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Free Efile H&r Block

Irs Forms Amended Tax ReturnH&r Block Free FilingIrs Easy Form2010 Federal Tax FormsH&r Block Free Tax Return2005 Tax FilingAmended Federal Tax Return2010 1040Free Turbo Tax For MilitaryFree Tax Return For 2012Free State Taxes OnlineHrblockFederal Form 1040ezAmend Tax ReturnsState Tax Forms And InstructionsWhere Can I File My 2012 Taxes OnlineAmended1040x Tax ReturnFile Past Taxes For FreeDownload A 1040ez Federal Tax FormBack Tax FilingFiling Amended Tax ReturnTurbotax 2010 Software1040 Ez Tax ReturnFile Income Tax 2014State Tax Return Online2013 Form 1040ezHow To File Taxes StudentEz Tax Form 2012Www Myfreetaxes Com Unitedwayhoco OrgH And R Block Online TaxesFiling Military TaxesFree State Taxes And FederalHow Do I File An Amended Tax ReturnAmend Federal Tax ReturnHow To File Taxes For Self Employment Income1040ez Efile FreeIrs Form Ez 1040File Free State TaxState Of Illinois Tax Filing Online

Free Efile H&r Block

Free efile h&r block 3. Free efile h&r block   Self-Employment Tax Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Who Must Pay Self-Employment Tax?Employed by a U. Free efile h&r block S. Free efile h&r block Church Effect of Exclusion Members of the Clergy Income From U. Free efile h&r block S. Free efile h&r block Possessions Exemption From Social Security and Medicare Taxes Topics - This chapter discusses: Who must pay self-employment tax, and Who is exempt from self-employment tax. Free efile h&r block Useful Items - You may want to see: Publication 334 Tax Guide for Small Business 517 Social Security and Other Information for Members of the Clergy and Religious Workers Form (and Instructions) Form 1040-PR Planilla para la Declaración de la Contribución Federal sobre el Trabajo por Cuenta Propia Form 1040-SS U. Free efile h&r block S. Free efile h&r block Self-Employment Tax Return Form 4361 Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners Schedule SE (Form 1040) Self-Employment Tax See chapter 7 for information about getting these publications and forms. Free efile h&r block Who Must Pay Self-Employment Tax? If you are a self-employed U. Free efile h&r block S. Free efile h&r block citizen or resident, the rules for paying self-employment tax are generally the same whether you are living in the United States or abroad. Free efile h&r block The self-employment tax is a social security and Medicare tax on net earnings from self- employment. Free efile h&r block You must pay self-employment tax if your net earnings from self-employment are at least $400. Free efile h&r block For 2013, the maximum amount of net earnings from self-employment that is subject to the social security portion of the tax is $113,700. Free efile h&r block All net earnings are subject to the Medicare portion of the tax. Free efile h&r block Employed by a U. Free efile h&r block S. Free efile h&r block Church If you were employed by a U. Free efile h&r block S. Free efile h&r block church or a qualified church-controlled organization that chose exemption from social security and Medicare taxes and you received wages of $108. Free efile h&r block 28 or more from the organization, the amounts paid to you are subject to self-employment tax. Free efile h&r block However, you can choose to be exempt from social security and Medicare taxes if you are a member of a recognized religious sect. Free efile h&r block See Publication 517 for more information about church employees and self-employment tax. Free efile h&r block Effect of Exclusion You must take all of your self-employment income into account in figuring your net earnings from self-employment, even income that is exempt from income tax because of the foreign earned income exclusion. Free efile h&r block Example. Free efile h&r block You are in business abroad as a consultant and qualify for the foreign earned income exclusion. Free efile h&r block Your foreign earned income is $95,000, your business deductions total $27,000, and your net profit is $68,000. Free efile h&r block You must pay self-employment tax on all of your net profit, including the amount you can exclude from income. Free efile h&r block Members of the Clergy If you are a member of the clergy, you are treated as self-employed for self-employment tax purposes. Free efile h&r block Your U. Free efile h&r block S. Free efile h&r block self-employment tax is based upon net earnings from self-employment figured without regard to the foreign earned income exclusion or the foreign housing exclusion. Free efile h&r block You can receive exemption from coverage for your ministerial duties if you conscientiously oppose public insurance due to religious reasons or if you oppose it due to the religious principles of your denomination. Free efile h&r block You must file Form 4361 to apply for this exemption. Free efile h&r block This subject is discussed in further detail in Publication 517. Free efile h&r block Income From U. Free efile h&r block S. Free efile h&r block Possessions If you are a U. Free efile h&r block S. Free efile h&r block citizen or resident alien and you own and operate a business in Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, American Samoa, or the U. Free efile h&r block S. Free efile h&r block Virgin Islands, you must pay tax on your net earnings from self-employment (if they are $400 or more) from those sources. Free efile h&r block You must pay the self-employment tax whether or not the income is exempt from U. Free efile h&r block S. Free efile h&r block income taxes (or whether or not you otherwise must file a U. Free efile h&r block S. Free efile h&r block income tax return). Free efile h&r block Unless your situation is described below, attach Schedule SE (Form 1040) to your U. Free efile h&r block S. Free efile h&r block income tax return. Free efile h&r block If you do not have to file Form 1040 with the United States and you are a resident of any of the U. Free efile h&r block S. Free efile h&r block possessions listed in the preceding paragraph, figure your self-employment tax on Form 1040-SS. Free efile h&r block Residents of Puerto Rico may file the Spanish-language Formulario 1040-PR. Free efile h&r block If you are not enclosing a check or money order, file your return with the: Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0215 If you are enclosing a check or money order, file your return with the: Department of the Treasury P. Free efile h&r block O. Free efile h&r block Box 1303 Charlotte, NC 28201-1303 Exemption From Social Security and Medicare Taxes The United States may reach agreements with foreign countries to eliminate dual coverage and dual contributions (taxes) to social security systems for the same work. Free efile h&r block See Bilateral Social Security (Totalization) Agreements in chapter 2 under Social Security and Medicare Taxes. Free efile h&r block As a general rule, self-employed persons who are subject to dual taxation will only be covered by the social security system of the country where they reside. Free efile h&r block For more information on how any specific agreement affects self-employed persons, contact the United States Social Security Administration, as discussed under Bilateral Social Security (Totalization) Agreements in chapter 2. Free efile h&r block If your self-employment earnings should be exempt from foreign social security tax and subject only to U. Free efile h&r block S. Free efile h&r block self-employment tax, you should request a certificate of coverage from the U. Free efile h&r block S. Free efile h&r block Social Security Administration, Office of International Programs. Free efile h&r block The certificate will establish your exemption from the foreign social security tax. Free efile h&r block Send the request to the: Social Security Administration Office of International Programs P. Free efile h&r block O. Free efile h&r block Box 17741 Baltimore, MD 21235-7741 Prev  Up  Next   Home   More Online Publications
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Understanding Your CP54E Notice

Your tax return shows a different name and/or ID number from the information we have for your account. Please provide the requested information.


What you need to do

  • Review your identifying information shown on this notice and compare it to your most recent social security card or taxpayer ID card.
  • Complete the CP54 response form to explain the discrepancies.
  • Include copies of documents to substantiate your name and identifying number.

You may want to

  • Contact the Social Security Administration (SSA) to update your records if any of the following occurred:
    • you recently married and are using your spouse’s last name and have not already contacted SSA,
    • you legally changed your name without contacting SSA,
    • or your social security number and/or name are different than on your social security card.

 


Answers to Common Questions

Q. I sent you my information. When will I get my refund?

A. Once we receive your response form and verify the information you provided, you should receive your refund in 4 to 6 weeks. If you don’t hear from us after 4 to 6 weeks, call our “Where’s My Refund?” toll free line at 1-800-829-1954 to check on the status of your refund.

 


Tips for next year

Make sure you file using your name and taxpayer ID number as they appear on your social security card or taxpayer ID card. Also, make sure this information is correct on any payments you send to the IRS.
 

Page Last Reviewed or Updated: 22-Jan-2014

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How to get help

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  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Free Efile H&r Block

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