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Refile taxes Index Symbols $10,000, pagos en efectivo en exceso de, Introducción A Asistencia (see Ayuda con los impuestos) Ayuda (see Ayuda con los impuestos) Ayuda con los impuestos, Cómo Obtener Ayuda con los Impuestos D Defensor del Contribuyente, Servicio del Defensor del Contribuyente. Refile taxes F Formulario, ¿Quién tiene que presentar el Formulario 8300-SP? 8300-SP, ¿Quién tiene que presentar el Formulario 8300-SP? I Información adicional (see Ayuda con los impuestos) Informe de pagos en efectivo en exceso de $10,000, Introducción P Publicaciones (see Ayuda con los impuestos) Q Qué Hay de Nuevo, Qué Hay de Nuevo S Servicios gratuitos para los impuestos, Servicios gratuitos para los impuestos. Refile taxes T Transacciones en efectivo en exceso de $10,000, Introducción Prev  Up     Home   More Online Publications
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Small claims courts resolve disputes over small amounts of money. While the maximum amount that can be claimed differs from state to state, court procedures are generally simple, inexpensive, quick and informal. Court fees are minimal, and you often get your filing fee back if you win your case. Typically, you will not need a lawyer-some states do not permit them. If you live in a state that allows lawyers and the party you are suing brings one, don't be intimidated. Most judges make allowances for consumers who appear without lawyers. Even though the court is informal, the judge's decision must be followed.

If you file a case and win, the losing party should give you what the court says you are owed without further action on your part. But some losers refuse to follow the court's decision. When this happens, you can go back to court and ask for the order to be enforced. Depending on local laws, law enforcement officials might sell a person's property or take money from a bank account or business cash register. If the person who owes the money receives a salary, the court might order an employer to garnish (deduct money from) each paycheck to pay you.

Check your local telephone book under the municipal, county or state government headings for small claims court offices. Ask the clerk how to use the small claims court. Before taking your own case to court, observe a small claims court session and ask the court if it has information that will help you prepare your presentation to the judge.

The Refile Taxes

Refile taxes 13. Refile taxes   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. Refile taxes It is divided into the following sections. Refile taxes Cost basis. Refile taxes Adjusted basis. Refile taxes Basis other than cost. Refile taxes Your basis is the amount of your investment in property for tax purposes. Refile taxes Use the basis to figure gain or loss on the sale, exchange, or other disposition of property. Refile taxes Also use it to figure deductions for depreciation, amortization, depletion, and casualty losses. Refile taxes If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. Refile taxes Only the basis allocated to the business or investment use of the property can be depreciated. Refile taxes Your original basis in property is adjusted (increased or decreased) by certain events. Refile taxes For example, if you make improvements to the property, increase your basis. Refile taxes If you take deductions for depreciation or casualty losses, or claim certain credits, reduce your basis. Refile taxes Keep accurate records of all items that affect the basis of your property. Refile taxes For more information on keeping records, see chapter 1. Refile taxes 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. Refile taxes The cost is the amount you pay in cash, debt obligations, other property, or services. Refile taxes 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). Refile taxes In addition, the basis of real estate and business assets may include other items. Refile taxes Loans with low or no interest. Refile taxes    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. Refile taxes You generally have unstated interest if your interest rate is less than the applicable federal rate. Refile taxes   For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. Refile taxes Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. Refile taxes If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. Refile taxes Lump sum purchase. Refile taxes   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. Refile taxes Allocate the cost basis according to the respective fair market values (FMVs) of the land and buildings at the time of purchase. Refile taxes Figure the basis of each asset by multiplying the lump sum by a fraction. Refile taxes The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. Refile taxes    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. Refile taxes Fair market value (FMV). Refile taxes   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. Refile taxes Sales of similar property on or about the same date may be helpful in figuring the FMV of the property. Refile taxes Assumption of mortgage. Refile taxes   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. Refile taxes Settlement costs. Refile taxes   Your basis includes the settlement fees and closing costs you paid for buying the property. Refile taxes (A fee for buying property is a cost that must be paid even if you buy the property for cash. Refile taxes ) Do not include fees and costs for getting a loan on the property in your basis. Refile taxes   The following are some of the settlement fees or closing costs you can include in the basis of your property. Refile taxes Abstract fees (abstract of title fees). Refile taxes Charges for installing utility services. Refile taxes Legal fees (including fees for the title search and preparation of the sales contract and deed). Refile taxes Recording fees. Refile taxes Survey fees. Refile taxes Transfer taxes. Refile taxes Owner's title insurance. Refile taxes 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. Refile taxes   Settlement costs do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Refile taxes   The following are some of the settlement fees and closing costs you cannot include in the basis of property. Refile taxes Casualty insurance premiums. Refile taxes Rent for occupancy of the property before closing. Refile taxes Charges for utilities or other services related to occupancy of the property before closing. Refile taxes 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. Refile taxes Fees for refinancing a mortgage. Refile taxes Real estate taxes. Refile taxes   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. Refile taxes You cannot deduct them as an expense. Refile taxes    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. Refile taxes Do not include that amount in the basis of your property. Refile taxes If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. Refile taxes Points. Refile taxes   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. Refile taxes Generally, you deduct the points over the term of the loan. Refile taxes For more information on how to deduct points, see chapter 23. Refile taxes Points on home mortgage. Refile taxes   Special rules may apply to points you and the seller pay when you get a mortgage to buy your main home. Refile taxes If certain requirements are met, you can deduct the points in full for the year in which they are paid. Refile taxes Reduce the basis of your home by any seller-paid points. Refile taxes 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. Refile taxes The result is the adjusted basis. Refile taxes Increases to Basis Increase the basis of any property by all items properly added to a capital account. Refile taxes Examples of items that increase basis are shown in Table 13-1. Refile taxes These include the items discussed below. Refile taxes Improvements. Refile taxes   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. Refile taxes 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. Refile taxes Assessments for local improvements. Refile taxes   Add to the basis of property assessments for improvements such as streets and sidewalks if they increase the value of the property assessed. Refile taxes Do not deduct them as taxes. Refile taxes However, you can deduct as taxes assessments for maintenance or repairs, or for meeting interest charges related to the improvements. Refile taxes Example. Refile taxes 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. Refile taxes Add the assessment to your property's basis. Refile taxes In this example, the assessment is a depreciable asset. Refile taxes 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. Refile taxes Examples of items that decrease basis are shown in Table 13-1. Refile taxes These include the items discussed below. Refile taxes Table 13-1. Refile taxes 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. Refile taxes   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. Refile taxes    You must increase your basis in the property by the amount you spend on repairs that restore the property to its pre-casualty condition. Refile taxes   For more information on casualty and theft losses, see chapter 25. Refile taxes Depreciation and section 179 deduction. Refile taxes   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. Refile taxes   For more information about depreciation and the section 179 deduction, see Publication 946 and the Instructions for Form 4562. Refile taxes Example. Refile taxes 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. Refile taxes You added an improvement to the duplex that cost $10,000. Refile taxes In February last year, the duplex was damaged by fire. Refile taxes Up to that time, you had been allowed depreciation of $23,000. Refile taxes You sold some salvaged material for $1,300 and collected $19,700 from your insurance company. Refile taxes You deducted a casualty loss of $1,000 on your income tax return for last year. Refile taxes You spent $19,000 of the insurance proceeds for restoration of the duplex, which was completed this year. Refile taxes You must use the duplex's adjusted basis after the restoration to determine depreciation for the rest of the property's recovery period. Refile taxes 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. Refile taxes Your basis in the land is its original cost of $5,000. Refile taxes Easements. Refile taxes   The amount you receive for granting an easement is generally considered to be proceeds from the sale of an interest in real property. Refile taxes It reduces the basis of the affected part of the property. Refile taxes 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. Refile taxes   If the gain is on a capital asset, see chapter 16 for information about how to report it. Refile taxes If the gain is on property used in a trade or business, see Publication 544 for information about how to report it. Refile taxes Exclusion of subsidies for energy conservation measures. Refile taxes   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. Refile taxes Reduce the basis of the property for which you received the subsidy by the excluded amount. Refile taxes For more information about this subsidy, see chapter 12. Refile taxes Postponed gain from sale of home. Refile taxes    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. Refile taxes For more information on the rules for the sale of a home, see chapter 15. Refile taxes Basis Other Than Cost There are many times when you cannot use cost as basis. Refile taxes In these cases, the fair market value or the adjusted basis of the property can be used. Refile taxes Fair market value (FMV) and adjusted basis were discussed earlier. Refile taxes Property Received for Services If you receive property for your services, include the FMV of the property in income. Refile taxes The amount you include in income becomes your basis. Refile taxes 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. Refile taxes Restricted property. Refile taxes   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. Refile taxes 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. Refile taxes 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). Refile taxes For more information, see Restricted Property in Publication 525. Refile taxes Bargain purchases. Refile taxes   A bargain purchase is a purchase of an item for less than its FMV. Refile taxes 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. Refile taxes Your basis in the property is its FMV (your purchase price plus the amount you include in income). Refile taxes   If the difference between your purchase price and the FMV is a qualified employee discount, do not include the difference in income. Refile taxes However, your basis in the property is still its FMV. Refile taxes See Employee Discounts in Publication 15-B. Refile taxes Taxable Exchanges A taxable exchange is one in which the gain is taxable or the loss is deductible. Refile taxes A taxable gain or deductible loss also is known as a recognized gain or loss. Refile taxes 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. Refile taxes 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. Refile taxes Similar or related property. Refile taxes   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. Refile taxes Decrease the basis by the following. Refile taxes Any loss you recognize on the involuntary conversion. Refile taxes Any money you receive that you do not spend on similar property. Refile taxes Increase the basis by the following. Refile taxes Any gain you recognize on the involuntary conversion. Refile taxes Any cost of acquiring the replacement property. Refile taxes Money or property not similar or related. Refile taxes    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. Refile taxes Example. Refile taxes The state condemned your property. Refile taxes The adjusted basis of the property was $26,000 and the state paid you $31,000 for it. Refile taxes You realized a gain of $5,000 ($31,000 − $26,000). Refile taxes You bought replacement property similar in use to the converted property for $29,000. Refile taxes You recognize a gain of $2,000 ($31,000 − $29,000), the unspent part of the payment from the state. Refile taxes Your unrecognized gain is $3,000, the difference between the $5,000 realized gain and the $2,000 recognized gain. Refile taxes 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. Refile taxes   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. Refile taxes Basis for depreciation. Refile taxes   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. Refile taxes For information, see What Is the Basis of Your Depreciable Property? in chapter 1 of Publication 946. Refile taxes Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. Refile taxes If you receive property in a nontaxable exchange, its basis is generally the same as the basis of the property you transferred. Refile taxes See Nontaxable Trades in chapter 14. Refile taxes Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. Refile taxes To qualify as a like-kind exchange, the property traded and the property received must be both of the following. Refile taxes Qualifying property. Refile taxes Like-kind property. Refile taxes The basis of the property you receive is generally the same as the adjusted basis of the property you gave up. Refile taxes 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. Refile taxes Qualifying property. Refile taxes   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. Refile taxes Like-kind property. Refile taxes   There must be an exchange of like-kind property. Refile taxes Like-kind properties are properties of the same nature or character, even if they differ in grade or quality. Refile taxes The exchange of real estate for real estate and personal property for similar personal property are exchanges of like-kind property. Refile taxes Example. Refile taxes You trade in an old truck used in your business with an adjusted basis of $1,700 for a new one costing $6,800. Refile taxes The dealer allows you $2,000 on the old truck, and you pay $4,800. Refile taxes This is a like-kind exchange. Refile taxes 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). Refile taxes 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). Refile taxes The basis of the new truck is the price you pay the dealer. Refile taxes Partially nontaxable exchanges. Refile taxes   A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. Refile taxes The basis of the property you receive is the same as the adjusted basis of the property you gave up, with the following adjustments. Refile taxes Decrease the basis by the following amounts. Refile taxes Any money you receive. Refile taxes Any loss you recognize on the exchange. Refile taxes Increase the basis by the following amounts. Refile taxes Any additional costs you incur. Refile taxes Any gain you recognize on the exchange. Refile taxes If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. Refile taxes Allocation of basis. Refile taxes   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. Refile taxes The rest is the basis of the like-kind property. Refile taxes More information. Refile taxes   See Like-Kind Exchanges in chapter 1 of Publication 544 for more information. Refile taxes Basis for depreciation. Refile taxes   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind exchange. Refile taxes For information, see What Is the Basis of Your Depreciable Property? in chapter 1 of Publication 946. Refile taxes 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. Refile taxes The same rule applies to a transfer by your former spouse that is incident to divorce. Refile taxes 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. Refile taxes If the property transferred to you is a series E, series EE, or series I U. Refile taxes S. Refile taxes savings bond, the transferor must include in income the interest accrued to the date of transfer. Refile taxes 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. Refile taxes For more information on these bonds, see chapter 7. Refile taxes 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. Refile taxes For more information about the transfer of property from a spouse, see chapter 14. Refile taxes 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. Refile taxes FMV less than donor's adjusted basis. Refile taxes   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. Refile taxes 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. Refile taxes 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. Refile taxes See Adjusted Basis , earlier. Refile taxes Example. Refile taxes You received an acre of land as a gift. Refile taxes At the time of the gift, the land had an FMV of $8,000. Refile taxes The donor's adjusted basis was $10,000. Refile taxes After you received the property, no events occurred to increase or decrease your basis. Refile taxes 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. Refile taxes 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. Refile taxes If the sales price is between $8,000 and $10,000, you have neither gain nor loss. Refile taxes Business property. Refile taxes   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. Refile taxes FMV equal to or greater than donor's adjusted basis. Refile taxes   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. Refile taxes Increase your basis by all or part of any gift tax paid, depending on the date of the gift, explained later. Refile taxes   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. Refile taxes See Adjusted Basis , earlier. Refile taxes   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. Refile taxes Figure the increase by multiplying the gift tax paid by a fraction. Refile taxes The numerator of the fraction is the net increase in value of the gift and the denominator is the amount of the gift. Refile taxes   The net increase in value of the gift is the FMV of the gift minus the donor's adjusted basis. Refile taxes 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. Refile taxes Example. Refile taxes In 2013, you received a gift of property from your mother that had an FMV of $50,000. Refile taxes Her adjusted basis was $20,000. Refile taxes The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). Refile taxes She paid a gift tax of $7,320 on the property. Refile taxes 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) × . Refile taxes 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. Refile taxes If you received a gift before 1977, your basis in the gift (the donor's adjusted basis) includes any gift tax paid on it. Refile taxes However, your basis cannot exceed the FMV of the gift at the time it was given to you. Refile taxes 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. Refile taxes The FMV on the alternate valuation date if the personal representative for the estate elects to use alternate valuation. Refile taxes 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. Refile taxes 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. Refile taxes 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. Refile taxes For more information, see the instructions to Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. Refile taxes Property inherited from a decedent who died in 2010. Refile taxes   If you inherited property from a decedent who died in 2010, special rules may apply. Refile taxes For more information, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. Refile taxes Community property. Refile taxes   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. Refile taxes 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. Refile taxes 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. Refile taxes Example. Refile taxes You and your spouse owned community property that had a basis of $80,000. Refile taxes When your spouse died, half the FMV of the community interest was includible in your spouse's estate. Refile taxes The FMV of the community interest was $100,000. Refile taxes The basis of your half of the property after the death of your spouse is $50,000 (half of the $100,000 FMV). Refile taxes The basis of the other half to your spouse's heirs is also $50,000. Refile taxes For more information about community property, see Publication 555, Community Property. Refile taxes 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. Refile taxes To do so, you must figure its basis for depreciation at the time of the change. Refile taxes An example of changing property held for personal use to business or rental use would be renting out your former personal residence. Refile taxes Basis for depreciation. Refile taxes   The basis for depreciation is the lesser of the following amounts. Refile taxes The FMV of the property on the date of the change. Refile taxes Your adjusted basis on the date of the change. Refile taxes Example. Refile taxes Several years ago, you paid $160,000 to have your house built on a lot that cost $25,000. Refile taxes 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. Refile taxes Because land is not depreciable, you include only the cost of the house when figuring the basis for depreciation. Refile taxes Your adjusted basis in the house when you changed its use was $178,000 ($160,000 + $20,000 − $2,000). Refile taxes 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. Refile taxes 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). Refile taxes Sale of property. Refile taxes   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. Refile taxes Gain. Refile taxes   The basis for figuring a gain is your adjusted basis in the property when you sell the property. Refile taxes Example. Refile taxes 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. Refile taxes Your adjusted basis for figuring gain is $165,500 ($178,000 + $25,000 (land) − $37,500). Refile taxes Loss. Refile taxes   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. Refile taxes Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . Refile taxes Example. Refile taxes 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. Refile taxes 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. Refile taxes Reduce that amount ($180,000) by the depreciation deductions ($37,500). Refile taxes The basis for loss is $142,500 ($180,000 − $37,500). Refile taxes 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. Refile taxes 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. Refile taxes You must adjust the basis of stocks for certain events that occur after purchase. Refile taxes 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. Refile taxes This rule applies only when the additional stock received is identical to the stock held. Refile taxes Also reduce your basis when you receive nontaxable distributions. Refile taxes They are a return of capital. Refile taxes Example. Refile taxes In 2011 you bought 100 shares of XYZ stock for $1,000 or $10 a share. Refile taxes In 2012 you bought 100 shares of XYZ stock for $1,600 or $16 a share. Refile taxes In 2013 XYZ declared a 2-for-1 stock split. Refile taxes You now have 200 shares of stock with a basis of $5 a share and 200 shares with a basis of $8 a share. Refile taxes Other basis. Refile taxes   There are other ways to figure the basis of stocks or bonds depending on how you acquired them. Refile taxes For detailed information, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. Refile taxes Identifying stocks or bonds sold. Refile taxes   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. Refile taxes 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. Refile taxes For more information about identifying securities you sell, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. Refile taxes Mutual fund shares. Refile taxes   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. Refile taxes For more information, see Publication 550. Refile taxes Bond premium. Refile taxes   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. Refile taxes See Bond Premium Amortization in chapter 3 of Publication 550 for more information. Refile taxes 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. Refile taxes Original issue discount (OID) on debt instruments. Refile taxes   You must increase your basis in an OID debt instrument by the OID you include in income for that instrument. Refile taxes See Original Issue Discount (OID) in chapter 7 and Publication 1212, Guide To Original Issue Discount (OID) Instruments. Refile taxes Tax-exempt obligations. Refile taxes    OID on tax-exempt obligations is generally not taxable. Refile taxes 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. Refile taxes The accrued OID is added to the basis of the obligation to determine your gain or loss. Refile taxes See chapter 4 of Publication 550. Refile taxes Prev  Up  Next   Home   More Online Publications