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Ez Tax Form

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Ez Tax Form

Ez tax form Publication 80 - Introductory Material Table of Contents Future Developments What's New Reminders Calendar Future Developments For the latest information about developments related to Publication 80 (Circular SS), such as legislation enacted after it was published, go to www. Ez tax form irs. Ez tax form gov/pub80. Ez tax form What's New Social security and Medicare tax for 2014. Ez tax form  The social security tax rate is 6. Ez tax form 2% each for the employee and employer, unchanged from 2013. Ez tax form The social security wage base limit is $117,000. Ez tax form The Medicare tax rate is 1. Ez tax form 45% each for the employee and employer, unchanged from 2013. Ez tax form There is no wage base limit for Medicare tax. Ez tax form Social security and Medicare taxes apply to the wages of household workers you pay $1,900 or more in cash or an equivalent form of compensation. Ez tax form Social security and Medicare taxes apply to election workers who are paid $1,600 or more in cash or an equivalent form of compensation. Ez tax form Change of responsible party. Ez tax form . Ez tax form  Beginning January 1, 2014, any entity with an employer identification number (EIN) must file Form 8822-B, Change of Address or Responsible Party—Business, to report the latest change to its responsible party. Ez tax form Form 8822-B must be filed within 60 days of the change. Ez tax form If the change in the identity of your responsible party occurred before 2014, and you have not previously notified the IRS of the change, file Form 8822-B before March 1, 2014, reporting only the most recent change. Ez tax form For a definition of “responsible party”, see the Form 8822-B instructions. Ez tax form Same-sex marriage. Ez tax form  For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. Ez tax form For more information, see Revenue Ruling 2013-17, 2013-38 I. Ez tax form R. Ez tax form B. Ez tax form 201, available at www. Ez tax form irs. Ez tax form gov/irb/2013-38_IRB/ar07. Ez tax form html. Ez tax form Notice 2013-61 provides special administrative procedures for employers to make claims for refund or adjustments of overpayments of social security and Medicare taxes with respect to certain same-sex spouse benefits before expiration of the period of limitations. Ez tax form Notice 2013-61, 2013-44 I. Ez tax form R. Ez tax form B. Ez tax form 432, is available at www. Ez tax form irs. Ez tax form gov/irb/2013-44_IRB/ar10. Ez tax form html. Ez tax form Reminders Additional Medicare Tax withholding. Ez tax form  In addition to withholding Medicare tax at 1. Ez tax form 45%, you must withhold a 0. Ez tax form 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Ez tax form You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Ez tax form Additional Medicare Tax is only imposed on the employee. Ez tax form There is no employer share of Additional Medicare Tax. Ez tax form All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. Ez tax form For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Employment and Payments , in section 12. Ez tax form For more information on Additional Medicare Tax, visit IRS. Ez tax form gov and enter “Additional Medicare Tax” in the search box. Ez tax form Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans. Ez tax form  The work opportunity tax credit is available for eligible unemployed veterans who begin work on or after November 22, 2011, and before January 1, 2014. Ez tax form Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. Ez tax form For more information, visit IRS. Ez tax form gov and enter “work opportunity tax credit” in the search box. Ez tax form Outsourcing payroll duties. Ez tax form  Employers are responsible to ensure that tax returns are filed and deposits and payments are made, even if the employer contracts with a third party to perform these acts. Ez tax form The employer remains responsible if the third party fails to perform any required action. Ez tax form If you choose to outsource any of your payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer such as a payroll service provider or reporting agent, visit IRS. Ez tax form gov and enter “outsourcing payroll duties” in the search box for helpful information on this topic. Ez tax form Residents of the Philippines working in the Commonwealth of the Northern Mariana Islands (CNMI). Ez tax form  The IRS will not assert that an employer has understated liability for social security and Medicare taxes because they failed to treat services performed before January 1, 2015, in the CNMI by a resident of the Philippines as employment as defined under Internal Revenue Code section 3121(b). Ez tax form For more information, see Announcement 2012-43, 2012-51 I. Ez tax form R. Ez tax form B. Ez tax form 723, available at www. Ez tax form irs. Ez tax form gov/irb/2012-51_IRB/ar15. Ez tax form html. Ez tax form CNMI government employees now subject to social security and Medicare taxes. Ez tax form  Beginning in the fourth calendar quarter of 2012, CNMI government employees are subject to social security and Medicare taxes. Ez tax form COBRA premium assistance credit. Ez tax form  The credit for COBRA premium assistance payments applies to premiums paid for employees involuntarily terminated between September 1, 2008 and May 31, 2010, and to premiums paid for up to 15 months. Ez tax form See COBRA premium assistance credit in Publication 15 (Circular E), Employer's Tax Guide. Ez tax form You can get Publication 15 (Circular E) at IRS. Ez tax form gov. Ez tax form You must receive written notice from the IRS to file Form 944. Ez tax form  If you have been filing Forms 941-SS and believe your employment taxes for the calendar year will be $1,000 or less, and you would like to file Form 944, Employer's ANNUAL Federal Tax Return, instead of Forms 941-SS, you must contact the IRS to request to file Form 944. Ez tax form You must receive written notice from the IRS to file Form 944 instead of Forms 941-SS before you may file this form. Ez tax form For more information on requesting to file Form 944 visit IRS. Ez tax form gov and enter “file employment taxes annually” in the search box. Ez tax form Federal employers in the CNMI. Ez tax form  The U. Ez tax form S. Ez tax form Treasury Department and the CNMI Division of Revenue and Taxation entered into an agreement under 5 USC 5517 in December 2006. Ez tax form Under this agreement, all federal employers (including the Department of Defense) are required to withhold CNMI income taxes (rather than federal income taxes) and deposit the CNMI taxes with the CNMI Treasury for employees who are subject to CNMI taxes and whose regular place of federal employment is in the CNMI. Ez tax form Federal employers are also required to file quarterly and annual reports with the CNMI Division of Revenue and Taxation. Ez tax form For questions, contact the CNMI Division of Revenue and Taxation. Ez tax form Change of address. Ez tax form  Use Form 8822-B to notify the IRS of an address change. Ez tax form Do not mail Form 8822-B with your employment tax return. Ez tax form Federal tax deposits must be made by electronic funds transfer. Ez tax form  You must use electronic funds transfer to make all federal tax deposits. Ez tax form Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). Ez tax form If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Ez tax form Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Ez tax form EFTPS is a free service provided by the Department of Treasury. Ez tax form Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Ez tax form For more information on making federal tax deposits, see How To Deposit in section 8. Ez tax form For more information about EFTPS or to enroll in EFTPS, visit the EFTPS website at www. Ez tax form eftps. Ez tax form gov or call 1-800-555-4477 (U. Ez tax form S. Ez tax form Virgin Islands only) or 303-967-5916 (toll call) or 1-800-733-4829 (TDD). Ez tax form Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. Ez tax form Electronic filing and payment. Ez tax form  Using electronic options can make filing a return and paying your federal tax easier. Ez tax form Use the Electronic Federal Tax Payment System (EFTPS) to make deposits or pay in full, whether you rely on a tax professional or prepare your own taxes. Ez tax form You can use IRS e-file to file certain returns. Ez tax form If there is a balance due on the return, you can e-file and e-pay in a single step by authorizing an electronic funds withdrawal (EFW) from your bank account while e-filing. Ez tax form Do not use EFW to pay taxes that are required to be deposited. Ez tax form Visit the IRS website at www. Ez tax form irs. Ez tax form gov/efile for more information on filing electronically. Ez tax form For more information on paying your taxes using EFW, visit the IRS website at www. Ez tax form irs. Ez tax form gov/e-pay. Ez tax form A fee may be charged to file electronically. Ez tax form For EFTPS, visit www. Ez tax form eftps. Ez tax form gov or call EFTPS Customer Service at 1-800-555-4477 (U. Ez tax form S. Ez tax form Virgin Islands only) or 303-967-5916 (toll call). Ez tax form For electronic filing of Forms W-2AS, W-2CM, W-2GU, W-2VI, Wage and Tax Statements; W-3SS, Transmittal of Wage and Tax Statements; and W-2c, Corrected Wage and Tax Statement, visit www. Ez tax form socialsecurity. Ez tax form gov/employer. Ez tax form If you are filing your tax return or paying your federal taxes electronically, a valid EIN is required. Ez tax form If a valid EIN is not provided, the return or payment will not be processed. Ez tax form This may result in penalties and delays in processing your return or payment. Ez tax form Electronic option for filing Forms W-2AS, W-2CM, W-2GU, or W-2VI. Ez tax form  Employers in American Samoa, the CNMI, Guam, and the U. Ez tax form S. Ez tax form Virgin Islands can now use the Social Security Administration's W-2 Online service to create, save, print, and submit up to 50 Forms W-2AS, W-2CM, W-2GU, or W-2VI at a time over the Internet. Ez tax form Form W-3SS will be generated automatically based on your Forms W-2AS, W-2CM, W-2GU, or W-2VI. Ez tax form For more information, visit Social Security Administration's SSA website at www. Ez tax form ssa. Ez tax form gov/bso/bsowelcome. Ez tax form htm. Ez tax form Credit or debit card payments. Ez tax form  For information on paying your taxes with a credit or debit card, visit the IRS website at www. Ez tax form irs. Ez tax form gov/e-pay. Ez tax form However, do not use credit or debit cards to make federal tax deposits. Ez tax form Hiring new employees. Ez tax form  Record the number and name from each new employee's social security card. Ez tax form An employee who does not have a social security card should apply for one on Form SS-5, Application for a Social Security Card. Ez tax form See section 3. Ez tax form Reporting discrepancies between Forms 941-SS (or Form 944) and Forms W-2. Ez tax form  File Schedule D (Form 941), Report of Discrepancies Caused by Acquisitions, Statutory Mergers, or Consolidations, to explain certain wage, tax, and payment discrepancies between Forms 941-SS (or Form 944), and Forms W-2 that were caused by acquisitions, statutory mergers, or consolidations. Ez tax form For more information, see the Instructions for Schedule D (Form 941). Ez tax form Apply for an employer identification number (EIN) online. Ez tax form  You can apply for an EIN online by visiting IRS. Ez tax form gov and clicking on the Apply for an EIN Online link under Tools. Ez tax form Dishonored payments. Ez tax form  Any form of payment that is dishonored and returned from a financial institution is subject to a penalty. Ez tax form The penalty is $25 or 2% of the payment, whichever is more. Ez tax form However, the penalty on dishonored payments of $24. Ez tax form 99 or less is an amount equal to the payment. Ez tax form For example, a dishonored payment of $18 is charged a penalty of $18. Ez tax form Private delivery services. Ez tax form  You can use certain private delivery services designated by the IRS to send tax returns or payments. Ez tax form The list includes only the following: DHL Express (DHL): DHL Same Day Service. Ez tax form Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First. Ez tax form United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. Ez tax form M. Ez tax form , UPS Worldwide Express Plus, and UPS Worldwide Express. Ez tax form For the IRS mailing address to use if you are using a private delivery service, go to IRS. Ez tax form gov and enter “private delivery service” in the search box. Ez tax form Your private delivery service can tell you how to get written proof of the mailing date. Ez tax form Private delivery services cannot deliver items to P. Ez tax form O. Ez tax form boxes. Ez tax form You must use the U. Ez tax form S. Ez tax form Postal Service to mail any item to an IRS P. Ez tax form O. Ez tax form box address. Ez tax form Recordkeeping. Ez tax form  Keep all records of employment taxes for 4 years. Ez tax form These should be available for IRS review. Ez tax form There is no required format for such records, but they should include your EIN; the amounts and dates of all wage payments (including fringe benefits) and tips reported; the names, addresses, and occupations of employees receiving such payments and their social security numbers; copies of returns filed; dates of employment; and the dates and amounts of deposits made. Ez tax form Farm employers must keep a record of the name, permanent address, and EIN of each crew leader. Ez tax form See Farm Crew Leaders in section 2. Ez tax form Disregarded entities and qualified subchapter S subsidiaries (QSubs). Ez tax form  Eligible single-owner disregarded entities and QSubs are treated as separate entities for employment tax purposes. Ez tax form Eligible single-member entities that have not elected to be taxed as corporations must report and pay employment taxes on wages paid to their employees using the entities' own names and EINs. Ez tax form See Regulations sections 1. Ez tax form 1361-4(a)(7) and 301. Ez tax form 7701-2(c)(2)(iv). Ez tax form Photographs of missing children. Ez tax form  The IRS is a proud partner with the National Center for Missing and Exploited Children. Ez tax form Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Ez tax form You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Ez tax form Calendar   If any date for filing a return, furnishing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, the due date is the next business day. Ez tax form A statewide legal holiday delays a filing due date only if the IRS office where you are required to file is located in that state. Ez tax form However, a statewide legal holiday does not delay the due date of federal tax deposits. Ez tax form See Deposits on Business Days Only in section 8. Ez tax form For any filing due date, you will meet the “file” or “furnish” requirement if the envelope containing the return or form is properly addressed, contains sufficient postage, and is postmarked by the U. Ez tax form S. Ez tax form Postal Service on or before the due date, or sent by an IRS-designated delivery service on or before the due date. Ez tax form See Private delivery services under Reminders. Ez tax form The following are important dates and responsibilities. Ez tax form Also see Publication 509, Tax Calendars. Ez tax form By January 31. Ez tax form   Furnish wage and tax statements to employees. Ez tax form Give each employee a completed Form W-2AS, W-2CM, W-2GU, or W-2VI. Ez tax form See section 10 for more information. Ez tax form File Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, with the IRS. Ez tax form If you deposited all Form 943 taxes when due, you have 10 additional calendar days to file. Ez tax form U. Ez tax form S. Ez tax form Virgin Islands employers only must file Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, with the IRS. Ez tax form Pay or deposit (if more than $500) any balance of the tax due. Ez tax form If you deposited the full amount of taxes when due, you have 10 additional calendar days to file. Ez tax form File Form 944 with the IRS if you were notified by the IRS to file Form 944 instead of quarterly Forms 941-SS. Ez tax form If you deposited the full amount of taxes when due, you have 10 additional calendar days to file. Ez tax form By February 28. Ez tax form  File paper wage and tax statements with the Social Security Administration (SSA). Ez tax form File Copy A of Forms W-2AS, W-2CM, W-2GU, or W-2VI, and Form W-3SS with the Social Security Administration (SSA). Ez tax form For electronically filed returns, see By March 31 next. Ez tax form By March 31. Ez tax form  File electronic Forms W-2AS, W-2CM, W-2GU, or W-2VI with the SSA. Ez tax form Visit the SSA's Reporting Instructions & Information webpage at www. Ez tax form socialsecurity. Ez tax form gov/employer for more information. Ez tax form By April 30, July 31, October 31, and January 31. Ez tax form  File Form 941-SS with the IRS. Ez tax form If you deposited the full amount of taxes when due, you have 10 additional calendar days to file. Ez tax form Do not file Forms 941-SS for these quarters if you have been notified to file Form 944 and you did not request to file quarterly Forms 941-SS. Ez tax form Deposit FUTA tax for the quarter (including any amount carried over from other quarters) if over $500. Ez tax form If $500 or less, carry it over to the next quarter. Ez tax form See section 11 for more information. Ez tax form Prev  Up  Next   Home   More Online Publications
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Report Phishing

The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.

What is phishing?
Phishing is a scam typically carried out by unsolicited email and/or websites that pose as legitimate sites and lure unsuspecting victims to provide personal and financial information.

All unsolicited email claiming to be from either the IRS or any other IRS-related components such as the Office of Professional Responsibility or EFTPS, should be reported to phishing@irs.gov.

However, if you have experienced monetary losses due to an IRS-related incident please file a complaint with the Federal Trade Commission through their Complaint Assistant to make that information available to investigators.

ALERT: IRS Warns of Phone Scam

What to do if you receive a suspicious IRS-related communication

If

Then

You receive an email claiming to be from the IRS that contains a request for personal information …
  1. Do not reply.
  2. Do not open any attachments. Attachments may contain malicious code that will infect your computer.
  3. Do not click on any links.
    If you clicked on links in a suspicious email or phishing website and entered confidential information, visit our identity protection page.
  4. Forward the email as-is, to us at phishing@irs.gov.
  5. After you forward the email and/or header information to us, delete the original email message you received.

Note:
Please forward the full original email to us at phishing@irs.gov. Do not forward scanned images of printed emails as that strips the email of valuable information only available in the electronic copy.

You discover a website on the Internet that claims to be the IRS but you suspect it is bogus … ... send the URL of the suspicious site to phishing@irs.gov. Please add in the subject line of the email, 'Suspicious website'.
You receive a phone call or paper letter via mail from an individual claiming to be the IRS but you suspect they are not an IRS employee …

Phone call:

  1. Ask for a call back number and employee badge number.
  2. Contact the IRS to determine if the caller is an IRS employee with a legitimate need to contact you.
  3. If you determine the person calling you is an IRS employee with a legitimate need to contact you, call them back.

Letter or notice via paper mail:

  1. Contact the IRS to determine if the mail is a legitimate IRS letter.
  2. If it is a legitimate IRS letter, reply if needed.

Report the incident to the Treasury Inspector General for Tax Administration if the caller or party that sent the paper letter is not legitimate.

You receive an unsolicited e-mail or fax, involving a stock or share purchase 

... and you are a U.S. citizen located in the United States or its territories or a U.S. citizen living abroad.

  1. Complete the appropriate complaint form with the U.S. Securities and Exchange Commission.
  2. Forward email to phishing@irs.gov.
    Please add in the subject line of the email, 'Stock'.
  3. If you are a victim of monetary or identity theft, you may submit a complaint through the FTC Complaint Assistant.  

... and you are not a U.S. citizen and reside outside the United States.

  1. Complete the appropriate complaint form with the U.S. Securities and Exchange Commission.
  2. Contact your securities regulator and file a complaint.
  3. Forward email to phishing@irs.gov.
    Please add in the subject line of the e-mail, 'Stock'.
  4. If you are a victim of monetary or identity theft, you may report your complaint to econsumer.gov.
You receive an unsolicited fax (such as Form W8-BEN) claiming to be from the IRS, requesting personal information … Contact the IRS to determine if the fax is from the IRS.
  • If you learn the fax is not from the IRS, please send us the information via email at phishing@irs.gov. In the subject line of the email, please type the word ‘FAX’.
You receive a text message or Short Message Service (SMS) message claiming to be from the IRS …
  1. Do not reply.
  2. Do not open any attachments. Attachments may contain malicious code that will infect your computer or mobile phone.
  3. Do not click on any links. If you clicked on links in a suspicious SMS and entered confidential information, visit our identity protection page.
  4. Forward the text as-is, to us at 202-552-1226. Note: Standard text messaging rates apply.
  5. If possible, in a separate text, forward the originating number to us at 202-552-1226
  6. After you forward the text, please delete the original text.

You have a tax-related question ...

Note: Do not submit tax-related questions to phishing@irs.gov.

If you have a tax-related question, unrelated to phishing or identity theft, please contact the IRS.

How to identify phishing email scams claiming to be from the IRS and bogus IRS websites


The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.

The IRS does not:

  • request detailed personal information through e-mail.
  • send any communication requesting your PIN numbers, passwords or similar access information for credit cards, banks or other financial accounts.

What to do if you receive a suspicious email message that does not claim to be from the IRS

 If

 Then

You receive a suspicious phishing email not claiming to be from the IRS ... Forward the email as-is to reportphishing@antiphishing.org.
You receive an email you suspect contains malicious code or a malicious attachment and you HAVE clicked on the link or downloaded the attachment … Visit OnGuardOnline.gov to learn what to do if you suspect you have malware on your computer.
You receive an email you suspect contains malicious code or a malicious attachment and you HAVE NOT clicked on the link or downloaded the attachment … Forward the email to your Internet Service Provider’s abuse department and/or to spam@uce.gov.

 

 

Page Last Reviewed or Updated: 26-Mar-2014

Phishing-Malware

See YouTube for more ID theft videos.

 

The Ez Tax Form

Ez tax form 6. Ez tax form   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. Ez tax form Use basis to figure the gain or loss on the sale, exchange, or other disposition of property. Ez tax form Also use basis to figure depreciation, amortization, depletion, and casualty losses. Ez tax form If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. Ez tax form Only the basis allocated to the business or investment use of the property can be depreciated. Ez tax form Your original basis in property is adjusted (increased or decreased) by certain events. Ez tax form For example, if you make improvements to the property, increase your basis. Ez tax form If you take deductions for depreciation, or casualty losses, or claim certain credits, reduce your basis. Ez tax form Keep accurate records of all items that affect the basis of your assets. Ez tax form For information on keeping records, see chapter 1. Ez tax form 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. Ez tax form Cost Basis The basis of property you buy is usually its cost. Ez tax form Cost is the amount you pay in cash, debt obligations, other property, or services. Ez tax form Your cost includes amounts you pay for sales tax, freight, installation, and testing. Ez tax form The basis of real estate and business assets will include other items, discussed later. Ez tax form Basis generally does not include interest payments. Ez tax form However, see Carrying charges and Capitalized interest in chapter 4 of Publication 535. Ez tax form You also may have to capitalize (add to basis) certain other costs related to buying or producing property. Ez tax form Under the uniform capitalization rules, discussed later, you may have to capitalize direct costs and certain indirect costs of producing property. Ez tax form Loans with low or no interest. Ez tax form   If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price minus the amount considered to be unstated interest. Ez tax form You generally have unstated interest if your interest rate is less than the applicable federal rate. Ez tax form See the discussion of unstated interest in Publication 537, Installment Sales. Ez tax form Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. Ez tax form If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. Ez tax form Some of these expenses are discussed next. Ez tax form Lump sum purchase. Ez tax form   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. Ez tax form Allocate the cost basis according to the respective fair market values (FMVs) of the land and improvements at the time of purchase. Ez tax form Figure the basis of each asset by multiplying the lump sum by a fraction. Ez tax form The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. Ez tax form Fair market value (FMV). Ez tax form   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. Ez tax form Sales of similar property on or about the same date may help in figuring the FMV of the property. Ez tax form 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. Ez tax form Real estate taxes. Ez tax form   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. Ez tax form   If you reimburse the seller for taxes the seller paid for you, you generally can deduct that amount as a tax expense. Ez tax form Whether or not you reimburse the seller, do not include that amount in the basis of your property. Ez tax form Settlement costs. Ez tax form   Your basis includes the settlement fees and closing costs for buying the property. Ez tax form See Publication 551 for a detailed list of items you can and cannot include in basis. Ez tax form   Do not include fees and costs for getting a loan on the property. Ez tax form Also, do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Ez tax form Points. Ez tax form   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. Ez tax form You may be able to deduct the points currently or over the term of the loan. Ez tax form For more information about deducting points, see Points in chapter 4 of Publication 535. Ez tax form Assumption of a mortgage. Ez tax form   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. Ez tax form Example. Ez tax form If you buy a farm for $100,000 cash and assume a mortgage of $400,000, your basis is $500,000. Ez tax form Constructing assets. Ez tax form   If you build property or have assets built for you, your expenses for this construction are part of your basis. Ez tax form 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. Ez tax form   In addition, if you use your own employees, farm materials, and equipment to build an asset, do not deduct the following expenses. Ez tax form You must capitalize them (include them in the asset's basis). Ez tax form Employee wages paid for the construction work, reduced by any employment credits allowed. Ez tax form Depreciation on equipment you own while it is used in the construction. Ez tax form Operating and maintenance costs for equipment used in the construction. Ez tax form The cost of business supplies and materials used in the construction. Ez tax form    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. Ez tax form 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. Ez tax form To determine the basis of these assets or separate items, there must be an allocation of basis. Ez tax form Group of assets acquired. Ez tax form   If you buy multiple assets for a lump sum, allocate the amount you pay among the assets. Ez tax form Use this allocation to figure your basis for depreciation and gain or loss on a later disposition of any of these assets. Ez tax form You and the seller may agree in the sales contract to a specific allocation of the purchase price among the assets. Ez tax form 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. Ez tax form Farming business acquired. Ez tax form   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. Ez tax form Generally, reduce the purchase price by any cash received. Ez tax form 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. Ez tax form See Trade or Business Acquired under Allocating the Basis in Publication 551 for more information. Ez tax form Transplanted embryo. Ez tax form   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. Ez tax form Allocate the rest of the purchase price to the basis of the calf. Ez tax form Neither the cost allocated to the cow nor the cost allocated to the calf is deductible as a current business expense. Ez tax form 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. Ez tax form You recover these costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Ez tax form 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. Ez tax form 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. Ez tax form You produce property if you construct, build, install, manufacture, develop, improve, or create the property. Ez tax form You are not subject to the uniform capitalization rules if the property is produced for personal use. Ez tax form In a farming business, you produce property if you raise or grow any agricultural or horticultural commodity, including plants and animals. Ez tax form Plants. Ez tax form   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. Ez tax form Animals. Ez tax form   An animal produced in a farming business includes any stock, poultry or other bird, and fish or other sea life. Ez tax form The direct and indirect costs of producing plants or animals include preparatory costs and preproductive period costs. Ez tax form Preparatory costs include the acquisition costs of the seed, seedling, plant, or animal. Ez tax form For plants, preproductive period costs include the costs of items such as irrigation, pruning, frost protection, spraying, and harvesting. Ez tax form For animals, preproductive period costs include the costs of items such as feed, maintaining pasture or pen areas, breeding, veterinary services, and bedding. Ez tax form Exceptions. Ez tax form   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. Ez tax form   Exceptions (1) and (2) do not apply to a corporation, partnership, or tax shelter required to use an accrual method of accounting. Ez tax form See Accrual Method Required under Accounting Methods in chapter 2. Ez tax form   In addition, you can elect not to use the uniform capitalization rules for plants with a preproductive period of more than 2 years. Ez tax form If you make this election, special rules apply. Ez tax form This election cannot be made by a corporation, partnership, or tax shelter required to use an accrual method of accounting. Ez tax form 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. Ez tax form    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. Ez tax form See chapter 7, for additional information on depreciation. Ez tax form Example. Ez tax form You grow trees that have a preproductive period of more than 2 years. Ez tax form The trees produce an annual crop. Ez tax form You are an individual and the uniform capitalization rules apply to your farming business. Ez tax form You must capitalize the direct costs and an allocable part of indirect costs incurred due to the production of the trees. Ez tax form You are not required to capitalize the costs of producing the annual crop because its preproductive period is 2 years or less. Ez tax form Preproductive period of more than 2 years. Ez tax form   The preproductive period of plants grown in commercial quantities in the United States is based on their nationwide weighted average preproductive period. Ez tax form Plants producing the crops or yields shown in Table 6-1 have a nationwide weighted average preproductive period of more than 2 years. Ez tax form Other plants (not shown in Table 6-1) may also have a nationwide weighted average preproductive period of more than 2 years. Ez tax form More information. Ez tax form   For more information on the uniform capitalization rules that apply to property produced in a farming business, see Regulations section 1. Ez tax form 263A-4. Ez tax form Table 6-1. Ez tax form 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. Ez tax form 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. Ez tax form 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. Ez tax form Increases to Basis Increase the basis of any property by all items properly added to a capital account. Ez tax form These include the cost of any improvements having a useful life of more than 1 year. Ez tax form The following costs increase the basis of property. Ez tax form The cost of extending utility service lines to property. Ez tax form Legal fees, such as the cost of defending and perfecting title. Ez tax form Legal fees for seeking a decrease in an assessment levied against property to pay for local improvements. Ez tax form Assessments for items such as paving roads and building ditches that increase the value of the property assessed. Ez tax form Do not deduct these expenses as taxes. Ez tax form However, you can deduct as taxes amounts assessed for maintenance or repairs, or for meeting interest charges related to the improvements. Ez tax form 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. Ez tax form See chapter 7. Ez tax form Deducting vs. Ez tax form capitalizing costs. Ez tax form   Do not add to your basis costs you can deduct as current expenses. Ez tax form For example, amounts paid for incidental repairs or maintenance are deductible as business expenses and are not added to basis. Ez tax form However, you can elect either to deduct or to capitalize certain other costs. Ez tax form See chapter 7 in Publication 535. Ez tax form Decreases to Basis The following are some items that reduce the basis of property. Ez tax form Section 179 deduction. Ez tax form Deductions previously allowed or allowable for amortization, depreciation, and depletion. Ez tax form Alternative motor vehicle credit. Ez tax form See Form 8910. Ez tax form Alternative fuel vehicle refueling property credit. Ez tax form See Form 8911. Ez tax form Residential energy efficient property credits. Ez tax form See Form 5695. Ez tax form Investment credit (part or all) taken. Ez tax form Casualty and theft losses and insurance reimbursements. Ez tax form Payments you receive for granting an easement. Ez tax form Exclusion from income of subsidies for energy conservation measures. Ez tax form Certain canceled debt excluded from income. Ez tax form Rebates from a manufacturer or seller. Ez tax form Patronage dividends received from a cooperative association as a result of a purchase of property. Ez tax form See Patronage Dividends in chapter 3. Ez tax form Gas-guzzler tax. Ez tax form See Form 6197. Ez tax form Some of these items are discussed next. Ez tax form For a more detailed list of items that decrease basis, see section 1016 of the Internal Revenue Code and Publication 551. Ez tax form Depreciation and section 179 deduction. Ez tax form   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. Ez tax form For more information on these deductions, see chapter 7. Ez tax form Section 179 deduction. Ez tax form   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. Ez tax form Depreciation. Ez tax form   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. Ez tax form 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. Ez tax form If you did not take a depreciation deduction, reduce the basis by the full amount of the depreciation you could have taken. Ez tax form   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. Ez tax form   See chapter 7 for information on figuring the depreciation you should have claimed. Ez tax form   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. Ez tax form Casualty and theft losses. Ez tax form   If you have a casualty or theft loss, decrease the basis of the property by any insurance or other reimbursement. Ez tax form Also, decrease it by any deductible loss not covered by insurance. Ez tax form See chapter 11 for information about figuring your casualty or theft loss. Ez tax form   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. Ez tax form To make this determination, compare the repaired property to the property before the casualty. Ez tax form Easements. Ez tax form   The amount you receive for granting an easement is usually considered to be proceeds from the sale of an interest in the real property. Ez tax form It reduces the basis of the affected part of the property. Ez tax form If the amount received is more than the basis of the part of the property affected by the easement, reduce your basis in that part to zero and treat the excess as a recognized gain. Ez tax form See Easements and rights-of-way in chapter 3. Ez tax form Exclusion from income of subsidies for energy conservation measures. Ez tax form   You can exclude from gross income any subsidy you received from a public utility company for the purchase or installation of an energy conservation measure for a dwelling unit. Ez tax form Reduce the basis of the property by the excluded amount. Ez tax form Canceled debt excluded from income. Ez tax form   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. Ez tax form A debt includes any indebtedness for which you are liable or which attaches to property you hold. Ez tax form   You can exclude your canceled debt from income if the debt is any of the following. Ez tax form Debt canceled in a bankruptcy case or when you are insolvent. Ez tax form Qualified farm debt. Ez tax form Qualified real property business debt (provided you are not a C corporation). Ez tax form Qualified principal residence indebtedness. Ez tax form Discharge of certain indebtedness of a qualified individual because of Midwestern disasters. Ez tax form If you exclude canceled debt described in (1) or (2), you may have to reduce the basis of your depreciable and nondepreciable property. Ez tax form If you exclude canceled debt described in (3), you must only reduce the basis of your depreciable property by the excluded amount. Ez tax form   For more information about canceled debt in a bankruptcy case, see Publication 908, Bankruptcy Tax Guide. Ez tax form For more information about insolvency and canceled debt that is qualified farm debt or qualified principal residence indebtedness, see chapter 3. Ez tax form For more information about qualified real property business debt, see Publication 334, Tax Guide for Small Business. Ez tax form For more information about canceled debt in Midwestern disaster areas, see Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. Ez tax form Basis Other Than Cost There are times when you cannot use cost as basis. Ez tax form In these situations, the fair market value or the adjusted basis of property may be used. Ez tax form Examples are discussed next. Ez tax form Property changed from personal to business or rental use. Ez tax form   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. Ez tax form 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. Ez tax form   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. Ez tax form   If you later sell or dispose of this property, the basis you use will depend on whether you are figuring a gain or loss. Ez tax form The basis for figuring a gain is your adjusted basis in the property when you sell the property. Ez tax form Figure the basis for a loss starting with the smaller of your adjusted basis or the FMV of the property at the time of the change to business or rental use. Ez tax form Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . Ez tax form Property received for services. Ez tax form   If you receive property for services, include the property's FMV in income. Ez tax form The amount you include in income becomes your basis. Ez tax form If the services were performed for a price agreed on beforehand, it will be accepted as the FMV of the property if there is no evidence to the contrary. Ez tax form Example. Ez tax form George Smith is an accountant and also operates a farming business. Ez tax form George agreed to do some accounting work for his neighbor in exchange for a dairy cow. Ez tax form The accounting work and the cow are each worth $1,500. Ez tax form George must include $1,500 in income for his accounting services. Ez tax form George's basis in the cow is $1,500. Ez tax form Taxable Exchanges A taxable exchange is one in which the gain is taxable, or the loss is deductible. Ez tax form A taxable gain or deductible loss also is known as a recognized gain or loss. Ez tax form A taxable exchange occurs when you receive cash or get property that is not similar or related in use to the property exchanged. Ez tax form If you receive property in exchange for other property in a taxable exchange, the basis of the property you receive is usually its FMV at the time of the exchange. Ez tax form Example. Ez tax form You trade a tract of farmland with an adjusted basis of $2,000 for a tractor that has an FMV of $6,000. Ez tax form You must report a taxable gain of $4,000 for the land. Ez tax form The tractor has a basis of $6,000. Ez tax form 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. Ez tax form Similar or related property. Ez tax form   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. Ez tax form However, make the following adjustments. Ez tax form Decrease the basis by the following amounts. Ez tax form Any loss you recognize on the involuntary conversion. Ez tax form Any money you receive that you do not spend on similar property. Ez tax form Increase the basis by the following amounts. Ez tax form Any gain you recognize on the involuntary conversion. Ez tax form Any cost of acquiring the replacement property. Ez tax form Money or property not similar or related. Ez tax form   If you receive money or property not similar or related in service or use to the converted property and you buy replacement property similar or related in service or use to the converted property, the basis of the replacement property is its cost decreased by the gain not recognized on the involuntary conversion. Ez tax form Allocating the basis. Ez tax form   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. Ez tax form Basis for depreciation. Ez tax form   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. Ez tax form For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. Ez tax form For more information about involuntary conversions, see chapter 11. Ez tax form Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. Ez tax form A nontaxable gain or loss also is known as an unrecognized gain or loss. Ez tax form If you receive property in a nontaxable exchange, its basis is usually the same as the basis of the property you transferred. Ez tax form Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. Ez tax form 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. Ez tax form There must also be an exchange of like-kind property. Ez tax form For more information, see Like-Kind Exchanges in  chapter 8. Ez tax form The basis of the property you receive generally is the same as the adjusted basis of the property you gave up. Ez tax form Example 1. Ez tax form You traded a truck you used in your farming business for a new smaller truck to use in farming. Ez tax form The adjusted basis of the old truck was $10,000. Ez tax form The FMV of the new truck is $30,000. Ez tax form 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. Ez tax form Example 2. Ez tax form You trade a field cultivator (adjusted basis of $8,000) for a planter (FMV of $9,000). Ez tax form You use both the field cultivator and the planter in your farming business. Ez tax form The basis of the planter you receive is $8,000, the same as the field cultivator traded Exchange expenses. Ez tax form   Exchange expenses generally are the closing costs that you pay. Ez tax form They include such items as brokerage commissions, attorney fees, and deed preparation fees. Ez tax form Add them to the basis of the like-kind property you receive. Ez tax form Property plus cash. Ez tax form   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. Ez tax form Example. Ez tax form You trade in a truck (adjusted basis of $3,000) for another truck (FMV of $7,500) and pay $4,000. Ez tax form Your basis in the new truck is $7,000 (the $3,000 adjusted basis of the old truck plus the $4,000 cash). Ez tax form Special rules for related persons. Ez tax form   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. Ez tax form 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. Ez tax form Each person reports it on the tax return filed for the year in which the later disposition occurred. Ez tax form If this rule applies, the basis of the property received in the original exchange will be its FMV. Ez tax form For more information, see chapter 8. Ez tax form Exchange of business property. Ez tax form   Exchanging the property of one business for the property of another business generally is a multiple property exchange. Ez tax form For information on figuring basis, see Multiple Property Exchanges in chapter 1 of Publication 544. Ez tax form Basis for depreciation. Ez tax form   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind transaction. Ez tax form For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. Ez tax form Partially Nontaxable Exchanges A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. Ez tax form The basis of the property you receive is the same as the adjusted basis of the property you gave up with the following adjustments. Ez tax form Decrease the basis by the following amounts. Ez tax form Any money you receive. Ez tax form Any loss you recognize on the exchange. Ez tax form Increase the basis by the following amounts. Ez tax form Any additional costs you incur. Ez tax form Any gain you recognize on the exchange. Ez tax form If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. Ez tax form Example 1. Ez tax form You trade farmland (basis of $100,000) for another tract of farmland (FMV of $110,000) and $30,000 cash. Ez tax form You realize a gain of $40,000. Ez tax form 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). Ez tax form Include your gain in income (recognize gain) only to the extent of the cash received. Ez tax form Your basis in the land you received is figured as follows. Ez tax form 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. Ez tax form You trade a truck (adjusted basis of $22,750) for another truck (FMV of $20,000) and $10,000 cash. Ez tax form You realize a gain of $7,250. Ez tax form 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). Ez tax form You include all the gain in your income (recognize gain) because the gain is less than the cash you received. Ez tax form Your basis in the truck you received is figured as follows. Ez tax form 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. Ez tax form   If you receive like-kind and unlike properties in the exchange, allocate the basis first to the unlike property, other than money, up to its FMV on the date of the exchange. Ez tax form The rest is the basis of the like-kind property. Ez tax form Example. Ez tax form You traded a tractor with an adjusted basis of $15,000 for another tractor that had an FMV of $12,500. Ez tax form You also received $1,000 cash and a truck that had an FMV of $3,000. Ez tax form The truck is unlike property. Ez tax form You realized a gain of $1,500. Ez tax form 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). Ez tax form 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. Ez tax form Your basis in the properties you received is figured as follows. Ez tax form 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). Ez tax form This is the truck's FMV. Ez tax form The rest ($12,500) is the basis of the tractor. Ez tax form 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. Ez tax form Example. Ez tax form You used a tractor on your farm for 3 years. Ez tax form Its adjusted basis is $22,000 and its FMV is $40,000. Ez tax form You are interested in a new tractor, which sells for $60,000. Ez tax form Ordinarily, you would trade your old tractor for the new one and pay the dealer $20,000. Ez tax form Your basis for depreciating the new tractor would then be $42,000 ($20,000 + $22,000, the adjusted basis of your old tractor). Ez tax form 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. Ez tax form 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). Ez tax form Your basis for depreciating the new tractor is $42,000, the same as if you traded the old tractor. Ez tax form 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. Ez tax form You also must know its FMV at the time it was given to you and any gift tax paid on it. Ez tax form FMV equal to or greater than donor's adjusted basis. Ez tax form   If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis when you received the gift. Ez tax form Increase your basis by all or part of any gift tax paid, depending on the date of the gift. Ez tax form   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. Ez tax form See Adjusted Basis , earlier. Ez tax form   If you received a gift during the tax year, increase your basis in the gift (the donor's adjusted basis) by the part of the gift tax paid on it due to the net increase in value of the gift. Ez tax form Figure the increase by multiplying the gift tax paid by the following fraction. Ez tax form 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. Ez tax form The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Ez tax form Example. Ez tax form In 2013, you received a gift of property from your mother that had an FMV of $50,000. Ez tax form Her adjusted basis was $20,000. Ez tax form The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). Ez tax form She paid a gift tax of $7,320. Ez tax form Your basis, $26,076, is figured as follows. Ez tax form 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) × . Ez tax form 83 Gift tax due to net increase in value $6,076 Adjusted basis of property to your mother +20,000 Your basis in the property $26,076 Note. Ez tax form If you received a gift before 1977, your basis in the gift (the donor's adjusted basis) includes any gift tax paid on it. Ez tax form However, your basis cannot exceed the FMV of the gift when it was given to you. Ez tax form FMV less than donor's adjusted basis. Ez tax form   If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. Ez tax form Your basis for figuring gain is the donor's adjusted basis plus or minus any required adjustments to basis while you held the property. Ez tax form Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustments to basis while you held the property. Ez tax form (See Adjusted Basis , earlier. Ez tax form )   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. Ez tax form Example. Ez tax form You received farmland as a gift from your parents when they retired from farming. Ez tax form At the time of the gift, the land had an FMV of $80,000. Ez tax form Your parents' adjusted basis was $100,000. Ez tax form After you received the land, no events occurred that would increase or decrease your basis. Ez tax form 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. Ez tax form 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. Ez tax form If the sales price is between $80,000 and $100,000, you have neither gain nor loss. Ez tax form 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. Ez tax form If you then tried to figure a loss using the FMV ($80,000), you would get a $10,000 gain. Ez tax form Business property. Ez tax form   If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deductions is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property. Ez tax form Property Transferred From a Spouse The basis of property transferred to you or transferred in trust for your benefit by your spouse is the same as your spouse's adjusted basis. Ez tax form The same rule applies to a transfer by your former spouse if the transfer is incident to divorce. Ez tax form However, for property transferred in trust, adjust your basis for any gain recognized by your spouse or former spouse if the liabilities assumed plus the liabilities to which the property is subject are more than the adjusted basis of the property transferred. Ez tax form 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. Ez tax form For more information, see Property Settlements in Publication 504, Divorced or Separated Individuals. Ez tax form Inherited Property Your basis in property you inherited from a decedent, who died before January 1, 2010, or after December 31, 2010, is generally one of the following: The FMV of the property at the date of the decedent's death. Ez tax form If a federal estate return is filed, you can use its appraised value. Ez tax form The FMV on the alternate valuation date, if the personal representative for the estate elects to use alternate valuation. Ez tax form For information on the alternate valuation, see the Instructions for Form 706. Ez tax form 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. Ez tax form If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes. Ez tax form Special-use valuation method. Ez tax form   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. Ez tax form If so, the executor or personal representative values the qualified real property based on its use as a farm or other closely held business. Ez tax form 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. Ez tax form The qualified heirs should be able to get the necessary value from the executor or personal representative of the estate. Ez tax form   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. Ez tax form 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. Ez tax form Figure all FMVs without regard to the special-use valuation. Ez tax form   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. Ez tax form 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. Ez tax form The tax also does not apply if you transfer the property to a member of your family and certain requirements are met. Ez tax form   You can elect to increase your basis in special-use valuation property if it becomes subject to the additional estate tax. Ez tax form 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. Ez tax form 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. Ez tax form The increase in your basis is considered to have occurred immediately before the event that resulted in the additional estate tax. Ez tax form   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. Ez tax form   For more information, see Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, Form 706-A, and the related instructions. Ez tax form Property inherited from a decedent who died in 2010. Ez tax form   If you inherited property from a decedent who died in 2010, different rules may apply. Ez tax form See Publication 4895, Tax Treatment of Property Acquired From a Decendent Dying in 2010, for details. Ez tax form 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. Ez tax form Partner's basis. Ez tax form   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. Ez tax form 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. Ez tax form For more information, see Partner's Basis for Distributed Property in Publication 541, Partnerships. Ez tax form Shareholder's basis. Ez tax form   The basis of property distributed by a corporation to a shareholder is its fair market value. Ez tax form For more information about corporate distributions, see Distributions to Shareholders in Publication 542, Corporations. Ez tax form Prev  Up  Next   Home   More Online Publications