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1040ez Form 2012

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1040ez Form 2012

1040ez form 2012 13. 1040ez form 2012   Payment of Taxes Table of Contents How To Make Deposits When To Make Deposits Amount of DepositsSafe Harbor Rule Generally, semimonthly deposits of excise taxes are required. 1040ez form 2012 A semimonthly period is the first 15 days of a month (the first semimonthly period) or the 16th through the last day of a month (the second semimonthly period). 1040ez form 2012 However, no deposit is required for the situations listed below; the taxes are payable with Form 720. 1040ez form 2012 The net liability for taxes listed in Part I (Form 720) does not exceed $2,500 for the quarter. 1040ez form 2012 The gas guzzler tax is being paid on a one-time filing. 1040ez form 2012 The liability is for taxes listed in Part II (Form 720), except for the floor stocks tax which generally requires a single deposit. 1040ez form 2012 How To Make Deposits Electronic deposit requirement. 1040ez form 2012   You must use electronic funds transfer to make excise tax deposits. 1040ez form 2012 Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). 1040ez form 2012 If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make deposits on your behalf. 1040ez form 2012 Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. 1040ez form 2012   EFTPS is a free service provided by the Department of Treasury. 1040ez form 2012 Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. 1040ez form 2012 To get more information about EFTPS or to enroll in EFTPS, visit www. 1040ez form 2012 eftps. 1040ez form 2012 gov or call 1-800-555-4477. 1040ez form 2012 Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide to Getting Started. 1040ez form 2012    Depositing on time. 1040ez form 2012 For EFTPS deposits to be on time, you must initiate the transaction at least 1 day before the date the deposit is due (before 8:00 p. 1040ez form 2012 m. 1040ez form 2012 Eastern time). 1040ez form 2012 You will automatically be enrolled in EFTPS when you apply for an EIN. 1040ez form 2012 You will receive a separate mailing containing instructions for activating your EFTPS enrollment after you receive your EIN. 1040ez form 2012 When To Make Deposits There are two methods for determining deposits: the regular method and the alternative method. 1040ez form 2012 The regular method applies to all taxes in Part I of Form 720 except for communications and air transportation taxes if deposits are based on amounts billed or tickets sold, rather than on amounts actually collected. 1040ez form 2012 See Alternative method below. 1040ez form 2012 If you are depositing more than one tax under a method, combine all the taxes under the method and make one deposit for the semimonthly period. 1040ez form 2012 Regular method. 1040ez form 2012   The deposit of tax for a semimonthly period is due by the 14th day following that period. 1040ez form 2012 Generally, this is the 29th day of a month for the first semimonthly period and the 14th day of the following month for the second semimonthly period. 1040ez form 2012 If the 14th or the 29th day falls on a Saturday, Sunday, or legal holiday, you must make the deposit by the immediately preceding day that is not a Saturday, Sunday, or legal holiday. 1040ez form 2012 Alternative method (IRS Nos. 1040ez form 2012 22, 26, 27, and 28). 1040ez form 2012   Deposits of communications and air transportation taxes may be based on taxes included in amounts billed or tickets sold during a semimonthly period instead of on taxes actually collected during the period. 1040ez form 2012 Under the alternative method, the tax included in amounts billed or tickets sold during a semimonthly period is considered collected during the first 7 days of the second following semimonthly period. 1040ez form 2012 The deposit of tax is due by the 3rd banking day after the 7th day of that period. 1040ez form 2012   For an example of the alternative method, see the Instructions for Form 720. 1040ez form 2012 To use the alternative method, you must keep a separate account of the tax included in amounts billed or tickets sold during the month and report on Form 720 the tax included in amounts billed or tickets sold and not the amount of tax that is actually collected. 1040ez form 2012 For example, amounts billed in December, January, and February are considered collected during January, February, and March and are reported on Form 720 as the tax for the 1st quarter of the calendar year. 1040ez form 2012 The separate account for each month must reflect: All items of tax included in amounts billed or tickets sold during the month, and Other items of adjustment relating to tax for prior months (within the statute of limitations on credits or refunds). 1040ez form 2012 The separate account for any month cannot include an adjustment resulting from a refusal to pay or inability to collect unless the refusal has been reported to the IRS. 1040ez form 2012 See Uncollected Tax Report in chapter 4. 1040ez form 2012 The net amount of tax that is considered collected during the semimonthly period must be either: The net amount of tax reflected in the separate account for the corresponding semimonthly period of the preceding month, or One-half of the net amount of tax reflected in the separate account for the preceding month. 1040ez form 2012 Special rule for deposits of taxes in September. 1040ez form 2012   See the Instructions for Form 720 for a special rule on deposits made in September. 1040ez form 2012 Amount of Deposits Deposits for a semimonthly period generally must be at least 95% of the net tax liability for that period unless the safe harbor rule (discussed later) applies. 1040ez form 2012 Generally, you do not have to make a deposit for a period in which you incurred no tax liability. 1040ez form 2012 Net tax liability. 1040ez form 2012   Your net tax liability is your tax liability for the period minus any claims on Schedule C (Form 720) for the period. 1040ez form 2012 You may figure your net tax liability for a semimonthly period by dividing your net liability incurred during the calendar month by two. 1040ez form 2012 If you use this method, you must use it for all semimonthly periods in the calendar quarter. 1040ez form 2012 Do not reduce your liability by any amounts from Form 720X. 1040ez form 2012 Safe Harbor Rule The safe harbor rule applies separately to deposits under the regular method and the alternative method. 1040ez form 2012 Persons who filed Form 720 for the look-back quarter (the 2nd calendar quarter preceding the current quarter) are considered to meet the semimonthly deposit requirement if the deposit for each semimonthly period in the current quarter is at least 1/6 (16. 1040ez form 2012 67%) of the net tax liability reported for the look-back quarter. 1040ez form 2012 For the semimonthly period for which the additional deposit is required, the additional deposit must be at least 11/90 12. 1040ez form 2012 23%), 10/90 (11. 1040ez form 2012 12%) for non-EFTPS, of the net tax liability reported for the look-back quarter. 1040ez form 2012 Also, the total deposit for that semimonthly period must be at least 1/6 (16. 1040ez form 2012 67%) of the net tax liability reported for the look-back quarter. 1040ez form 2012 Exceptions. 1040ez form 2012   The safe harbor rule does not apply to: The 1st and 2nd quarters beginning on or after the effective date of an increase in the rate of tax unless the deposit of taxes for each semimonthly period in the calendar quarter is at least 1/6 (16. 1040ez form 2012 67%) of the tax liability you would have had for the look-back quarter if the increased rate of tax had been in effect for that look-back quarter, Any quarter if liability includes any tax not in effect throughout the look-back quarter, or For deposits under the alternative method, any quarter if liability includes any tax not in effect throughout the look-back quarter and the month preceding the look-back quarter. 1040ez form 2012 Requirements to be met. 1040ez form 2012   For the safe harbor rule to apply, you must: Make each deposit timely at an authorized financial institution, and Pay any underpayment for the current quarter by the due date of the return. 1040ez form 2012    The IRS may withdraw the right to make deposits of tax using the safe harbor rule from any person not complying with these rules. 1040ez form 2012 Tax rate increases. 1040ez form 2012   You must modify the safe harbor rule if there has been an increase in the rate of tax. 1040ez form 2012 You must figure your tax liability in the look-back quarter as if the increased rate had been in effect. 1040ez form 2012 To qualify for the safe harbor rule, your deposits cannot be less than 1/6 of the refigured tax liability. 1040ez form 2012 Prev  Up  Next   Home   More Online Publications
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The 1040ez Form 2012

1040ez form 2012 13. 1040ez form 2012   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. 1040ez form 2012 It is divided into the following sections. 1040ez form 2012 Cost basis. 1040ez form 2012 Adjusted basis. 1040ez form 2012 Basis other than cost. 1040ez form 2012 Your basis is the amount of your investment in property for tax purposes. 1040ez form 2012 Use the basis to figure gain or loss on the sale, exchange, or other disposition of property. 1040ez form 2012 Also use it to figure deductions for depreciation, amortization, depletion, and casualty losses. 1040ez form 2012 If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. 1040ez form 2012 Only the basis allocated to the business or investment use of the property can be depreciated. 1040ez form 2012 Your original basis in property is adjusted (increased or decreased) by certain events. 1040ez form 2012 For example, if you make improvements to the property, increase your basis. 1040ez form 2012 If you take deductions for depreciation or casualty losses, or claim certain credits, reduce your basis. 1040ez form 2012 Keep accurate records of all items that affect the basis of your property. 1040ez form 2012 For more information on keeping records, see chapter 1. 1040ez form 2012 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. 1040ez form 2012 The cost is the amount you pay in cash, debt obligations, other property, or services. 1040ez form 2012 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). 1040ez form 2012 In addition, the basis of real estate and business assets may include other items. 1040ez form 2012 Loans with low or no interest. 1040ez form 2012    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. 1040ez form 2012 You generally have unstated interest if your interest rate is less than the applicable federal rate. 1040ez form 2012   For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. 1040ez form 2012 Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. 1040ez form 2012 If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. 1040ez form 2012 Lump sum purchase. 1040ez form 2012   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. 1040ez form 2012 Allocate the cost basis according to the respective fair market values (FMVs) of the land and buildings at the time of purchase. 1040ez form 2012 Figure the basis of each asset by multiplying the lump sum by a fraction. 1040ez form 2012 The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. 1040ez form 2012    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. 1040ez form 2012 Fair market value (FMV). 1040ez form 2012   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. 1040ez form 2012 Sales of similar property on or about the same date may be helpful in figuring the FMV of the property. 1040ez form 2012 Assumption of mortgage. 1040ez form 2012   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. 1040ez form 2012 Settlement costs. 1040ez form 2012   Your basis includes the settlement fees and closing costs you paid for buying the property. 1040ez form 2012 (A fee for buying property is a cost that must be paid even if you buy the property for cash. 1040ez form 2012 ) Do not include fees and costs for getting a loan on the property in your basis. 1040ez form 2012   The following are some of the settlement fees or closing costs you can include in the basis of your property. 1040ez form 2012 Abstract fees (abstract of title fees). 1040ez form 2012 Charges for installing utility services. 1040ez form 2012 Legal fees (including fees for the title search and preparation of the sales contract and deed). 1040ez form 2012 Recording fees. 1040ez form 2012 Survey fees. 1040ez form 2012 Transfer taxes. 1040ez form 2012 Owner's title insurance. 1040ez form 2012 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. 1040ez form 2012   Settlement costs do not include amounts placed in escrow for the future payment of items such as taxes and insurance. 1040ez form 2012   The following are some of the settlement fees and closing costs you cannot include in the basis of property. 1040ez form 2012 Casualty insurance premiums. 1040ez form 2012 Rent for occupancy of the property before closing. 1040ez form 2012 Charges for utilities or other services related to occupancy of the property before closing. 1040ez form 2012 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. 1040ez form 2012 Fees for refinancing a mortgage. 1040ez form 2012 Real estate taxes. 1040ez form 2012   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. 1040ez form 2012 You cannot deduct them as an expense. 1040ez form 2012    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. 1040ez form 2012 Do not include that amount in the basis of your property. 1040ez form 2012 If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. 1040ez form 2012 Points. 1040ez form 2012   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. 1040ez form 2012 Generally, you deduct the points over the term of the loan. 1040ez form 2012 For more information on how to deduct points, see chapter 23. 1040ez form 2012 Points on home mortgage. 1040ez form 2012   Special rules may apply to points you and the seller pay when you get a mortgage to buy your main home. 1040ez form 2012 If certain requirements are met, you can deduct the points in full for the year in which they are paid. 1040ez form 2012 Reduce the basis of your home by any seller-paid points. 1040ez form 2012 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. 1040ez form 2012 The result is the adjusted basis. 1040ez form 2012 Increases to Basis Increase the basis of any property by all items properly added to a capital account. 1040ez form 2012 Examples of items that increase basis are shown in Table 13-1. 1040ez form 2012 These include the items discussed below. 1040ez form 2012 Improvements. 1040ez form 2012   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. 1040ez form 2012 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. 1040ez form 2012 Assessments for local improvements. 1040ez form 2012   Add to the basis of property assessments for improvements such as streets and sidewalks if they increase the value of the property assessed. 1040ez form 2012 Do not deduct them as taxes. 1040ez form 2012 However, you can deduct as taxes assessments for maintenance or repairs, or for meeting interest charges related to the improvements. 1040ez form 2012 Example. 1040ez form 2012 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. 1040ez form 2012 Add the assessment to your property's basis. 1040ez form 2012 In this example, the assessment is a depreciable asset. 1040ez form 2012 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. 1040ez form 2012 Examples of items that decrease basis are shown in Table 13-1. 1040ez form 2012 These include the items discussed below. 1040ez form 2012 Table 13-1. 1040ez form 2012 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. 1040ez form 2012   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. 1040ez form 2012    You must increase your basis in the property by the amount you spend on repairs that restore the property to its pre-casualty condition. 1040ez form 2012   For more information on casualty and theft losses, see chapter 25. 1040ez form 2012 Depreciation and section 179 deduction. 1040ez form 2012   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. 1040ez form 2012   For more information about depreciation and the section 179 deduction, see Publication 946 and the Instructions for Form 4562. 1040ez form 2012 Example. 1040ez form 2012 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. 1040ez form 2012 You added an improvement to the duplex that cost $10,000. 1040ez form 2012 In February last year, the duplex was damaged by fire. 1040ez form 2012 Up to that time, you had been allowed depreciation of $23,000. 1040ez form 2012 You sold some salvaged material for $1,300 and collected $19,700 from your insurance company. 1040ez form 2012 You deducted a casualty loss of $1,000 on your income tax return for last year. 1040ez form 2012 You spent $19,000 of the insurance proceeds for restoration of the duplex, which was completed this year. 1040ez form 2012 You must use the duplex's adjusted basis after the restoration to determine depreciation for the rest of the property's recovery period. 1040ez form 2012 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. 1040ez form 2012 Your basis in the land is its original cost of $5,000. 1040ez form 2012 Easements. 1040ez form 2012   The amount you receive for granting an easement is generally considered to be proceeds from the sale of an interest in real property. 1040ez form 2012 It reduces the basis of the affected part of the property. 1040ez form 2012 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. 1040ez form 2012   If the gain is on a capital asset, see chapter 16 for information about how to report it. 1040ez form 2012 If the gain is on property used in a trade or business, see Publication 544 for information about how to report it. 1040ez form 2012 Exclusion of subsidies for energy conservation measures. 1040ez form 2012   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. 1040ez form 2012 Reduce the basis of the property for which you received the subsidy by the excluded amount. 1040ez form 2012 For more information about this subsidy, see chapter 12. 1040ez form 2012 Postponed gain from sale of home. 1040ez form 2012    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. 1040ez form 2012 For more information on the rules for the sale of a home, see chapter 15. 1040ez form 2012 Basis Other Than Cost There are many times when you cannot use cost as basis. 1040ez form 2012 In these cases, the fair market value or the adjusted basis of the property can be used. 1040ez form 2012 Fair market value (FMV) and adjusted basis were discussed earlier. 1040ez form 2012 Property Received for Services If you receive property for your services, include the FMV of the property in income. 1040ez form 2012 The amount you include in income becomes your basis. 1040ez form 2012 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. 1040ez form 2012 Restricted property. 1040ez form 2012   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. 1040ez form 2012 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. 1040ez form 2012 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). 1040ez form 2012 For more information, see Restricted Property in Publication 525. 1040ez form 2012 Bargain purchases. 1040ez form 2012   A bargain purchase is a purchase of an item for less than its FMV. 1040ez form 2012 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. 1040ez form 2012 Your basis in the property is its FMV (your purchase price plus the amount you include in income). 1040ez form 2012   If the difference between your purchase price and the FMV is a qualified employee discount, do not include the difference in income. 1040ez form 2012 However, your basis in the property is still its FMV. 1040ez form 2012 See Employee Discounts in Publication 15-B. 1040ez form 2012 Taxable Exchanges A taxable exchange is one in which the gain is taxable or the loss is deductible. 1040ez form 2012 A taxable gain or deductible loss also is known as a recognized gain or loss. 1040ez form 2012 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. 1040ez form 2012 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. 1040ez form 2012 Similar or related property. 1040ez form 2012   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. 1040ez form 2012 Decrease the basis by the following. 1040ez form 2012 Any loss you recognize on the involuntary conversion. 1040ez form 2012 Any money you receive that you do not spend on similar property. 1040ez form 2012 Increase the basis by the following. 1040ez form 2012 Any gain you recognize on the involuntary conversion. 1040ez form 2012 Any cost of acquiring the replacement property. 1040ez form 2012 Money or property not similar or related. 1040ez form 2012    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. 1040ez form 2012 Example. 1040ez form 2012 The state condemned your property. 1040ez form 2012 The adjusted basis of the property was $26,000 and the state paid you $31,000 for it. 1040ez form 2012 You realized a gain of $5,000 ($31,000 − $26,000). 1040ez form 2012 You bought replacement property similar in use to the converted property for $29,000. 1040ez form 2012 You recognize a gain of $2,000 ($31,000 − $29,000), the unspent part of the payment from the state. 1040ez form 2012 Your unrecognized gain is $3,000, the difference between the $5,000 realized gain and the $2,000 recognized gain. 1040ez form 2012 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. 1040ez form 2012   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. 1040ez form 2012 Basis for depreciation. 1040ez form 2012   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. 1040ez form 2012 For information, see What Is the Basis of Your Depreciable Property? in chapter 1 of Publication 946. 1040ez form 2012 Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. 1040ez form 2012 If you receive property in a nontaxable exchange, its basis is generally the same as the basis of the property you transferred. 1040ez form 2012 See Nontaxable Trades in chapter 14. 1040ez form 2012 Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. 1040ez form 2012 To qualify as a like-kind exchange, the property traded and the property received must be both of the following. 1040ez form 2012 Qualifying property. 1040ez form 2012 Like-kind property. 1040ez form 2012 The basis of the property you receive is generally the same as the adjusted basis of the property you gave up. 1040ez form 2012 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. 1040ez form 2012 Qualifying property. 1040ez form 2012   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. 1040ez form 2012 Like-kind property. 1040ez form 2012   There must be an exchange of like-kind property. 1040ez form 2012 Like-kind properties are properties of the same nature or character, even if they differ in grade or quality. 1040ez form 2012 The exchange of real estate for real estate and personal property for similar personal property are exchanges of like-kind property. 1040ez form 2012 Example. 1040ez form 2012 You trade in an old truck used in your business with an adjusted basis of $1,700 for a new one costing $6,800. 1040ez form 2012 The dealer allows you $2,000 on the old truck, and you pay $4,800. 1040ez form 2012 This is a like-kind exchange. 1040ez form 2012 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). 1040ez form 2012 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). 1040ez form 2012 The basis of the new truck is the price you pay the dealer. 1040ez form 2012 Partially nontaxable exchanges. 1040ez form 2012   A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. 1040ez form 2012 The basis of the property you receive is the same as the adjusted basis of the property you gave up, with the following adjustments. 1040ez form 2012 Decrease the basis by the following amounts. 1040ez form 2012 Any money you receive. 1040ez form 2012 Any loss you recognize on the exchange. 1040ez form 2012 Increase the basis by the following amounts. 1040ez form 2012 Any additional costs you incur. 1040ez form 2012 Any gain you recognize on the exchange. 1040ez form 2012 If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. 1040ez form 2012 Allocation of basis. 1040ez form 2012   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. 1040ez form 2012 The rest is the basis of the like-kind property. 1040ez form 2012 More information. 1040ez form 2012   See Like-Kind Exchanges in chapter 1 of Publication 544 for more information. 1040ez form 2012 Basis for depreciation. 1040ez form 2012   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind exchange. 1040ez form 2012 For information, see What Is the Basis of Your Depreciable Property? in chapter 1 of Publication 946. 1040ez form 2012 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. 1040ez form 2012 The same rule applies to a transfer by your former spouse that is incident to divorce. 1040ez form 2012 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. 1040ez form 2012 If the property transferred to you is a series E, series EE, or series I U. 1040ez form 2012 S. 1040ez form 2012 savings bond, the transferor must include in income the interest accrued to the date of transfer. 1040ez form 2012 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. 1040ez form 2012 For more information on these bonds, see chapter 7. 1040ez form 2012 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. 1040ez form 2012 For more information about the transfer of property from a spouse, see chapter 14. 1040ez form 2012 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. 1040ez form 2012 FMV less than donor's adjusted basis. 1040ez form 2012   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. 1040ez form 2012 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. 1040ez form 2012 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. 1040ez form 2012 See Adjusted Basis , earlier. 1040ez form 2012 Example. 1040ez form 2012 You received an acre of land as a gift. 1040ez form 2012 At the time of the gift, the land had an FMV of $8,000. 1040ez form 2012 The donor's adjusted basis was $10,000. 1040ez form 2012 After you received the property, no events occurred to increase or decrease your basis. 1040ez form 2012 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. 1040ez form 2012 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. 1040ez form 2012 If the sales price is between $8,000 and $10,000, you have neither gain nor loss. 1040ez form 2012 Business property. 1040ez form 2012   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. 1040ez form 2012 FMV equal to or greater than donor's adjusted basis. 1040ez form 2012   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. 1040ez form 2012 Increase your basis by all or part of any gift tax paid, depending on the date of the gift, explained later. 1040ez form 2012   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. 1040ez form 2012 See Adjusted Basis , earlier. 1040ez form 2012   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. 1040ez form 2012 Figure the increase by multiplying the gift tax paid by a fraction. 1040ez form 2012 The numerator of the fraction is the net increase in value of the gift and the denominator is the amount of the gift. 1040ez form 2012   The net increase in value of the gift is the FMV of the gift minus the donor's adjusted basis. 1040ez form 2012 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. 1040ez form 2012 Example. 1040ez form 2012 In 2013, you received a gift of property from your mother that had an FMV of $50,000. 1040ez form 2012 Her adjusted basis was $20,000. 1040ez form 2012 The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). 1040ez form 2012 She paid a gift tax of $7,320 on the property. 1040ez form 2012 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) × . 1040ez form 2012 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. 1040ez form 2012 If you received a gift before 1977, your basis in the gift (the donor's adjusted basis) includes any gift tax paid on it. 1040ez form 2012 However, your basis cannot exceed the FMV of the gift at the time it was given to you. 1040ez form 2012 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. 1040ez form 2012 The FMV on the alternate valuation date if the personal representative for the estate elects to use alternate valuation. 1040ez form 2012 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. 1040ez form 2012 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. 1040ez form 2012 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. 1040ez form 2012 For more information, see the instructions to Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. 1040ez form 2012 Property inherited from a decedent who died in 2010. 1040ez form 2012   If you inherited property from a decedent who died in 2010, special rules may apply. 1040ez form 2012 For more information, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. 1040ez form 2012 Community property. 1040ez form 2012   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. 1040ez form 2012 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. 1040ez form 2012 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. 1040ez form 2012 Example. 1040ez form 2012 You and your spouse owned community property that had a basis of $80,000. 1040ez form 2012 When your spouse died, half the FMV of the community interest was includible in your spouse's estate. 1040ez form 2012 The FMV of the community interest was $100,000. 1040ez form 2012 The basis of your half of the property after the death of your spouse is $50,000 (half of the $100,000 FMV). 1040ez form 2012 The basis of the other half to your spouse's heirs is also $50,000. 1040ez form 2012 For more information about community property, see Publication 555, Community Property. 1040ez form 2012 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. 1040ez form 2012 To do so, you must figure its basis for depreciation at the time of the change. 1040ez form 2012 An example of changing property held for personal use to business or rental use would be renting out your former personal residence. 1040ez form 2012 Basis for depreciation. 1040ez form 2012   The basis for depreciation is the lesser of the following amounts. 1040ez form 2012 The FMV of the property on the date of the change. 1040ez form 2012 Your adjusted basis on the date of the change. 1040ez form 2012 Example. 1040ez form 2012 Several years ago, you paid $160,000 to have your house built on a lot that cost $25,000. 1040ez form 2012 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. 1040ez form 2012 Because land is not depreciable, you include only the cost of the house when figuring the basis for depreciation. 1040ez form 2012 Your adjusted basis in the house when you changed its use was $178,000 ($160,000 + $20,000 − $2,000). 1040ez form 2012 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. 1040ez form 2012 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). 1040ez form 2012 Sale of property. 1040ez form 2012   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. 1040ez form 2012 Gain. 1040ez form 2012   The basis for figuring a gain is your adjusted basis in the property when you sell the property. 1040ez form 2012 Example. 1040ez form 2012 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. 1040ez form 2012 Your adjusted basis for figuring gain is $165,500 ($178,000 + $25,000 (land) − $37,500). 1040ez form 2012 Loss. 1040ez form 2012   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. 1040ez form 2012 Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . 1040ez form 2012 Example. 1040ez form 2012 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. 1040ez form 2012 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. 1040ez form 2012 Reduce that amount ($180,000) by the depreciation deductions ($37,500). 1040ez form 2012 The basis for loss is $142,500 ($180,000 − $37,500). 1040ez form 2012 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. 1040ez form 2012 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. 1040ez form 2012 You must adjust the basis of stocks for certain events that occur after purchase. 1040ez form 2012 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. 1040ez form 2012 This rule applies only when the additional stock received is identical to the stock held. 1040ez form 2012 Also reduce your basis when you receive nontaxable distributions. 1040ez form 2012 They are a return of capital. 1040ez form 2012 Example. 1040ez form 2012 In 2011 you bought 100 shares of XYZ stock for $1,000 or $10 a share. 1040ez form 2012 In 2012 you bought 100 shares of XYZ stock for $1,600 or $16 a share. 1040ez form 2012 In 2013 XYZ declared a 2-for-1 stock split. 1040ez form 2012 You now have 200 shares of stock with a basis of $5 a share and 200 shares with a basis of $8 a share. 1040ez form 2012 Other basis. 1040ez form 2012   There are other ways to figure the basis of stocks or bonds depending on how you acquired them. 1040ez form 2012 For detailed information, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. 1040ez form 2012 Identifying stocks or bonds sold. 1040ez form 2012   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. 1040ez form 2012 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. 1040ez form 2012 For more information about identifying securities you sell, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. 1040ez form 2012 Mutual fund shares. 1040ez form 2012   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. 1040ez form 2012 For more information, see Publication 550. 1040ez form 2012 Bond premium. 1040ez form 2012   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. 1040ez form 2012 See Bond Premium Amortization in chapter 3 of Publication 550 for more information. 1040ez form 2012 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. 1040ez form 2012 Original issue discount (OID) on debt instruments. 1040ez form 2012   You must increase your basis in an OID debt instrument by the OID you include in income for that instrument. 1040ez form 2012 See Original Issue Discount (OID) in chapter 7 and Publication 1212, Guide To Original Issue Discount (OID) Instruments. 1040ez form 2012 Tax-exempt obligations. 1040ez form 2012    OID on tax-exempt obligations is generally not taxable. 1040ez form 2012 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. 1040ez form 2012 The accrued OID is added to the basis of the obligation to determine your gain or loss. 1040ez form 2012 See chapter 4 of Publication 550. 1040ez form 2012 Prev  Up  Next   Home   More Online Publications