Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

How To Ammend A Federal Tax Return

Can I File An Amended Tax ReturnPrintable Tax Forms 1040ezWhere Can I Get A State Tax Form1040ez GovWww Irs Gov Form 1040x InstructionsH&r Block AdvantageH&r Block Income TaxHow Do I File 2009 Taxes Online1040ez Electronic FilingHow To File An Amended Tax Return 2013Tax Act 2012 FreePast Year TaxFiling 1040 Ez Online1040 Form 2012Amending A ReturnHow To File Taxes From 2009How To Fill Out 1040x ExampleTurbotax Free 1040ez2012 Tax Form 1040ezFree Tax FilingFree Tax Usa1040x TurbotaxTaxes For UnemployedE File2011 Tax BookletTaxes For Self EmployedFiling Back Taxes OnlineState Tax Filing RequirementsHow To File Taxes OnlineIrs 1040ez 2011 FormEzformHow To Amend My 2012 Tax ReturnE File Tax ReturnsMilitary Taxes Online1040 Ez Tax FormHow To File A Tax AmendmentFile A 1040x Amended ReturnH&r Block 2012 TaxesE File 2010 Tax ReturnIrs Form 1040ez

How To Ammend A Federal Tax Return

How to ammend a federal tax return Publication 587 - Additional Material Prev  Up  Next   Home   More Online Publications
Español

The How To Ammend A Federal Tax Return

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