turbo tax software   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. 2011 turbo tax software 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. 2011 turbo tax software If you did not take a depreciation deduction, reduce the basis by the full amount of the depreciation you could have taken. 2011 turbo tax software   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. 2011 turbo tax software   See chapter 7 for information on figuring the depreciation you should have claimed. 2011 turbo tax software   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. 2011 turbo tax software Casualty and theft losses. 2011 turbo tax software   If you have a casualty or theft loss, decrease the basis of the property by any insurance or other reimbursement. 2011 turbo tax software Also, decrease it by any deductible loss not covered by insurance. 2011 turbo tax software See chapter 11 for information about figuring your casualty or theft loss. 2011 turbo tax software   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. 2011 turbo tax software To make this determination, compare the repaired property to the property before the casualty. 2011 turbo tax software Easements. 2011 turbo tax software   The amount you receive for granting an easement is usually considered to be proceeds from the sale of an interest in the real property. 2011 turbo tax software It reduces the basis of the affected part of the property. 2011 turbo tax software 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. 2011 turbo tax software See Easements and rights-of-way in chapter 3. 2011 turbo tax software Exclusion from income of subsidies for energy conservation measures. 2011 turbo tax software   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. 2011 turbo tax software Reduce the basis of the property by the excluded amount. 2011 turbo tax software Canceled debt excluded from income. 2011 turbo tax software   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. 2011 turbo tax software A debt includes any indebtedness for which you are liable or which attaches to property you hold. 2011 turbo tax software   You can exclude your canceled debt from income if the debt is any of the following. 2011 turbo tax software Debt canceled in a bankruptcy case or when you are insolvent. 2011 turbo tax software Qualified farm debt. 2011 turbo tax software Qualified real property business debt (provided you are not a C corporation). 2011 turbo tax software Qualified principal residence indebtedness. 2011 turbo tax software Discharge of certain indebtedness of a qualified individual because of Midwestern disasters. 2011 turbo tax software If you exclude canceled debt described in (1) or (2), you may have to reduce the basis of your depreciable and nondepreciable property. 2011 turbo tax software If you exclude canceled debt described in (3), you must only reduce the basis of your depreciable property by the excluded amount. 2011 turbo tax software   For more information about canceled debt in a bankruptcy case, see Publication 908, Bankruptcy Tax Guide. 2011 turbo tax software For more information about insolvency and canceled debt that is qualified farm debt or qualified principal residence indebtedness, see chapter 3. 2011 turbo tax software For more information about qualified real property business debt, see Publication 334, Tax Guide for Small Business. 2011 turbo tax software For more information about canceled debt in Midwestern disaster areas, see Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. 2011 turbo tax software Basis Other Than Cost There are times when you cannot use cost as basis. 2011 turbo tax software In these situations, the fair market value or the adjusted basis of property may be used. 2011 turbo tax software Examples are discussed next. 2011 turbo tax software Property changed from personal to business or rental use. 2011 turbo tax software   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. 2011 turbo tax software 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. 2011 turbo tax software   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. 2011 turbo tax software   If you later sell or dispose of this property, the basis you use will depend on whether you are figuring a gain or loss. 2011 turbo tax software The basis for figuring a gain is your adjusted basis in the property when you sell the property. 2011 turbo tax software 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. 2011 turbo tax software Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . 2011 turbo tax software Property received for services. 2011 turbo tax software   If you receive property for services, include the property's FMV in income. 2011 turbo tax software The amount you include in income becomes your basis. 2011 turbo tax software 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. 2011 turbo tax software Example. 2011 turbo tax software George Smith is an accountant and also operates a farming business. 2011 turbo tax software George agreed to do some accounting work for his neighbor in exchange for a dairy cow. 2011 turbo tax software The accounting work and the cow are each worth $1,500. 2011 turbo tax software George must include $1,500 in income for his accounting services. 2011 turbo tax software George's basis in the cow is $1,500. 2011 turbo tax software Taxable Exchanges A taxable exchange is one in which the gain is taxable, or the loss is deductible. 2011 turbo tax software A taxable gain or deductible loss also is known as a recognized gain or loss. 2011 turbo tax software A taxable exchange occurs when you receive cash or get property that is not similar or related in use to the property exchanged. 2011 turbo tax software 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. 2011 turbo tax software Example. 2011 turbo tax software You trade a tract of farmland with an adjusted basis of $2,000 for a tractor that has an FMV of $6,000. 2011 turbo tax software You must report a taxable gain of $4,000 for the land. 2011 turbo tax software The tractor has a basis of $6,000. 2011 turbo tax software 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. 2011 turbo tax software Similar or related property. 2011 turbo tax software   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. 2011 turbo tax software However, make the following adjustments. 2011 turbo tax software Decrease the basis by the following amounts. 2011 turbo tax software Any loss you recognize on the involuntary conversion. 2011 turbo tax software Any money you receive that you do not spend on similar property. 2011 turbo tax software Increase the basis by the following amounts. 2011 turbo tax software Any gain you recognize on the involuntary conversion. 2011 turbo tax software Any cost of acquiring the replacement property. 2011 turbo tax software Money or property not similar or related. 2011 turbo tax software   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. 2011 turbo tax software Allocating the basis. 2011 turbo tax software   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. 2011 turbo tax software Basis for depreciation. 2011 turbo tax software   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. 2011 turbo tax software For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. 2011 turbo tax software For more information about involuntary conversions, see chapter 11. 2011 turbo tax software Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. 2011 turbo tax software A nontaxable gain or loss also is known as an unrecognized gain or loss. 2011 turbo tax software If you receive property in a nontaxable exchange, its basis is usually the same as the basis of the property you transferred. 2011 turbo tax software Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. 2011 turbo tax software 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. 2011 turbo tax software There must also be an exchange of like-kind property. 2011 turbo tax software For more information, see Like-Kind Exchanges in  chapter 8. 2011 turbo tax software The basis of the property you receive generally is the same as the adjusted basis of the property you gave up. 2011 turbo tax software Example 1. 2011 turbo tax software You traded a truck you used in your farming business for a new smaller truck to use in farming. 2011 turbo tax software The adjusted basis of the old truck was $10,000. 2011 turbo tax software The FMV of the new truck is $30,000. 2011 turbo tax software 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. 2011 turbo tax software Example 2. 2011 turbo tax software You trade a field cultivator (adjusted basis of $8,000) for a planter (FMV of $9,000). 2011 turbo tax software You use both the field cultivator and the planter in your farming business. 2011 turbo tax software The basis of the planter you receive is $8,000, the same as the field cultivator traded Exchange expenses. 2011 turbo tax software   Exchange expenses generally are the closing costs that you pay. 2011 turbo tax software They include such items as brokerage commissions, attorney fees, and deed preparation fees. 2011 turbo tax software Add them to the basis of the like-kind property you receive. 2011 turbo tax software Property plus cash. 2011 turbo tax software   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. 2011 turbo tax software Example. 2011 turbo tax software You trade in a truck (adjusted basis of $3,000) for another truck (FMV of $7,500) and pay $4,000. 2011 turbo tax software Your basis in the new truck is $7,000 (the $3,000 adjusted basis of the old truck plus the $4,000 cash). 2011 turbo tax software Special rules for related persons. 2011 turbo tax software   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. 2011 turbo tax software 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. 2011 turbo tax software Each person reports it on the tax return filed for the year in which the later disposition occurred. 2011 turbo tax software If this rule applies, the basis of the property received in the original exchange will be its FMV. 2011 turbo tax software For more information, see chapter 8. 2011 turbo tax software Exchange of business property. 2011 turbo tax software   Exchanging the property of one business for the property of another business generally is a multiple property exchange. 2011 turbo tax software For information on figuring basis, see Multiple Property Exchanges in chapter 1 of Publication 544. 2011 turbo tax software Basis for depreciation. 2011 turbo tax software   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind transaction. 2011 turbo tax software For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. 2011 turbo tax software Partially Nontaxable Exchanges A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. 2011 turbo tax software The basis of the property you receive is the same as the adjusted basis of the property you gave up with the following adjustments. 2011 turbo tax software Decrease the basis by the following amounts. 2011 turbo tax software Any money you receive. 2011 turbo tax software Any loss you recognize on the exchange. 2011 turbo tax software Increase the basis by the following amounts. 2011 turbo tax software Any additional costs you incur. 2011 turbo tax software Any gain you recognize on the exchange. 2011 turbo tax software If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. 2011 turbo tax software Example 1. 2011 turbo tax software You trade farmland (basis of $100,000) for another tract of farmland (FMV of $110,000) and $30,000 cash. 2011 turbo tax software You realize a gain of $40,000. 2011 turbo tax software 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). 2011 turbo tax software Include your gain in income (recognize gain) only to the extent of the cash received. 2011 turbo tax software Your basis in the land you received is figured as follows. 2011 turbo tax software 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. 2011 turbo tax software You trade a truck (adjusted basis of $22,750) for another truck (FMV of $20,000) and $10,000 cash. 2011 turbo tax software You realize a gain of $7,250. 2011 turbo tax software 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). 2011 turbo tax software You include all the gain in your income (recognize gain) because the gain is less than the cash you received. 2011 turbo tax software Your basis in the truck you received is figured as follows. 2011 turbo tax software 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. 2011 turbo tax software   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. 2011 turbo tax software The rest is the basis of the like-kind property. 2011 turbo tax software Example. 2011 turbo tax software You traded a tractor with an adjusted basis of $15,000 for another tractor that had an FMV of $12,500. 2011 turbo tax software You also received $1,000 cash and a truck that had an FMV of $3,000. 2011 turbo tax software The truck is unlike property. 2011 turbo tax software You realized a gain of $1,500. 2011 turbo tax software 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). 2011 turbo tax software 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. 2011 turbo tax software Your basis in the properties you received is figured as follows. 2011 turbo tax software 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). 2011 turbo tax software This is the truck's FMV. 2011 turbo tax software The rest ($12,500) is the basis of the tractor. 2011 turbo tax software 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. 2011 turbo tax software Example. 2011 turbo tax software You used a tractor on your farm for 3 years. 2011 turbo tax software Its adjusted basis is $22,000 and its FMV is $40,000. 2011 turbo tax software You are interested in a new tractor, which sells for $60,000. 2011 turbo tax software Ordinarily, you would trade your old tractor for the new one and pay the dealer $20,000. 2011 turbo tax software Your basis for depreciating the new tractor would then be $42,000 ($20,000 + $22,000, the adjusted basis of your old tractor). 2011 turbo tax software 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. 2011 turbo tax software 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). 2011 turbo tax software Your basis for depreciating the new tractor is $42,000, the same as if you traded the old tractor. 2011 turbo tax software 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. 2011 turbo tax software You also must know its FMV at the time it was given to you and any gift tax paid on it. 2011 turbo tax software FMV equal to or greater than donor's adjusted basis. 2011 turbo tax software   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. 2011 turbo tax software Increase your basis by all or part of any gift tax paid, depending on the date of the gift. 2011 turbo tax software   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. 2011 turbo tax software See Adjusted Basis , earlier. 2011 turbo tax software   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. 2011 turbo tax software Figure the increase by multiplying the gift tax paid by the following fraction. 2011 turbo tax software 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. 2011 turbo tax software 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. 2011 turbo tax software Example. 2011 turbo tax software In 2013, you received a gift of property from your mother that had an FMV of $50,000. 2011 turbo tax software Her adjusted basis was $20,000. 2011 turbo tax software The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). 2011 turbo tax software She paid a gift tax of $7,320. 2011 turbo tax software Your basis, $26,076, is figured as follows. 2011 turbo tax software 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) × . 2011 turbo tax software 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. 2011 turbo tax software If you received a gift before 1977, your basis in the gift (the donor's adjusted basis) includes any gift tax paid on it. 2011 turbo tax software However, your basis cannot exceed the FMV of the gift when it was given to you. 2011 turbo tax software FMV less than donor's adjusted basis. 2011 turbo tax software   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. 2011 turbo tax software Your basis for figuring gain is the donor's adjusted basis plus or minus any required adjustments to basis while you held the property. 2011 turbo tax software 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. 2011 turbo tax software (See Adjusted Basis , earlier. 2011 turbo tax software )   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. 2011 turbo tax software Example. 2011 turbo tax software You received farmland as a gift from your parents when they retired from farming. 2011 turbo tax software At the time of the gift, the land had an FMV of $80,000. 2011 turbo tax software Your parents' adjusted basis was $100,000. 2011 turbo tax software After you received the land, no events occurred that would increase or decrease your basis. 2011 turbo tax software 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. 2011 turbo tax software 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. 2011 turbo tax software If the sales price is between $80,000 and $100,000, you have neither gain nor loss. 2011 turbo tax software 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. 2011 turbo tax software If you then tried to figure a loss using the FMV ($80,000), you would get a $10,000 gain. 2011 turbo tax software Business property. 2011 turbo tax software   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. 2011 turbo tax software 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. 2011 turbo tax software The same rule applies to a transfer by your former spouse if the transfer is incident to divorce. 2011 turbo tax software 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. 2011 turbo tax software 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. 2011 turbo tax software For more information, see Property Settlements in Publication 504, Divorced or Separated Individuals. 2011 turbo tax software 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. 2011 turbo tax software If a federal estate return is filed, you can use its appraised value. 2011 turbo tax software The FMV on the alternate valuation date, if the personal representative for the estate elects to use alternate valuation. 2011 turbo tax software For information on the alternate valuation, see the Instructions for Form 706. 2011 turbo tax software 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. 2011 turbo tax software 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. 2011 turbo tax software Special-use valuation method. 2011 turbo tax software   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. 2011 turbo tax software If so, the executor or personal representative values the qualified real property based on its use as a farm or other closely held business. 2011 turbo tax software 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. 2011 turbo tax software The qualified heirs should be able to get the necessary value from the executor or personal representative of the estate. 2011 turbo tax software   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. 2011 turbo tax software 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. 2011 turbo tax software Figure all FMVs without regard to the special-use valuation. 2011 turbo tax software   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. 2011 turbo tax software 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. 2011 turbo tax software The tax also does not apply if you transfer the property to a member of your family and certain requirements are met. 2011 turbo tax software   You can elect to increase your basis in special-use valuation property if it becomes subject to the additional estate tax. 2011 turbo tax software 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. 2011 turbo tax software 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. 2011 turbo tax software The increase in your basis is considered to have occurred immediately before the event that resulted in the additional estate tax. 2011 turbo tax software   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. 2011 turbo tax software   For more information, see Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, Form 706-A, and the related instructions. 2011 turbo tax software Property inherited from a decedent who died in 2010. 2011 turbo tax software   If you inherited property from a decedent who died in 2010, different rules may apply. 2011 turbo tax software See Publication 4895, Tax Treatment of Property Acquired From a Decendent Dying in 2010, for details. 2011 turbo tax software 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. 2011 turbo tax software Partner's basis. 2011 turbo tax software   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. 2011 turbo tax software 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. 2011 turbo tax software For more information, see Partner's Basis for Distributed Property in Publication 541, Partnerships. 2011 turbo tax software Shareholder's basis. 2011 turbo tax software   The basis of property distributed by a corporation to a shareholder is its fair market value. 2011 turbo tax software For more information about corporate distributions, see Distributions to Shareholders in Publication 542, Corporations. 2011 turbo tax software Prev  Up  Next   Home   More Online Publications