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Printable 1040ez Form

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Printable 1040ez Form

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Know Your Rights

The Federal Deposit Insurance Corporation and other federal regulators require banks, insurance companies, brokerage firms and certain businesses who share financial information to tell you their privacy policies. They must give you this information when you open an account, and at least once every year after. They must include:

  • the kinds of information being collected;
  • how the confidentiality and security of this information will be protected; and
  • what types of businesses may be provided this information.

If a business is going to share the information with anyone outside its corporate family, it must also give you the chance to "opt-out" or say no to information sharing. Even if you don't opt out, your actual account numbers may not be shared with third parties for marketing purposes.

You cannot prevent certain types of information from being shared, including information needed to conduct normal business or protect against fraud, or information that is already publicly available. Also, a bank can share your information with a partner company to market products.

Your credit information has additional privacy protections under the Fair Credit Reporting Act. Only people with a legitimate business need can get a copy of your report. An employer can only get your report with your written consent. For more information on your rights under this federal law and to find out how you can get a copy of your credit report, visit the Credit Bureaus and Credit Scores section.

If Your Wallet is Lost or Stolen

Your wallet contains some of your most important personal items, from hard-earned money to credit cards and driver’s license. For an identity thief, your wallet offers a treasure trove of personal information. If your wallet is lost or stolen:

  • File a report with the police immediately.
  • Cancel your credit and debit cards and request new cards and account numbers.
  • Report the missing cards to the major credit reporting agencies.
  • Report your missing license to the department of motor vehicles.

Check with the Federal Trade Commission for more information on protecting your privacy

The Printable 1040ez Form

Printable 1040ez form 13. Printable 1040ez form   Basis of Property Table of Contents Introduction Useful Items - You may want to see: Cost BasisReal Property Adjusted BasisIncreases to Basis Decreases to Basis Basis Other Than CostProperty Received for Services Taxable Exchanges Involuntary Conversions Nontaxable Exchanges Property Transferred From a Spouse Property Received as a Gift Inherited Property Property Changed From Personal to Business or Rental Use Stocks and Bonds Introduction This chapter discusses how to figure your basis in property. Printable 1040ez form It is divided into the following sections. Printable 1040ez form Cost basis. Printable 1040ez form Adjusted basis. Printable 1040ez form Basis other than cost. Printable 1040ez form Your basis is the amount of your investment in property for tax purposes. Printable 1040ez form Use the basis to figure gain or loss on the sale, exchange, or other disposition of property. Printable 1040ez form Also use it to figure deductions for depreciation, amortization, depletion, and casualty losses. Printable 1040ez form If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. Printable 1040ez form Only the basis allocated to the business or investment use of the property can be depreciated. Printable 1040ez form Your original basis in property is adjusted (increased or decreased) by certain events. Printable 1040ez form For example, if you make improvements to the property, increase your basis. Printable 1040ez form If you take deductions for depreciation or casualty losses, or claim certain credits, reduce your basis. Printable 1040ez form Keep accurate records of all items that affect the basis of your property. Printable 1040ez form For more information on keeping records, see chapter 1. Printable 1040ez form Useful Items - You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 525 Taxable and Nontaxable Income 535 Business Expenses 537 Installment Sales 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 551 Basis of Assets 946 How To Depreciate Property Cost Basis The basis of property you buy is usually its cost. Printable 1040ez form The cost is the amount you pay in cash, debt obligations, other property, or services. Printable 1040ez form Your cost also includes amounts you pay for the following items: Sales tax, Freight, Installation and testing, Excise taxes, Legal and accounting fees (when they must be capitalized), Revenue stamps, Recording fees, and Real estate taxes (if you assume liability for the seller). Printable 1040ez form In addition, the basis of real estate and business assets may include other items. Printable 1040ez form Loans with low or no interest. Printable 1040ez form    If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price minus any amount considered to be unstated interest. Printable 1040ez form You generally have unstated interest if your interest rate is less than the applicable federal rate. Printable 1040ez form   For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. Printable 1040ez form Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. Printable 1040ez form If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. Printable 1040ez form Lump sum purchase. Printable 1040ez form   If you buy buildings and the land on which they stand for a lump sum, allocate the cost basis among the land and the buildings. Printable 1040ez form Allocate the cost basis according to the respective fair market values (FMVs) of the land and buildings at the time of purchase. Printable 1040ez form Figure the basis of each asset by multiplying the lump sum by a fraction. Printable 1040ez form The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. Printable 1040ez form    If you are not certain of the FMVs of the land and buildings, you can allocate the basis according to their assessed values for real estate tax purposes. Printable 1040ez form Fair market value (FMV). Printable 1040ez form   FMV is the price at which the property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the necessary facts. Printable 1040ez form Sales of similar property on or about the same date may be helpful in figuring the FMV of the property. Printable 1040ez form Assumption of mortgage. Printable 1040ez form   If you buy property and assume (or buy the property subject to) an existing mortgage on the property, your basis includes the amount you pay for the property plus the amount to be paid on the mortgage. Printable 1040ez form Settlement costs. Printable 1040ez form   Your basis includes the settlement fees and closing costs you paid for buying the property. Printable 1040ez form (A fee for buying property is a cost that must be paid even if you buy the property for cash. Printable 1040ez form ) Do not include fees and costs for getting a loan on the property in your basis. Printable 1040ez form   The following are some of the settlement fees or closing costs you can include in the basis of your property. Printable 1040ez form Abstract fees (abstract of title fees). Printable 1040ez form Charges for installing utility services. Printable 1040ez form Legal fees (including fees for the title search and preparation of the sales contract and deed). Printable 1040ez form Recording fees. Printable 1040ez form Survey fees. Printable 1040ez form Transfer taxes. Printable 1040ez form Owner's title insurance. Printable 1040ez form Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. Printable 1040ez form   Settlement costs do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Printable 1040ez form   The following are some of the settlement fees and closing costs you cannot include in the basis of property. Printable 1040ez form Casualty insurance premiums. Printable 1040ez form Rent for occupancy of the property before closing. Printable 1040ez form Charges for utilities or other services related to occupancy of the property before closing. Printable 1040ez form Charges connected with getting a loan, such as points (discount points, loan origination fees), mortgage insurance premiums, loan assumption fees, cost of a credit report, and fees for an appraisal required by a lender. Printable 1040ez form Fees for refinancing a mortgage. Printable 1040ez form Real estate taxes. Printable 1040ez form   If you pay real estate taxes the seller owed on real property you bought, and the seller did not reimburse you, treat those taxes as part of your basis. Printable 1040ez form You cannot deduct them as an expense. Printable 1040ez form    If you reimburse the seller for taxes the seller paid for you, you can usually deduct that amount as an expense in the year of purchase. Printable 1040ez form Do not include that amount in the basis of your property. Printable 1040ez form If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. Printable 1040ez form Points. Printable 1040ez form   If you pay points to get a loan (including a mortgage, second mortgage, line of credit, or a home equity loan), do not add the points to the basis of the related property. Printable 1040ez form Generally, you deduct the points over the term of the loan. Printable 1040ez form For more information on how to deduct points, see chapter 23. Printable 1040ez form Points on home mortgage. Printable 1040ez form   Special rules may apply to points you and the seller pay when you get a mortgage to buy your main home. Printable 1040ez form If certain requirements are met, you can deduct the points in full for the year in which they are paid. Printable 1040ez form Reduce the basis of your home by any seller-paid points. Printable 1040ez form Adjusted Basis Before figuring gain or loss on a sale, exchange, or other disposition of property or figuring allowable depreciation, depletion, or amortization, you must usually make certain adjustments (increases and decreases) to the cost basis or basis other than cost (discussed later) of the property. Printable 1040ez form The result is the adjusted basis. Printable 1040ez form Increases to Basis Increase the basis of any property by all items properly added to a capital account. Printable 1040ez form Examples of items that increase basis are shown in Table 13-1. Printable 1040ez form These include the items discussed below. Printable 1040ez form Improvements. Printable 1040ez form   Add to your basis in property the cost of improvements having a useful life of more than 1 year, that increase the value of the property, lengthen its life, or adapt it to a different use. Printable 1040ez form For example, improvements include putting a recreation room in your unfinished basement, adding another bathroom or bedroom, putting up a fence, putting in new plumbing or wiring, installing a new roof, or paving your driveway. Printable 1040ez form Assessments for local improvements. Printable 1040ez form   Add to the basis of property assessments for improvements such as streets and sidewalks if they increase the value of the property assessed. Printable 1040ez form Do not deduct them as taxes. Printable 1040ez form However, you can deduct as taxes assessments for maintenance or repairs, or for meeting interest charges related to the improvements. Printable 1040ez form Example. Printable 1040ez form Your city changes the street in front of your store into an enclosed pedestrian mall and assesses you and other affected property owners for the cost of the conversion. Printable 1040ez form Add the assessment to your property's basis. Printable 1040ez form In this example, the assessment is a depreciable asset. Printable 1040ez form Decreases to Basis Decrease the basis of any property by all items that represent a return of capital for the period during which you held the property. Printable 1040ez form Examples of items that decrease basis are shown in Table 13-1. Printable 1040ez form These include the items discussed below. Printable 1040ez form Table 13-1. Printable 1040ez form Examples of Adjustments to Basis Increases to Basis Decreases to Basis • Capital improvements: • Exclusion from income of   Putting an addition on your home subsidies for energy conservation   Replacing an entire roof measures   Paving your driveway     Installing central air conditioning • Casualty or theft loss deductions   Rewiring your home and insurance reimbursements       • Assessments for local improvements:     Water connections     Extending utility service lines to the property • Postponed gain from the sale of a home   Sidewalks • Alternative motor vehicle credit  (Form 8910)   Roads       • Alternative fuel vehicle refueling     property credit (Form 8911)           • Residential energy credits (Form 5695)       • Casualty losses: • Depreciation and section 179 deduction   Restoring damaged property     • Nontaxable corporate distributions • Legal fees:     Cost of defending and perfecting a title • Certain canceled debt excluded from   Fees for getting a reduction of an assessment income     • Zoning costs • Easements           • Adoption tax benefits Casualty and theft losses. Printable 1040ez form   If you have a casualty or theft loss, decrease the basis in your property by any insurance proceeds or other reimbursement and by any deductible loss not covered by insurance. Printable 1040ez form    You must increase your basis in the property by the amount you spend on repairs that restore the property to its pre-casualty condition. Printable 1040ez form   For more information on casualty and theft losses, see chapter 25. Printable 1040ez form Depreciation and section 179 deduction. Printable 1040ez form   Decrease the basis of your qualifying business property by any section 179 deduction you take and the depreciation you deducted, or could have deducted (including any special depreciation allowance), on your tax returns under the method of depreciation you selected. Printable 1040ez form   For more information about depreciation and the section 179 deduction, see Publication 946 and the Instructions for Form 4562. Printable 1040ez form Example. Printable 1040ez form You owned a duplex used as rental property that cost you $40,000, of which $35,000 was allocated to the building and $5,000 to the land. Printable 1040ez form You added an improvement to the duplex that cost $10,000. Printable 1040ez form In February last year, the duplex was damaged by fire. Printable 1040ez form Up to that time, you had been allowed depreciation of $23,000. Printable 1040ez form You sold some salvaged material for $1,300 and collected $19,700 from your insurance company. Printable 1040ez form You deducted a casualty loss of $1,000 on your income tax return for last year. Printable 1040ez form You spent $19,000 of the insurance proceeds for restoration of the duplex, which was completed this year. Printable 1040ez form You must use the duplex's adjusted basis after the restoration to determine depreciation for the rest of the property's recovery period. Printable 1040ez form Figure the adjusted basis of the duplex as follows: Original cost of duplex $35,000 Addition to duplex 10,000 Total cost of duplex $45,000 Minus: Depreciation 23,000 Adjusted basis before casualty $22,000 Minus: Insurance proceeds $19,700     Deducted casualty loss 1,000     Salvage proceeds 1,300 22,000 Adjusted basis after casualty $-0- Add: Cost of restoring duplex 19,000 Adjusted basis after restoration $19,000 Note. Printable 1040ez form Your basis in the land is its original cost of $5,000. Printable 1040ez form Easements. Printable 1040ez form   The amount you receive for granting an easement is generally considered to be proceeds from the sale of an interest in real property. Printable 1040ez form It reduces the basis of the affected part of the property. Printable 1040ez form If the amount received is more than the basis of the part of the property affected by the easement, reduce your basis in that part to zero and treat the excess as a recognized gain. Printable 1040ez form   If the gain is on a capital asset, see chapter 16 for information about how to report it. Printable 1040ez form If the gain is on property used in a trade or business, see Publication 544 for information about how to report it. Printable 1040ez form Exclusion of subsidies for energy conservation measures. Printable 1040ez form   You can exclude from gross income any subsidy you received from a public utility company for the purchase or installation of an energy conservation measure for a dwelling unit. Printable 1040ez form Reduce the basis of the property for which you received the subsidy by the excluded amount. Printable 1040ez form For more information about this subsidy, see chapter 12. Printable 1040ez form Postponed gain from sale of home. Printable 1040ez form    If you postponed gain from the sale of your main home under rules in effect before May 7, 1997, you must reduce the basis of the home you acquired as a replacement by the amount of the postponed gain. Printable 1040ez form For more information on the rules for the sale of a home, see chapter 15. Printable 1040ez form Basis Other Than Cost There are many times when you cannot use cost as basis. Printable 1040ez form In these cases, the fair market value or the adjusted basis of the property can be used. Printable 1040ez form Fair market value (FMV) and adjusted basis were discussed earlier. Printable 1040ez form Property Received for Services If you receive property for your services, include the FMV of the property in income. Printable 1040ez form The amount you include in income becomes your basis. Printable 1040ez form If the services were performed for a price agreed on beforehand, it will be accepted as the FMV of the property if there is no evidence to the contrary. Printable 1040ez form Restricted property. Printable 1040ez form   If you receive property for your services and the property is subject to certain restrictions, your basis in the property is its FMV when it becomes substantially vested. Printable 1040ez form However, this rule does not apply if you make an election to include in income the FMV of the property at the time it is transferred to you, less any amount you paid for it. Printable 1040ez form Property is substantially vested when it is transferable or when it is not subject to a substantial risk of forfeiture (you do not have a good chance of losing it). Printable 1040ez form For more information, see Restricted Property in Publication 525. Printable 1040ez form Bargain purchases. Printable 1040ez form   A bargain purchase is a purchase of an item for less than its FMV. Printable 1040ez form If, as compensation for services, you buy goods or other property at less than FMV, include the difference between the purchase price and the property's FMV in your income. Printable 1040ez form Your basis in the property is its FMV (your purchase price plus the amount you include in income). Printable 1040ez form   If the difference between your purchase price and the FMV is a qualified employee discount, do not include the difference in income. Printable 1040ez form However, your basis in the property is still its FMV. Printable 1040ez form See Employee Discounts in Publication 15-B. Printable 1040ez form Taxable Exchanges A taxable exchange is one in which the gain is taxable or the loss is deductible. Printable 1040ez form A taxable gain or deductible loss also is known as a recognized gain or loss. Printable 1040ez form If you receive property in exchange for other property in a taxable exchange, the basis of the property you receive is usually its FMV at the time of the exchange. Printable 1040ez form Involuntary Conversions If you receive replacement property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, figure the basis of the replacement property using the basis of the converted property. Printable 1040ez form Similar or related property. Printable 1040ez form   If you receive replacement property similar or related in service or use to the converted property, the replacement property's basis is the same as the converted property's basis on the date of the conversion, with the following adjustments. Printable 1040ez form Decrease the basis by the following. Printable 1040ez form Any loss you recognize on the involuntary conversion. Printable 1040ez form Any money you receive that you do not spend on similar property. Printable 1040ez form Increase the basis by the following. Printable 1040ez form Any gain you recognize on the involuntary conversion. Printable 1040ez form Any cost of acquiring the replacement property. Printable 1040ez form Money or property not similar or related. Printable 1040ez form    If you receive money or property not similar or related in service or use to the converted property, and you buy replacement property similar or related in service or use to the converted property, the basis of the replacement property is its cost decreased by the gain not recognized on the conversion. Printable 1040ez form Example. Printable 1040ez form The state condemned your property. Printable 1040ez form The adjusted basis of the property was $26,000 and the state paid you $31,000 for it. Printable 1040ez form You realized a gain of $5,000 ($31,000 − $26,000). Printable 1040ez form You bought replacement property similar in use to the converted property for $29,000. Printable 1040ez form You recognize a gain of $2,000 ($31,000 − $29,000), the unspent part of the payment from the state. Printable 1040ez form Your unrecognized gain is $3,000, the difference between the $5,000 realized gain and the $2,000 recognized gain. Printable 1040ez form The basis of the replacement property is figured as follows: Cost of replacement property $29,000 Minus: Gain not recognized 3,000 Basis of replacement property $26,000 Allocating the basis. Printable 1040ez form   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. Printable 1040ez form Basis for depreciation. Printable 1040ez form   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. Printable 1040ez form For information, see What Is the Basis of Your Depreciable Property? in chapter 1 of Publication 946. Printable 1040ez form Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. Printable 1040ez form If you receive property in a nontaxable exchange, its basis is generally the same as the basis of the property you transferred. Printable 1040ez form See Nontaxable Trades in chapter 14. Printable 1040ez form Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. Printable 1040ez form To qualify as a like-kind exchange, the property traded and the property received must be both of the following. Printable 1040ez form Qualifying property. Printable 1040ez form Like-kind property. Printable 1040ez form The basis of the property you receive is generally the same as the adjusted basis of the property you gave up. Printable 1040ez form If you trade property in a like-kind exchange and also pay money, the basis of the property received is the adjusted basis of the property you gave up increased by the money you paid. Printable 1040ez form Qualifying property. Printable 1040ez form   In a like-kind exchange, you must hold for investment or for productive use in your trade or business both the property you give up and the property you receive. Printable 1040ez form Like-kind property. Printable 1040ez form   There must be an exchange of like-kind property. Printable 1040ez form Like-kind properties are properties of the same nature or character, even if they differ in grade or quality. Printable 1040ez form The exchange of real estate for real estate and personal property for similar personal property are exchanges of like-kind property. Printable 1040ez form Example. Printable 1040ez form You trade in an old truck used in your business with an adjusted basis of $1,700 for a new one costing $6,800. Printable 1040ez form The dealer allows you $2,000 on the old truck, and you pay $4,800. Printable 1040ez form This is a like-kind exchange. Printable 1040ez form The basis of the new truck is $6,500 (the adjusted basis of the old one, $1,700, plus the amount you paid, $4,800). Printable 1040ez form If you sell your old truck to a third party for $2,000 instead of trading it in and then buy a new one from the dealer, you have a taxable gain of $300 on the sale (the $2,000 sale price minus the $1,700 adjusted basis). Printable 1040ez form The basis of the new truck is the price you pay the dealer. Printable 1040ez form Partially nontaxable exchanges. Printable 1040ez form   A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. Printable 1040ez form The basis of the property you receive is the same as the adjusted basis of the property you gave up, with the following adjustments. Printable 1040ez form Decrease the basis by the following amounts. Printable 1040ez form Any money you receive. Printable 1040ez form Any loss you recognize on the exchange. Printable 1040ez form Increase the basis by the following amounts. Printable 1040ez form Any additional costs you incur. Printable 1040ez form Any gain you recognize on the exchange. Printable 1040ez form If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. Printable 1040ez form Allocation of basis. Printable 1040ez form   If you receive like-kind and unlike properties in the exchange, allocate the basis first to the unlike property, other than money, up to its FMV on the date of the exchange. Printable 1040ez form The rest is the basis of the like-kind property. Printable 1040ez form More information. Printable 1040ez form   See Like-Kind Exchanges in chapter 1 of Publication 544 for more information. Printable 1040ez form Basis for depreciation. Printable 1040ez form   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind exchange. Printable 1040ez form For information, see What Is the Basis of Your Depreciable Property? in chapter 1 of Publication 946. Printable 1040ez form Property Transferred From a Spouse The basis of property transferred to you or transferred in trust for your benefit by your spouse is the same as your spouse's adjusted basis. Printable 1040ez form The same rule applies to a transfer by your former spouse that is incident to divorce. Printable 1040ez form However, for property transferred in trust, adjust your basis for any gain recognized by your spouse or former spouse if the liabilities assumed, plus the liabilities to which the property is subject, are more than the adjusted basis of the property transferred. Printable 1040ez form If the property transferred to you is a series E, series EE, or series I U. Printable 1040ez form S. Printable 1040ez form savings bond, the transferor must include in income the interest accrued to the date of transfer. Printable 1040ez form Your basis in the bond immediately after the transfer is equal to the transferor's basis increased by the interest income includible in the transferor's income. Printable 1040ez form For more information on these bonds, see chapter 7. Printable 1040ez form At the time of the transfer, the transferor must give you the records needed to determine the adjusted basis and holding period of the property as of the date of the transfer. Printable 1040ez form For more information about the transfer of property from a spouse, see chapter 14. Printable 1040ez form Property Received as a Gift To figure the basis of property you receive as a gift, you must know its adjusted basis to the donor just before it was given to you, its FMV at the time it was given to you, and any gift tax paid on it. Printable 1040ez form FMV less than donor's adjusted basis. Printable 1040ez form   If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. Printable 1040ez form Your basis for figuring gain is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you held the property. Printable 1040ez form Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustments to basis while you held the property. Printable 1040ez form See Adjusted Basis , earlier. Printable 1040ez form Example. Printable 1040ez form You received an acre of land as a gift. Printable 1040ez form At the time of the gift, the land had an FMV of $8,000. Printable 1040ez form The donor's adjusted basis was $10,000. Printable 1040ez form After you received the property, no events occurred to increase or decrease your basis. Printable 1040ez form If you later sell the property for $12,000, you will have a $2,000 gain because you must use the donor's adjusted basis at the time of the gift ($10,000) as your basis to figure gain. Printable 1040ez form If you sell the property for $7,000, you will have a $1,000 loss because you must use the FMV at the time of the gift ($8,000) as your basis to figure loss. Printable 1040ez form If the sales price is between $8,000 and $10,000, you have neither gain nor loss. Printable 1040ez form Business property. Printable 1040ez form   If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deductions is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property. Printable 1040ez form FMV equal to or greater than donor's adjusted basis. Printable 1040ez form   If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift. Printable 1040ez form Increase your basis by all or part of any gift tax paid, depending on the date of the gift, explained later. Printable 1040ez form   Also, for figuring gain or loss from a sale or other disposition or for figuring depreciation, depletion, or amortization deductions on business property, you must increase or decrease your basis (the donor's adjusted basis) by any required adjustments to basis while you held the property. Printable 1040ez form See Adjusted Basis , earlier. Printable 1040ez form   If you received a gift during the tax year, increase your basis in the gift (the donor's adjusted basis) by the part of the gift tax paid on it due to the net increase in value of the gift. Printable 1040ez form Figure the increase by multiplying the gift tax paid by a fraction. Printable 1040ez form The numerator of the fraction is the net increase in value of the gift and the denominator is the amount of the gift. Printable 1040ez form   The net increase in value of the gift is the FMV of the gift minus the donor's adjusted basis. Printable 1040ez form The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Printable 1040ez form Example. Printable 1040ez form In 2013, you received a gift of property from your mother that had an FMV of $50,000. Printable 1040ez form Her adjusted basis was $20,000. Printable 1040ez form The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). Printable 1040ez form She paid a gift tax of $7,320 on the property. Printable 1040ez form Your basis is $26,076, figured as follows: Fair market value $50,000 Minus: Adjusted basis −20,000 Net increase in value $30,000     Gift tax paid $7,320 Multiplied by ($30,000 ÷ $36,000) × . Printable 1040ez form 83 Gift tax due to net increase in value $6,076 Adjusted basis of property to your mother +20,000 Your basis in the property $26,076 Note. Printable 1040ez form If you received a gift before 1977, your basis in the gift (the donor's adjusted basis) includes any gift tax paid on it. Printable 1040ez form However, your basis cannot exceed the FMV of the gift at the time it was given to you. Printable 1040ez form Inherited Property Your basis in property you inherited from a decedent, who died before January 1, 2010, or after December 31, 2010, is generally one of the following: The FMV of the property at the date of the decedent's death. Printable 1040ez form The FMV on the alternate valuation date if the personal representative for the estate elects to use alternate valuation. Printable 1040ez form The value under the special-use valuation method for real property used in farming or a closely held business if elected for estate tax purposes. Printable 1040ez form The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement. Printable 1040ez form If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes. Printable 1040ez form For more information, see the instructions to Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. Printable 1040ez form Property inherited from a decedent who died in 2010. Printable 1040ez form   If you inherited property from a decedent who died in 2010, special rules may apply. Printable 1040ez form For more information, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. Printable 1040ez form Community property. Printable 1040ez form   In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), husband and wife are each usually considered to own half the community property. Printable 1040ez form When either spouse dies, the total value of the community property, even the part belonging to the surviving spouse, generally becomes the basis of the entire property. Printable 1040ez form For this rule to apply, at least half the value of the community property interest must be includible in the decedent's gross estate, whether or not the estate must file a return. Printable 1040ez form Example. Printable 1040ez form You and your spouse owned community property that had a basis of $80,000. Printable 1040ez form When your spouse died, half the FMV of the community interest was includible in your spouse's estate. Printable 1040ez form The FMV of the community interest was $100,000. Printable 1040ez form The basis of your half of the property after the death of your spouse is $50,000 (half of the $100,000 FMV). Printable 1040ez form The basis of the other half to your spouse's heirs is also $50,000. Printable 1040ez form For more information about community property, see Publication 555, Community Property. Printable 1040ez form Property Changed From Personal to Business or Rental Use If you hold property for personal use and then change it to business use or use it to produce rent, you can begin to depreciate the property at the time of the change. Printable 1040ez form To do so, you must figure its basis for depreciation at the time of the change. Printable 1040ez form An example of changing property held for personal use to business or rental use would be renting out your former personal residence. Printable 1040ez form Basis for depreciation. Printable 1040ez form   The basis for depreciation is the lesser of the following amounts. Printable 1040ez form The FMV of the property on the date of the change. Printable 1040ez form Your adjusted basis on the date of the change. Printable 1040ez form Example. Printable 1040ez form Several years ago, you paid $160,000 to have your house built on a lot that cost $25,000. Printable 1040ez form You paid $20,000 for permanent improvements to the house and claimed a $2,000 casualty loss deduction for damage to the house before changing the property to rental use last year. Printable 1040ez form Because land is not depreciable, you include only the cost of the house when figuring the basis for depreciation. Printable 1040ez form Your adjusted basis in the house when you changed its use was $178,000 ($160,000 + $20,000 − $2,000). Printable 1040ez form On the same date, your property had an FMV of $180,000, of which $15,000 was for the land and $165,000 was for the house. Printable 1040ez form The basis for figuring depreciation on the house is its FMV on the date of the change ($165,000) because it is less than your adjusted basis ($178,000). Printable 1040ez form Sale of property. Printable 1040ez form   If you later sell or dispose of property changed to business or rental use, the basis you use will depend on whether you are figuring gain or loss. Printable 1040ez form Gain. Printable 1040ez form   The basis for figuring a gain is your adjusted basis in the property when you sell the property. Printable 1040ez form Example. Printable 1040ez form Assume the same facts as in the previous example except that you sell the property at a gain after being allowed depreciation deductions of $37,500. Printable 1040ez form Your adjusted basis for figuring gain is $165,500 ($178,000 + $25,000 (land) − $37,500). Printable 1040ez form Loss. Printable 1040ez form   Figure the basis for a loss starting with the smaller of your adjusted basis or the FMV of the property at the time of the change to business or rental use. Printable 1040ez form Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . Printable 1040ez form Example. Printable 1040ez form Assume the same facts as in the previous example, except that you sell the property at a loss after being allowed depreciation deductions of $37,500. Printable 1040ez form In this case, you would start with the FMV on the date of the change to rental use ($180,000), because it is less than the adjusted basis of $203,000 ($178,000 + $25,000 (land)) on that date. Printable 1040ez form Reduce that amount ($180,000) by the depreciation deductions ($37,500). Printable 1040ez form The basis for loss is $142,500 ($180,000 − $37,500). Printable 1040ez form Stocks and Bonds The basis of stocks or bonds you buy generally is the purchase price plus any costs of purchase, such as commissions and recording or transfer fees. Printable 1040ez form If you get stocks or bonds other than by purchase, your basis is usually determined by the FMV or the previous owner's adjusted basis, as discussed earlier. Printable 1040ez form You must adjust the basis of stocks for certain events that occur after purchase. Printable 1040ez form For example, if you receive additional stock from nontaxable stock dividends or stock splits, reduce your basis for each share of stock by dividing the adjusted basis of the old stock by the number of shares of old and new stock. Printable 1040ez form This rule applies only when the additional stock received is identical to the stock held. Printable 1040ez form Also reduce your basis when you receive nontaxable distributions. Printable 1040ez form They are a return of capital. Printable 1040ez form Example. Printable 1040ez form In 2011 you bought 100 shares of XYZ stock for $1,000 or $10 a share. Printable 1040ez form In 2012 you bought 100 shares of XYZ stock for $1,600 or $16 a share. Printable 1040ez form In 2013 XYZ declared a 2-for-1 stock split. Printable 1040ez form You now have 200 shares of stock with a basis of $5 a share and 200 shares with a basis of $8 a share. Printable 1040ez form Other basis. Printable 1040ez form   There are other ways to figure the basis of stocks or bonds depending on how you acquired them. Printable 1040ez form For detailed information, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. Printable 1040ez form Identifying stocks or bonds sold. Printable 1040ez form   If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stocks or bonds. Printable 1040ez form If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. Printable 1040ez form For more information about identifying securities you sell, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. Printable 1040ez form Mutual fund shares. Printable 1040ez form   If you sell mutual fund shares you acquired at various times and prices and left on deposit in an account kept by a custodian or agent, you can elect to use an average basis. Printable 1040ez form For more information, see Publication 550. Printable 1040ez form Bond premium. Printable 1040ez form   If you buy a taxable bond at a premium and elect to amortize the premium, reduce the basis of the bond by the amortized premium you deduct each year. Printable 1040ez form See Bond Premium Amortization in chapter 3 of Publication 550 for more information. Printable 1040ez form Although you cannot deduct the premium on a tax-exempt bond, you must amortize the premium each year and reduce your basis in the bond by the amortized amount. Printable 1040ez form Original issue discount (OID) on debt instruments. Printable 1040ez form   You must increase your basis in an OID debt instrument by the OID you include in income for that instrument. Printable 1040ez form See Original Issue Discount (OID) in chapter 7 and Publication 1212, Guide To Original Issue Discount (OID) Instruments. Printable 1040ez form Tax-exempt obligations. Printable 1040ez form    OID on tax-exempt obligations is generally not taxable. Printable 1040ez form However, when you dispose of a tax-exempt obligation issued after September 3, 1982, and acquired after March 1, 1984, you must accrue OID on the obligation to determine its adjusted basis. Printable 1040ez form The accrued OID is added to the basis of the obligation to determine your gain or loss. Printable 1040ez form See chapter 4 of Publication 550. Printable 1040ez form Prev  Up  Next   Home   More Online Publications