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Aarp Org Taxaide

H And R Block File FreeI Need To File Taxes For 2011Irs Form 1040ez 2012Taxes MilitaryFree TaxesFree File Free 1040 Tax ReturnFree Turbotax 2010Free State Tax Returns With FederalFree 2012 Tax HelpFederal Income Tax 1040ez OnlineForm 1040x 2011Irs 2012 Tax ReturnHow To File Ez Tax FormTurbotax Deluxe Federal E File State 2011 For Pc Download1040a Or 1040ezFiling Taxes With UnemploymentIrs Tax Form 1120 For 2012Myfreetax2012 Turbotax Free1040ez 2011 File OnlineCan I File My 2012 Taxes Online NowHow To File State Taxes Only1040ez Printable Tax Forms1040ez Form OnlineIrs 1040ez Form 2011H & R Block Free Tax FilingFile Free State TaxesCan You Do State Taxes For Free2011 Federal Income Tax Forms 1040 Ez1040nr InstructionsH&r Block Taxes Online Free1040ez Form PrintableIrs Efile1040ez20122012 Income Tax Forms 1040ezH&r Block Free Online Tax Filing2011 Tax Filing Deadline1040ez Earned Income CreditIrs File 1040ez1040a 2012

Aarp Org Taxaide

Aarp org taxaide Index A Acknowledgment, Acknowledgment. Aarp org taxaide Adoption expenses, Personal Expenses Airplanes, donations of, Cars, Boats, and Airplanes Appraisal fees, Appraisal Fees Assistance (see Tax help) Athletic events, Athletic events. Aarp org taxaide B Bargain sales, Bargain Sales Blood donated, Value of Time or Services Boats, donations of, Cars, Boats, and Airplanes Boats, fair market value, Cars, boats, and airplanes. Aarp org taxaide C Canadian charity, Canadian charities. Aarp org taxaide Capital gain property, Capital Gain Property Car expenses, Car expenses. Aarp org taxaide , Car expenses. Aarp org taxaide Carryovers, Carryovers Cars, donations of, Cars, Boats, and Airplanes Cash contributions, records to keep, Cash Contributions Charity benefit events, Charity benefit events. Aarp org taxaide Church deacon, Church deacon. Aarp org taxaide Clothing Fair market value of, Used clothing. Aarp org taxaide Conservation contribution, Special 50% Limit for Qualified Conservation Contributions Contributions from which you benefit, Contributions From Which You Benefit, Contributions From Which You Benefit Contributions of property, Contributions of Property Contributions subject to special rules Car, boat, or airplane, 1098–C, Contributions Subject to Special Rules Clothing, Contributions Subject to Special Rules Fractional interest in tangible personal property, Contributions Subject to Special Rules Future interest in tangible personal property, Contributions Subject to Special Rules Household items, Contributions Subject to Special Rules Inventory from your business, Contributions Subject to Special Rules Partial interest in property, Contributions Subject to Special Rules Patent or other intellectual property, Contributions Subject to Special Rules Property subject to a debt, Contributions Subject to Special Rules Qualified conservation contribution, Contributions Subject to Special Rules Taxidermy property, Contributions Subject to Special Rules Contributions to nonqualified organizations Foreign organizations, Contributions to Nonqualified Organizations Contributions you can deduct, Contributions You Can Deduct Conventions of a qualified organization, Conventions. Aarp org taxaide D Daily allowance (per diem) from a charitable organization, Daily allowance (per diem). Aarp org taxaide Deduction limits, Limits on Deductions Determining fair market value, Determining Fair Market Value Disaster relief, Reminders Donor-advised funds, Contributions to Donor-Advised Funds E Easement, Building in registered historic district. Aarp org taxaide F Farmer, Qualified farmer or rancher. Aarp org taxaide Food inventory, Food Inventory Foreign organizations Canadian, Canadian charities. Aarp org taxaide Israeli, Israeli charities. Aarp org taxaide Mexican, Mexican charities. Aarp org taxaide Form 8282, Form 8282. Aarp org taxaide 8283, Total deduction over $500. Aarp org taxaide Foster parents, Foster parents. Aarp org taxaide Free tax services, Free help with your tax return. Aarp org taxaide Future interests in property, Future Interest in Tangible Personal Property H Help (see Tax help) Historic building, Building in registered historic district. Aarp org taxaide Household items Fair market value of, Household items. Aarp org taxaide How to report, How To Report Noncash contributions, Reporting expenses for student living with you. Aarp org taxaide I Introduction, Introduction Inventory, Food Inventory Israeli charity, Israeli charities. Aarp org taxaide L Legislation, influencing, Contributions From Which You Benefit Limit on itemized deductions, What's New Limits on deductions, Limits on Deductions 20% limit, 20% Limit 30% limit, 30% Limit 50% limit, 50% Limit Calculation, How To Figure Your Deduction When Limits Apply Capital gain property, Special 30% Limit for Capital Gain Property Qualified conservation contributions, Special 50% Limit for Qualified Conservation Contributions M Meals, Personal Expenses Membership fees or dues, Membership fees or dues. Aarp org taxaide Mexican charity, Mexican charities. Aarp org taxaide Motor vehicles, donations of, Cars, Boats, and Airplanes Motor vehicles, fair market value, Cars, boats, and airplanes. Aarp org taxaide N Noncash contributions, Noncash Contributions How to report, Reporting expenses for student living with you. Aarp org taxaide Records to keep, Noncash Contributions Nondeductible contributions, Contributions You Cannot Deduct O Ordinary income property, Ordinary Income Property Out-of-pocket expenses, Out-of-pocket expenses. Aarp org taxaide Out-of-pocket expenses in giving services, Out-of-Pocket Expenses in Giving Services P Payroll deductions, Payroll deductions. Aarp org taxaide , Payroll deductions. Aarp org taxaide Penalty, valuation overstatement, Penalty Personal expenses, Personal Expenses Private foundation, 50% Limit Organizations Private nonoperating foundation, Contributions to private nonoperating foundations. Aarp org taxaide , 50% Limit Organizations Private operating foundation, 50% Limit Organizations Property Bargain sales, Bargain Sales Basis, Giving Property That Has Decreased in Value Capital gain, Capital Gain Property Capital gain election, Capital gain property election. Aarp org taxaide Decreased in value, Giving Property That Has Decreased in Value Future interests, Future Interest in Tangible Personal Property Increased in value, Giving Property That Has Increased in Value Inventory, Food Inventory Ordinary income, Ordinary Income Property Unrelated use, Tangible personal property put to unrelated use. Aarp org taxaide Publications (see Tax help) Q Qualified charitable distributions, Qualified Charitable Distributions Qualified conservation contribution, Special 50% Limit for Qualified Conservation Contributions Qualified organizations Foreign qualified organizations Canadian, Organizations That Qualify To Receive Deductible Contributions Israeli, Organizations That Qualify To Receive Deductible Contributions Mexican, Organizations That Qualify To Receive Deductible Contributions Types, Organizations That Qualify To Receive Deductible Contributions R Raffle or bingo, Contributions From Which You Benefit Recapture No exempt use, Recapture if no exempt use. Aarp org taxaide Recapture of deduction of fractional interest in tangible personal property Additional tax, Recapture of deduction. Aarp org taxaide Records to keep, Records To Keep Reminders Disaster relief, Reminders Reporting, How To Report Retirement home, Contributions From Which You Benefit S Services, value of, Value of Time or Services Split-dollar insurance arrangements, Contributions From Which You Benefit Student, Mutual exchange program. Aarp org taxaide Exchange program, Mutual exchange program. Aarp org taxaide Living with you, Student living with you. Aarp org taxaide Student living with you, Expenses Paid for Student Living With You, Reporting expenses for student living with you. Aarp org taxaide T Tangible personal property Future interest in, Future Interest in Tangible Personal Property Tax help, How To Get Tax Help Time, value of, Value of Time or Services Token items, Certain membership benefits can be disregarded. Aarp org taxaide Travel expenses, Travel. Aarp org taxaide Travel expenses for charitable services, Deductible travel expenses. Aarp org taxaide Tuition, Contributions From Which You Benefit U Underprivileged youths, Underprivileged youths selected by charity. Aarp org taxaide Uniforms, Uniforms. Aarp org taxaide Unrelated use, Unrelated use. Aarp org taxaide V Volunteers, Out-of-Pocket Expenses in Giving Services W Whaling captain, Expenses of Whaling Captains When to deduct, When To Deduct Prev  Up     Home   More Online Publications
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Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

Colorado Office of the Attorney General

Website: Colorado Office of the Attorney General

Address: Colorado Office of the Attorney General
Consumer Protection Section
1300 Broadway, 10th Floor
Denver, CO 80203

Phone Number: 720-508-6006

Toll-free: 1-800-222-4444 (CO)

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County Consumer Protection Offices

Pueblo County District Attorney's Office

Website: Pueblo County District Attorney's Office

Address: Pueblo County District Attorney's Office
Economic Crimes Unit
701 Court St.
Pueblo, CO 81003

Phone Number: 719-583-6030

Weld County District Attorney's Office

Website: Weld County District Attorney's Office

Address: Weld County District Attorney's Office
915 10th St.
PO Box 1167
Greeley, CO 80632-1167

Phone Number: 970-356-4010

Fourth Judicial District Attorney's Office

Website: Fourth Judicial District Attorney's Office

Address: Fourth Judicial District Attorney's Office
Economic Crimes Division
El Paso and Teller Counties
105 E. Vermijo Ave.
Colorado Springs, CO 80903

Phone Number: 719-520-6000 719-520-6002 (Fraud Hotline)

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City Consumer Protection Offices

Denver District Attorney's Office

Website: Denver District Attorney's Office

Address: Denver District Attorney's Office
Economic Crimes Unit
201 W. Colfax Ave.
Denver, CO 80202

Phone Number: 720-913-9179

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

Department of Regulatory Agencies

Website: Department of Regulatory Agencies

Address: Department of Regulatory Agencies
Division of Banking
1560 Broadway, Suite 975
Denver, CO 80202

Phone Number: 303-894-7575

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Department of Regulatory Agencies

Website: Department of Regulatory Agencies

Address: Department of Regulatory Agencies
Division of Insurance
1560 Broadway, Suite 850
Denver, CO 80202

Phone Number: 303-894-7490

Toll-free: 1-800-930-3745 (CO)

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Department of Regulatory Agencies

Website: Department of Regulatory Agencies

Address: Department of Regulatory Agencies
Division of Securities
1560 Broadway, Suite 900
Denver, CO 80202

Phone Number: 303-894-2320

TTY: 1-800-659-2656

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Public Utilities Commission

Website: Public Utilities Commission

Address: Public Utilities Commission
Consumer Protection Division
1560 Broadway, Suite 250
Denver, CO 80202

Phone Number: 303-894-2070

Toll-free: 1-800-456-0858 (CO)

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The Aarp Org Taxaide

Aarp org taxaide Publication 551 - Main Content Table of Contents Cost BasisStocks and Bonds Real Property Business Assets Allocating the Basis Adjusted BasisIncreases to Basis Decreases to Basis Adjustments to Basis Example Basis Other Than CostProperty Received for Services Taxable Exchanges Nontaxable Exchanges Property Transferred From a Spouse Property Received as a Gift Inherited Property Property Changed to Business or Rental Use How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). Aarp org taxaide Cost Basis The basis of property you buy is usually its cost. Aarp org taxaide The cost is the amount you pay in cash, debt obligations, other property, or services. Aarp org taxaide Your cost also includes amounts you pay for the following items. Aarp org taxaide 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 assumed for the seller). Aarp org taxaide  You may also have to capitalize (add to basis) certain other costs related to buying or producing property. Aarp org taxaide Loans with low or no interest. Aarp org taxaide   If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price, minus the amount considered to be unstated interest. Aarp org taxaide You generally have unstated interest if your interest rate is less than the applicable federal rate. Aarp org taxaide For more information, see Unstated Interest and Original Issue Discount in Publication 537. Aarp org taxaide Purchase of a business. Aarp org taxaide   When you purchase a trade or business, you generally purchase all assets used in the business operations, such as land, buildings, and machinery. Aarp org taxaide Allocate the price among the various assets, including any section 197 intangibles. Aarp org taxaide See Allocating the Basis, later. Aarp org taxaide Stocks and Bonds The basis of stocks or bonds you buy is generally the purchase price plus any costs of purchase, such as commissions and recording or transfer fees. Aarp org taxaide If you get stocks or bonds other than by purchase, your basis is usually determined by the fair market value (FMV) or the previous owner's adjusted basis of the stock. Aarp org taxaide You must adjust the basis of stocks for certain events that occur after purchase. Aarp org taxaide See Stocks and Bonds in chapter 4 of Publication 550 for more information on the basis of stock. Aarp org taxaide Identifying stock or bonds sold. Aarp org taxaide   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 stock or bonds. Aarp org taxaide 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. Aarp org taxaide For more information about identifying securities you sell, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. Aarp org taxaide Mutual fund shares. Aarp org taxaide   If you sell mutual fund shares acquired at different times and prices, you can choose to use an average basis. Aarp org taxaide For more information, see Publication 550. Aarp org taxaide Real Property Real property, also called real estate, is land and generally anything built on or attached to it. Aarp org taxaide If you buy real property, certain fees and other expenses become part of your cost basis in the property. Aarp org taxaide Real estate taxes. Aarp org taxaide   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. Aarp org taxaide You cannot deduct them as taxes. Aarp org taxaide   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. Aarp org taxaide Do not include that amount in the basis of the property. Aarp org taxaide If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. Aarp org taxaide Settlement costs. Aarp org taxaide   Your basis includes the settlement fees and closing costs for buying property. Aarp org taxaide You cannot include in your basis the fees and costs for getting a loan on property. Aarp org taxaide A fee for buying property is a cost that must be paid even if you bought the property for cash. Aarp org taxaide   The following items are some of the settlement fees or closing costs you can include in the basis of your property. Aarp org taxaide Abstract fees (abstract of title fees); Charges for installing utility services; Legal fees (including title search and preparation of the sales contract and deed); Recording fees; Surveys; Transfer taxes; Owner's title insurance; and 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. Aarp org taxaide   Settlement costs do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Aarp org taxaide   The following items are some settlement fees and closing costs you cannot include in the basis of the property. Aarp org taxaide Casualty insurance premiums. Aarp org taxaide Rent for occupancy of the property before closing. Aarp org taxaide Charges for utilities or other services related to occupancy of the property before closing. Aarp org taxaide Charges connected with getting a loan. Aarp org taxaide The following are examples of these charges. Aarp org taxaide Points (discount points, loan origination fees). Aarp org taxaide Mortgage insurance premiums. Aarp org taxaide Loan assumption fees. Aarp org taxaide Cost of a credit report. Aarp org taxaide Fees for an appraisal required by a lender. Aarp org taxaide Fees for refinancing a mortgage. Aarp org taxaide If these costs relate to business property, items (1) through (3) are deductible as business expenses. Aarp org taxaide Items (4) and (5) must be capitalized as costs of getting a loan and can be deducted over the period of the loan. Aarp org taxaide Points. Aarp org taxaide   If you pay points to obtain 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. Aarp org taxaide Generally, you deduct the points over the term of the loan. Aarp org taxaide For more information on how to deduct points, see Points in chapter 4 of Publication 535. Aarp org taxaide Points on home mortgage. Aarp org taxaide   Special rules may apply to points you and the seller pay when you obtain a mortgage to purchase your main home. Aarp org taxaide If certain requirements are met, you can deduct the points in full for the year in which they are paid. Aarp org taxaide Reduce the basis of your home by any seller-paid points. Aarp org taxaide For more information, see Points in Publication 936, Home Mortgage Interest Deduction. Aarp org taxaide Assumption of mortgage. Aarp org taxaide   If you buy property and assume (or buy 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. Aarp org taxaide Example. Aarp org taxaide If you buy a building for $20,000 cash and assume a mortgage of $80,000 on it, your basis is $100,000. Aarp org taxaide Constructing assets. Aarp org taxaide   If you build property or have assets built for you, your expenses for this construction are part of your basis. Aarp org taxaide Some of these expenses include the following costs. Aarp org taxaide Land, Labor and materials, Architect's fees, Building permit charges, Payments to contractors, Payments for rental equipment, and Inspection fees. Aarp org taxaide In addition, if you own a business and use your employees, material, and equipment to build an asset, do not deduct the following expenses. Aarp org taxaide You must include them in the asset's basis. Aarp org taxaide Employee wages paid for the construction work, reduced by any employment credits allowed; Depreciation on equipment you own while it is used in the construction; Operating and maintenance costs for equipment used in the construction; and The cost of business supplies and materials used in the construction. Aarp org taxaide    Do not include the value of your own labor, or any other labor you did not pay for, in the basis of any property you construct. Aarp org taxaide Business Assets If you purchase property to use in your business, your basis is usually its actual cost to you. Aarp org taxaide If you construct, create, or otherwise produce property, you must capitalize the costs as your basis. Aarp org taxaide In certain circumstances, you may be subject to the uniform capitalization rules, next. Aarp org taxaide Uniform Capitalization Rules The uniform capitalization rules specify the costs you add to basis in certain circumstances. Aarp org taxaide Activities subject to the rules. Aarp org taxaide   You must use the uniform capitalization rules if you do any of the following in your trade or business or activity carried on for profit. Aarp org taxaide Produce real or tangible personal property for use in the business or activity, Produce real or tangible personal property for sale to customers, or Acquire property for resale. Aarp org taxaide However, this rule does not apply to personal property if your average annual gross receipts for the 3 previous tax years are $10 million or less. Aarp org taxaide   You produce property if you construct, build, install, manufacture, develop, improve, create, raise, or grow the property. Aarp org taxaide Treat property produced for you under a contract as produced by you up to the amount you pay or costs you otherwise incur for the property. Aarp org taxaide Tangible personal property includes films, sound recordings, video tapes, books, or similar property. Aarp org taxaide    Under the uniform capitalization rules, you must capitalize all direct costs and an allocable part of most indirect costs you incur due to your production or resale activities. Aarp org taxaide To capitalize means to include certain expenses in the basis of property you produce or in your inventory costs rather than deduct them as a current expense. Aarp org taxaide You recover these costs through deductions for depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Aarp org taxaide   Any cost you cannot use to figure your taxable income for any tax year is not subject to the uniform capitalization rules. Aarp org taxaide Example. Aarp org taxaide If you incur a business meal expense for which your deduction would be limited to 50% of the cost of the meal, that amount is subject to the uniform capitalization rules. Aarp org taxaide The nondeductible part of the cost is not subject to the uniform capitalization rules. Aarp org taxaide More information. Aarp org taxaide   For more information about these rules, see the regulations under section 263A of the Internal Revenue Code and Publication 538, Accounting Periods and Methods. Aarp org taxaide Exceptions. Aarp org taxaide   The following are not subject to the uniform capitalization rules. Aarp org taxaide Property you produce that you do not use in your trade, business, or activity conducted for profit; Qualified creative expenses you pay or incur as a free-lance (self-employed) writer, photographer, or artist that are otherwise deductible on your tax return; Property you produce under a long-term contract, except for certain home construction contracts; Research and experimental expenses deductible under section 174 of the Internal Revenue Code; and Costs for personal property acquired for resale if your (or your predecessor's) average annual gross receipts for the 3 previous tax years do not exceed $10 million. Aarp org taxaide For other exceptions to the uniform capitalization rules, see section 1. Aarp org taxaide 263A-1(b) of the regulations. Aarp org taxaide   For information on the special rules that apply to costs incurred in the business of farming, see chapter 6 of Publication 225, Farmer's Tax Guide. Aarp org taxaide Intangible Assets Intangible assets include goodwill, patents, copyrights, trademarks, trade names, and franchises. Aarp org taxaide The basis of an intangible asset is usually the cost to buy or create it. Aarp org taxaide If you acquire multiple assets, for example a going business for a lump sum, see Allocating the Basis below to figure the basis of the individual assets. Aarp org taxaide The basis of certain intangibles can be amortized. Aarp org taxaide See chapter 8 of Publication 535 for information on the amortization of these costs. Aarp org taxaide Patents. Aarp org taxaide   The basis of a patent you get for an invention is the cost of development, such as research and experimental expenditures, drawings, working models, and attorneys' and governmental fees. Aarp org taxaide If you deduct the research and experimental expenditures as current business expenses, you cannot include them in the basis of the patent. Aarp org taxaide The value of the inventor's time spent on an invention is not part of the basis. Aarp org taxaide Copyrights. Aarp org taxaide   If you are an author, the basis of a copyright will usually be the cost of getting the copyright plus copyright fees, attorneys' fees, clerical assistance, and the cost of plates that remain in your possession. Aarp org taxaide Do not include the value of your time as the author, or any other person's time you did not pay for. Aarp org taxaide Franchises, trademarks, and trade names. Aarp org taxaide   If you buy a franchise, trademark, or trade name, the basis is its cost, unless you can deduct your payments as a business expense. Aarp org taxaide Allocating the Basis If you buy multiple assets for a lump sum, allocate the amount you pay among the assets you receive. Aarp org taxaide You must make this allocation to figure your basis for depreciation and gain or loss on a later disposition of any of these assets. Aarp org taxaide See Trade or Business Acquired below. Aarp org taxaide Group of Assets Acquired If you buy multiple assets for a lump sum, you and the seller may agree to a specific allocation of the purchase price among the assets in the sales contract. Aarp org taxaide If this allocation is based on the value of each asset and you and the seller have adverse tax interests, the allocation generally will be accepted. Aarp org taxaide However, see Trade or Business Acquired, next. Aarp org taxaide Trade or Business Acquired If you acquire a trade or business, allocate the consideration paid to the various assets acquired. Aarp org taxaide Generally, reduce the consideration paid by any cash and general deposit accounts (including checking and savings accounts) received. Aarp org taxaide Allocate the remaining consideration to the other business assets received in proportion to (but not more than) their fair market value in the following order. Aarp org taxaide Certificates of deposit, U. Aarp org taxaide S. Aarp org taxaide Government securities, foreign currency, and actively traded personal property, including stock and securities. Aarp org taxaide Accounts receivable, other debt instruments, and assets you mark to market at least annually for federal income tax purposes. Aarp org taxaide Property of a kind that would properly be included in inventory if on hand at the end of the tax year or property held primarily for sale to customers in the ordinary course of business. Aarp org taxaide All other assets except section 197 intangibles, goodwill, and going concern value. Aarp org taxaide Section 197 intangibles except goodwill and going concern value. Aarp org taxaide Goodwill and going concern value (whether or not they qualify as section 197 intangibles). Aarp org taxaide Agreement. Aarp org taxaide   The buyer and seller may enter into a written agreement as to the allocation of any consideration or the fair market value (FMV) of any of the assets. Aarp org taxaide This agreement is binding on both parties unless the IRS determines the amounts are not appropriate. Aarp org taxaide Reporting requirement. Aarp org taxaide   Both the buyer and seller involved in the sale of business assets must report to the IRS the allocation of the sales price among section 197 intangibles and the other business assets. Aarp org taxaide Use Form 8594 to provide this information. Aarp org taxaide The buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. Aarp org taxaide More information. Aarp org taxaide   See Sale of a Business in chapter 2 of Publication 544 for more information. Aarp org taxaide Land and Buildings If you buy buildings and the land on which they stand for a lump sum, allocate the basis of the property among the land and the buildings so you can figure the depreciation allowable on the buildings. Aarp org taxaide Figure the basis of each asset by multiplying the lump sum by a fraction. Aarp org taxaide The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. Aarp org taxaide If you are not certain of the FMV of the land and buildings, you can allocate the basis based on their assessed values for real estate tax purposes. Aarp org taxaide Demolition of building. Aarp org taxaide   Add demolition costs and other losses incurred for the demolition of any building to the basis of the land on which the demolished building was located. Aarp org taxaide Do not claim the costs as a current deduction. Aarp org taxaide Modification of building. Aarp org taxaide   A modification of a building will not be treated as a demolition if the following conditions are satisfied. Aarp org taxaide 75 percent or more of the existing external walls of the building are retained in place as internal or external walls, and 75 percent or more of the existing internal structural framework of the building is retained in place. Aarp org taxaide   If the building is a certified historic structure, the modification must also be part of a certified rehabilitation. Aarp org taxaide   If these conditions are met, add the costs of the modifications to the basis of the building. Aarp org taxaide Subdivided lots. Aarp org taxaide   If you buy a tract of land and subdivide it, you must determine the basis of each lot. Aarp org taxaide This is necessary because you must figure the gain or loss on the sale of each individual lot. Aarp org taxaide As a result, you do not recover your entire cost in the tract until you have sold all of the lots. Aarp org taxaide   To determine the basis of an individual lot, multiply the total cost of the tract by a fraction. Aarp org taxaide The numerator is the FMV of the lot and the denominator is the FMV of the entire tract. Aarp org taxaide Future improvement costs. Aarp org taxaide   If you are a developer and sell subdivided lots before the development work is completed, you can (with IRS consent) include in the basis of the properties sold an allocation of the estimated future cost for common improvements. Aarp org taxaide See Revenue Procedure 92–29 for more information, including an explanation of the procedures for getting consent from the IRS. Aarp org taxaide Use of erroneous cost basis. Aarp org taxaide   If you made a mistake in figuring the cost basis of subdivided lots sold in previous years, you cannot correct the mistake for years for which the statute of limitations (generally 3 tax years) has expired. Aarp org taxaide Figure the basis of any remaining lots by allocating the correct original cost basis of the entire tract among the original lots. Aarp org taxaide Example. Aarp org taxaide You bought a tract of land to which you assigned a cost of $15,000. Aarp org taxaide You subdivided the land into 15 building lots of equal size and equitably divided your basis so that each lot had a basis of $1,000. Aarp org taxaide You treated the sale of each lot as a separate transaction and figured gain or loss separately on each sale. Aarp org taxaide Several years later you determine that your original basis in the tract was $22,500 and not $15,000. Aarp org taxaide You sold eight lots using $8,000 of basis in years for which the statute of limitations has expired. Aarp org taxaide You now can take $1,500 of basis into account for figuring gain or loss only on the sale of each of the remaining seven lots ($22,500 basis divided among all 15 lots). Aarp org taxaide You cannot refigure the basis of the eight lots sold in tax years barred by the statute of limitations. Aarp org taxaide Adjusted Basis Before figuring gain or loss on a sale, exchange, or other disposition of property or figuring allowable depreciation, depletion, or amortization, you must usually make certain adjustments to the basis of the property. Aarp org taxaide The result of these adjustments to the basis is the adjusted basis. Aarp org taxaide Increases to Basis Increase the basis of any property by all items properly added to a capital account. Aarp org taxaide These include the cost of any improvements having a useful life of more than 1 year. Aarp org taxaide Rehabilitation expenses also increase basis. Aarp org taxaide However, you must subtract any rehabilitation credit allowed for these expenses before you add them to your basis. Aarp org taxaide If you have to recapture any of the credit, increase your basis by the recaptured amount. Aarp org taxaide If you make additions or improvements to business property, keep separate accounts for them. Aarp org taxaide Also, you must depreciate the basis of each according to the depreciation rules that would apply to the underlying property if you had placed it in service at the same time you placed the addition or improvement in service. Aarp org taxaide For more information, see Publication 946. Aarp org taxaide The following items increase the basis of property. Aarp org taxaide The cost of extending utility service lines to the property; Impact fees; Legal fees, such as the cost of defending and perfecting title; Legal fees for obtaining a decrease in an assessment levied against property to pay for local improvements; Zoning costs; and The capitalized value of a redeemable ground rent. Aarp org taxaide Assessments for Local Improvements Increase the basis of property by assessments for items such as paving roads and building ditches that increase the value of the property assessed. Aarp org taxaide Do not deduct them as taxes. Aarp org taxaide However, you can deduct as taxes charges for maintenance, repairs, or interest charges related to the improvements. Aarp org taxaide Example. Aarp org taxaide Your city changes the street in front of your store into an enclosed pedestrian mall and assesses you and other affected landowners for the cost of the conversion. Aarp org taxaide Add the assessment to your property's basis. Aarp org taxaide In this example, the assessment is a depreciable asset. Aarp org taxaide Deducting vs. Aarp org taxaide Capitalizing Costs Do not add to your basis costs you can deduct as current expenses. Aarp org taxaide For example, amounts paid for incidental repairs or maintenance that are deductible as business expenses cannot be added to basis. Aarp org taxaide However, you can choose either to deduct or to capitalize certain other costs. Aarp org taxaide If you capitalize these costs, include them in your basis. Aarp org taxaide If you deduct them, do not include them in your basis. Aarp org taxaide See Uniform Capitalization Rules earlier. Aarp org taxaide The costs you can choose to deduct or to capitalize include the following. Aarp org taxaide Carrying charges, such as interest and taxes, that you pay to own property, except carrying charges that must be capitalized under the uniform capitalization rules; Research and experimentation costs; Intangible drilling and development costs for oil, gas, and geothermal wells; Exploration costs for new mineral deposits; Mining development costs for a new mineral deposit; Costs of establishing, maintaining, or increasing the circulation of a newspaper or other periodical; and Costs of removing architectural and transportation barriers to people with disabilities and the elderly. Aarp org taxaide If you claim the disabled access credit, you must reduce the amount you deduct or capitalize by the amount of the credit. Aarp org taxaide For more information about deducting or capitalizing costs, see chapter 7 in Publication 535. Aarp org taxaide Table 1. Aarp org taxaide Examples of Increases and Decreases to Basis Increases to Basis Decreases to Basis Capital improvements:   Putting an addition on your home   Replacing an entire roof  Paving your driveway  Installing central air conditioning Rewiring your home Exclusion from income of subsidies for energy conservation measures  Casualty or theft loss deductions and insurance reimbursements  Vehicle credits Assessments for local improvements: Water connections Sidewalks Roads Section 179 deduction  Casualty losses: Restoring damaged property Depreciation  Nontaxable corporate distributions Legal fees:  Cost of defending and perfecting a title   Zoning costs   Decreases to Basis The following are some items that reduce the basis of property. Aarp org taxaide Section 179 deduction; Nontaxable corporate distributions; Deductions previously allowed (or allowable) for amortization, depreciation, and depletion; Exclusion of subsidies for energy conservation measures; Vehicle credits; Residential energy credits; Postponed gain from sale of home; Investment credit (part or all) taken; Casualty and theft losses and insurance reimbursement; Certain canceled debt excluded from income; Rebates from a manufacturer or seller; Easements; Gas-guzzler tax; Adoption tax benefits; and Credit for employer-provided child care. Aarp org taxaide Some of these items are discussed next. Aarp org taxaide Casualties and Thefts If you have a casualty or theft loss, decrease the basis in your property by any insurance or other reimbursement and by any deductible loss not covered by insurance. Aarp org taxaide You must increase your basis in the property by the amount you spend on repairs that substantially prolong the life of the property, increase its value, or adapt it to a different use. Aarp org taxaide To make this determination, compare the repaired property to the property before the casualty. Aarp org taxaide For more information on casualty and theft losses, see Publication 547, Casualties, Disasters, and Thefts. Aarp org taxaide Easements The amount you receive for granting an easement is generally considered to be a sale of an interest in real property. Aarp org taxaide It reduces the basis of the affected part of the property. Aarp org taxaide 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. Aarp org taxaide Vehicle Credits Unless you elect not to claim the qualified plug-in electric vehicle credit, the alternative motor vehicle credit, or the qualified plug-in electric drive motor vehicle credit, you may have to reduce the basis of each qualified vehicle by certain amounts reported. Aarp org taxaide For more information, see Form 8834, Qualified Plug-in Electric and Electric Vehicle Credit; Form 8910, Alternative Motor Vehicle Credit; Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit;and the related instructions. Aarp org taxaide Gas-Guzzler Tax Decrease the basis in your car by the gas-guzzler (fuel economy) tax if you begin using the car within 1 year of the date of its first sale for ultimate use. Aarp org taxaide This rule also applies to someone who later buys the car and begins using it not more than 1 year after the original sale for ultimate use. Aarp org taxaide If the car is imported, the one-year period begins on the date of entry or withdrawal of the car from the warehouse if that date is later than the date of the first sale for ultimate use. Aarp org taxaide Section 179 Deduction If you take the section 179 deduction for all or part of the cost of qualifying business property, decrease the basis of the property by the deduction. Aarp org taxaide For more information about the section 179 deduction, see Publication 946. Aarp org taxaide Exclusion of Subsidies for Energy Conservation Measures You can exclude from gross income any subsidy you received from a public utility company for the purchase or installation of any energy conservation measure for a dwelling unit. Aarp org taxaide Reduce the basis of the property for which you received the subsidy by the excluded amount. Aarp org taxaide For more information on this subsidy, see Publication 525. Aarp org taxaide Depreciation Decrease the basis of property by the depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you chose. Aarp org taxaide If you took less depreciation than you could have under the method chosen, decrease the basis by the amount you could have taken under that method. Aarp org taxaide If you did not take a depreciation deduction, reduce the basis by the full amount of the depreciation you could have taken. Aarp org taxaide Unless a timely election is made not to deduct the special depreciation allowance for property placed in service after September 10, 2001, decrease the property's basis by the special depreciation allowance you deducted or could have deducted. Aarp org taxaide If you deducted more depreciation than you should have, decrease your basis by the amount equal to the depreciation you should have deducted plus the part of the excess depreciation you deducted that actually reduced your tax liability for the year. Aarp org taxaide In decreasing your basis for depreciation, take into account the amount deducted on your tax returns as depreciation and any depreciation capitalized under the uniform capitalization rules. Aarp org taxaide For information on figuring depreciation, see Publication 946. Aarp org taxaide If you are claiming depreciation on a business vehicle, see Publication 463. Aarp org taxaide If the car is not used more than 50% for business during the tax year, you may have to recapture excess depreciation. Aarp org taxaide Include the excess depreciation in your gross income and add it to your basis in the property. Aarp org taxaide For information on the computation of excess depreciation, see chapter 4 in Publication 463. Aarp org taxaide Canceled Debt Excluded From Income If a debt you owe is canceled or forgiven, other than as a gift or bequest, you generally must include the canceled amount in your gross income for tax purposes. Aarp org taxaide A debt includes any indebtedness for which you are liable or which attaches to property you hold. Aarp org taxaide You can exclude canceled debt from income in the following situations. Aarp org taxaide Debt canceled in a bankruptcy case or when you are insolvent, Qualified farm debt, and Qualified real property business debt (provided you are not a C corporation). Aarp org taxaide If you exclude from income canceled debt under situation (1) or (2), you may have to reduce the basis of your depreciable and nondepreciable property. Aarp org taxaide However, in situation (3), you must reduce the basis of your depreciable property by the excluded amount. Aarp org taxaide For more information about canceled debt in a bankruptcy case or during insolvency, see Publication 908, Bankruptcy Tax Guide. Aarp org taxaide For more information about canceled debt that is qualified farm debt, see chapter 3 in Publication 225. Aarp org taxaide For more information about qualified real property business debt, see chapter 5 in Publication 334, Tax Guide for Small Business. Aarp org taxaide Postponed Gain From Sale of Home If you postponed gain from the sale of your main home before May 7, 1997, you must reduce the basis of your new home by the postponed gain. Aarp org taxaide For more information on the rules for the sale of a home, see Publication 523. Aarp org taxaide Adoption Tax Benefits If you claim an adoption credit for the cost of improvements you added to the basis of your home, decrease the basis of your home by the credit allowed. Aarp org taxaide This also applies to amounts you received under an employer's adoption assistance program and excluded from income. Aarp org taxaide For more information Form 8839, Qualified Adoption Expenses. Aarp org taxaide Employer-Provided Child Care If you are an employer, you can claim the employer-provided child care credit on amounts you paid or incurred to acquire, construct, rehabilitate, or expand property used as part of your qualified child care facility. Aarp org taxaide You must reduce your basis in that property by the credit claimed. Aarp org taxaide For more information, see Form 8882, Credit for Employer-Provided Child Care Facilities and Services. Aarp org taxaide Adjustments to Basis Example In January 2005, you paid $80,000 for real property to be used as a factory. Aarp org taxaide You also paid commissions of $2,000 and title search and legal fees of $600. Aarp org taxaide You allocated the total cost of $82,600 between the land and the building—$10,325 for the land and $72,275 for the building. Aarp org taxaide Immediately you spent $20,000 in remodeling the building before you placed it in service. Aarp org taxaide You were allowed depreciation of $14,526 for the years 2005 through 2009. Aarp org taxaide In 2008 you had a $5,000 casualty loss from a that was not covered by insurance on the building. Aarp org taxaide You claimed a deduction for this loss. Aarp org taxaide You spent $5,500 to repair the damages and extend the useful life of the building. Aarp org taxaide The adjusted basis of the building on January 1, 2010, is figured as follows: Original cost of building including fees and commissions $72,275 Adjustments to basis:     Add:         Improvements 20,000   Repair of damages 5,500       $97,775 Subtract:       Depreciation $14,526     Deducted casualty loss 5,000 19,526 Adjusted basis on January 1, 2010 $78,249 The basis of the land, $10,325, remains unchanged. Aarp org taxaide It is not affected by any of the above adjustments. Aarp org taxaide Basis Other Than Cost There are many times when you cannot use cost as basis. Aarp org taxaide In these cases, the fair market value or the adjusted basis of property may be used. Aarp org taxaide Adjusted basis is discussed earlier. Aarp org taxaide Fair market value (FMV). Aarp org taxaide   FMV is the price at which property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. Aarp org taxaide Sales of similar property on or about the same date may be helpful in figuring the property's FMV. Aarp org taxaide Property Received for Services If you receive property for services, include the property's FMV in income. Aarp org taxaide The amount you include in income becomes your basis. Aarp org taxaide 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. Aarp org taxaide Bargain Purchases A bargain purchase is a purchase of an item for less than its FMV. Aarp org taxaide If, as compensation for services, you purchase goods or other property at less than FMV, include the difference between the purchase price and the property's FMV in your income. Aarp org taxaide Your basis in the property is its FMV (your purchase price plus the amount you include in income). Aarp org taxaide If the difference between your purchase price and the FMV represents a qualified employee discount, do not include the difference in income. Aarp org taxaide However, your basis in the property is still its FMV. Aarp org taxaide See Employee Discounts in Publication 15-B. Aarp org taxaide Restricted Property 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 unless you make the election discussed later. Aarp org taxaide Property becomes substantially vested when your rights in the property or the rights of any person to whom you transfer the property are not subject to a substantial risk of forfeiture. Aarp org taxaide There is substantial risk of forfeiture when the rights to full enjoyment of the property depend on the future performance of substantial services by any person. Aarp org taxaide When the property becomes substantially vested, include the FMV, less any amount you paid for the property, in income. Aarp org taxaide Example. Aarp org taxaide Your employer gives you stock for services performed under the condition that you will have to return the stock unless you complete 5 years of service. Aarp org taxaide The stock is under a substantial risk of forfeiture and is not substantially vested when you receive it. Aarp org taxaide You do not report any income until you have completed the 5 years of service that satisfy the condition. Aarp org taxaide Fair market value. Aarp org taxaide   Figure the FMV of property you received without considering any restriction except one that by its terms will never end. Aarp org taxaide Example. Aarp org taxaide You received stock from your employer for services you performed. Aarp org taxaide If you want to sell the stock while you are still employed, you must sell the stock to your employer at book value. Aarp org taxaide At your retirement or death, you or your estate must offer to sell the stock to your employer at its book value. Aarp org taxaide This is a restriction that by its terms will never end and you must consider it when you figure the FMV. Aarp org taxaide Election. Aarp org taxaide   You can choose to include in your gross income the FMV of the property at the time of transfer, less any amount you paid for it. Aarp org taxaide If you make this choice, the substantially vested rules do not apply. Aarp org taxaide Your basis is the amount you paid plus the amount you included in income. Aarp org taxaide   See the discussion of Restricted Property in Publication 525 for more information. Aarp org taxaide Taxable Exchanges A taxable exchange is one in which the gain is taxable or the loss is deductible. Aarp org taxaide A taxable gain or deductible loss is also known as a recognized gain or loss. Aarp org taxaide If you receive property in exchange for other property in a taxable exchange, the basis of property you receive is usually its FMV at the time of the exchange. Aarp org taxaide A taxable exchange occurs when you receive cash or property not similar or related in use to the property exchanged. Aarp org taxaide Example. Aarp org taxaide You trade a tract of farm land with an adjusted basis of $3,000 for a tractor that has an FMV of $6,000. Aarp org taxaide You must report a taxable gain of $3,000 for the land. Aarp org taxaide The tractor has a basis of $6,000. Aarp org taxaide Involuntary Conversions If you receive property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, you can figure the basis of the replacement property you receive using the basis of the converted property. Aarp org taxaide Similar or related property. Aarp org taxaide   If you receive replacement property similar or related in service or use to the converted property, the replacement property's basis is the old property's basis on the date of the conversion. Aarp org taxaide However, make the following adjustments. Aarp org taxaide Decrease the basis by the following. Aarp org taxaide Any loss you recognize on the conversion, and Any money you receive that you do not spend on similar property. Aarp org taxaide Increase the basis by the following. Aarp org taxaide Any gain you recognize on the conversion, and Any cost of acquiring the replacement property. Aarp org taxaide Money or property not similar or related. Aarp org taxaide   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 new property is its cost decreased by the gain not recognized on the conversion. Aarp org taxaide Example. Aarp org taxaide The state condemned your property. Aarp org taxaide The property had an adjusted basis of $26,000 and the state paid you $31,000 for it. Aarp org taxaide You realized a gain of $5,000 ($31,000 − $26,000). Aarp org taxaide You bought replacement property similar in use to the converted property for $29,000. Aarp org taxaide You recognize a gain of $2,000 ($31,000 − $29,000), the unspent part of the payment from the state. Aarp org taxaide Your gain not recognized is $3,000, the difference between the $5,000 realized gain and the $2,000 recognized gain. Aarp org taxaide The basis of the new property is figured as follows: Cost of replacement property $29,000 Minus: Gain not recognized 3,000 Basis of the replacement property $26,000 Allocating the basis. Aarp org taxaide   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. Aarp org taxaide Example. Aarp org taxaide The state in the previous example condemned your unimproved real property and the replacement property you bought was improved real property with both land and buildings. Aarp org taxaide Allocate the replacement property's $26,000 basis between land and buildings based on their respective costs. Aarp org taxaide More information. Aarp org taxaide   For more information about condemnations, see Involuntary Conversions in Publication 544. Aarp org taxaide For more information about casualty and theft losses, see Publication 547. Aarp org taxaide Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. Aarp org taxaide If you receive property in a nontaxable exchange, its basis is usually the same as the basis of the property you transferred. Aarp org taxaide A nontaxable gain or loss is also known as an unrecognized gain or loss. Aarp org taxaide Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. Aarp org taxaide To qualify as a like-kind exchange, you must hold for business or investment purposes both the property you transfer and the property you receive. Aarp org taxaide There must also be an exchange of like-kind property. Aarp org taxaide For more information, see Like-Kind Exchanges in Publication 544. Aarp org taxaide The basis of the property you receive is the same as the basis of the property you gave up. Aarp org taxaide Example. Aarp org taxaide You exchange real estate (adjusted basis $50,000, FMV $80,000) held for investment for other real estate (FMV $80,000) held for investment. Aarp org taxaide Your basis in the new property is the same as the basis of the old ($50,000). Aarp org taxaide Exchange expenses. Aarp org taxaide   Exchange expenses are generally the closing costs you pay. Aarp org taxaide They include such items as brokerage commissions, attorney fees, deed preparation fees, etc. Aarp org taxaide Add them to the basis of the like-kind property received. Aarp org taxaide Property plus cash. Aarp org taxaide   If you trade property in a like-kind exchange and also pay money, the basis of the property received is the basis of the property you gave up increased by the money you paid. Aarp org taxaide Example. Aarp org taxaide You trade in a truck (adjusted basis $3,000) for another truck (FMV $7,500) and pay $4,000. Aarp org taxaide Your basis in the new truck is $7,000 (the $3,000 basis of the old truck plus the $4,000 paid). Aarp org taxaide Special rules for related persons. Aarp org taxaide   If a like-kind exchange takes place directly or indirectly between related persons and either party disposes of the property within 2 years after the exchange, the exchange no longer qualifies for like-kind exchange treatment. Aarp org taxaide Each person must report any gain or loss not recognized on the original exchange. Aarp org taxaide Each person reports it on the tax return filed for the year in which the later disposition occurs. Aarp org taxaide If this rule applies, the basis of the property received in the original exchange will be its fair market value. Aarp org taxaide   These rules generally do not apply to the following kinds of property dispositions. Aarp org taxaide Dispositions due to the death of either related person, Involuntary conversions, and Dispositions in which neither the original exchange nor the subsequent disposition had as a main purpose the avoidance of federal income tax. Aarp org taxaide Related persons. Aarp org taxaide   Generally, related persons are ancestors, lineal descendants, brothers and sisters (whole or half), and a spouse. Aarp org taxaide   For other related persons (for example, two corporations, an individual and a corporation, a grantor and fiduciary, etc. Aarp org taxaide ), see Nondeductible Loss in chapter 2 of Publication 544. Aarp org taxaide Exchange of business property. Aarp org taxaide   Exchanging the assets of one business for the assets of another business is a multiple property exchange. Aarp org taxaide For information on figuring basis, see Multiple Property Exchanges in chapter 1 of Publication 544. Aarp org taxaide Partially Nontaxable Exchange A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like property. Aarp org taxaide The basis of the property you receive is the same as the basis of the property you gave up, with the following adjustments. Aarp org taxaide Decrease the basis by the following amounts. Aarp org taxaide Any money you receive, and Any loss you recognize on the exchange. Aarp org taxaide Increase the basis by the following amounts. Aarp org taxaide Any additional costs you incur, and Any gain you recognize on the exchange. Aarp org taxaide If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. Aarp org taxaide Example. Aarp org taxaide You traded a truck (adjusted basis $6,000) for a new truck (FMV $5,200) and $1,000 cash. Aarp org taxaide You realized a gain of $200 ($6,200 − $6,000). Aarp org taxaide This is the FMV of the truck received plus the cash minus the adjusted basis of the truck you traded ($5,200 + $1,000 – $6,000). Aarp org taxaide You include all the gain in income (recognized gain) because the gain is less than the cash received. Aarp org taxaide Your basis in the new truck is: Adjusted basis of old truck $6,000 Minus: Cash received (adjustment 1(a)) 1,000   $5,000 Plus: Gain recognized (adjustment 2(b)) 200 Basis of new truck $5,200 Allocation of basis. Aarp org taxaide   Allocate the basis first to the unlike property, other than money, up to its FMV on the date of the exchange. Aarp org taxaide The rest is the basis of the like property. Aarp org taxaide Example. Aarp org taxaide You had an adjusted basis of $15,000 in real estate you held for investment. Aarp org taxaide You exchanged it for other real estate to be held for investment with an FMV of $12,500, a truck with an FMV of $3,000, and $1,000 cash. Aarp org taxaide The truck is unlike property. Aarp org taxaide You realized a gain of $1,500 ($16,500 − $15,000). Aarp org taxaide This is the FMV of the real estate received plus the FMV of the truck received plus the cash minus the adjusted basis of the real estate you traded ($12,500 + $3,000 + $1,000 – $15,000). Aarp org taxaide You include in income (recognize) all $1,500 of the gain because it is less than the FMV of the unlike property plus the cash received. Aarp org taxaide Your basis in the properties you received is figured as follows. Aarp org taxaide Adjusted basis of real estate transferred $15,000 Minus: Cash received (adjustment 1(a)) 1,000   $14,000 Plus: Gain recognized (adjustment 2(b)) 1,500 Total basis of properties received $15,500 Allocate the total basis of $15,500 first to the unlike property — the truck ($3,000). Aarp org taxaide This is the truck's FMV. Aarp org taxaide The rest ($12,500) is the basis of the real estate. Aarp org taxaide Sale and Purchase If you sell property and buy similar property in two mutually dependent transactions, you may have to treat the sale and purchase as a single nontaxable exchange. Aarp org taxaide Example. Aarp org taxaide You are a salesperson and you use one of your cars 100% for business. Aarp org taxaide You have used this car in your sales activities for 2 years and have depreciated it. Aarp org taxaide Your adjusted basis in the car is $22,600 and its FMV is $23,100. Aarp org taxaide You are interested in a new car, which sells for $28,000. Aarp org taxaide If you trade your old car and pay $4,900 for the new one, your basis for depreciation for the new car would be $27,500 ($4,900 plus the $22,600 basis of your old car). Aarp org taxaide However, you want a higher basis for depreciating the new car, so you agree to pay the dealer $28,000 for the new car if he will pay you $23,100 for your old car. Aarp org taxaide Because the two transactions are dependent on each other, you are treated as having exchanged your old car for the new one and paid $4,900 ($28,000 − $23,100). Aarp org taxaide Your basis for depreciating the new car is $27,500, the same as if you traded the old car. Aarp org taxaide Partial Business Use of Property If you have property used partly for business and partly for personal use, and you exchange it in a nontaxable exchange for property to be used wholly or partly in your business, the basis of the property you receive is figured as if you had exchanged two properties. Aarp org taxaide The first is an exchange of like-kind property. Aarp org taxaide The second is personal-use property on which gain is recognized and loss is not recognized. Aarp org taxaide First, figure your adjusted basis in the property as if you transferred two separate properties. Aarp org taxaide Figure the adjusted basis of each part of the property by taking into account any adjustments to basis. Aarp org taxaide Deduct the depreciation you took or could have taken from the adjusted basis of the business part. Aarp org taxaide Then figure the amount realized for your property and allocate it to the business and nonbusiness parts of the property. Aarp org taxaide The business part of the property is permitted to be exchanged tax free. Aarp org taxaide However, you must recognize any gain from the exchange of the nonbusiness part. Aarp org taxaide You are deemed to have received, in exchange for the nonbusiness part, an amount equal to its FMV on the date of the exchange. Aarp org taxaide The basis of the property you acquired is the total basis of the property transferred (adjusted to the date of the exchange), increased by any gain recognized on the nonbusiness part. Aarp org taxaide If the nonbusiness part of the property transferred is your main home, you may qualify to exclude from income all or part of the gain on that part. Aarp org taxaide For more information, see Publication 523. Aarp org taxaide Trade of car used partly in business. Aarp org taxaide   If you trade in a car you used partly in your business for another car you will use in your business, your basis for depreciation of the new car is not the same as your basis for figuring a gain or loss on its sale. Aarp org taxaide   For information on figuring your basis for depreciation, see Publication 463. Aarp org taxaide Property Transferred From a Spouse The basis of property transferred to you or transferred in trust for your benefit by your spouse (or former spouse if the transfer is incident to divorce), is the same as your spouse's adjusted basis. Aarp org taxaide However, adjust your basis for any gain recognized by your spouse or former spouse on property transferred in trust. Aarp org taxaide This rule applies only to a transfer of property in trust in which the liabilities assumed, plus the liabilities to which the property is subject, are more than the adjusted basis of the property transferred. Aarp org taxaide If the property transferred to you is a series E, series EE, or series I United States savings bond, the transferor must include in income the interest accrued to the date of transfer. Aarp org taxaide 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. Aarp org taxaide For more information on these bonds, see Publication 550. Aarp org taxaide At the time of the transfer, the transferor must give you the records necessary to determine the adjusted basis and holding period of the property as of the date of transfer. Aarp org taxaide For more information, see Publication 504, Divorced or Separated Individuals. Aarp org taxaide Property Received as a Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined earlier) to the donor just before it was given to you, its FMV at the time it was given to you, and any gift tax paid on it. Aarp org taxaide FMV Less Than Donor's Adjusted Basis 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. Aarp org taxaide Your basis for figuring gain is the same as the donor's adjusted basis plus or minus any required adjustment to basis while you held the property. Aarp org taxaide Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustment to basis while you held the property (see Adjusted Basis earlier). Aarp org taxaide If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and have a gain, you have neither gain nor loss on the sale or disposition of the property. Aarp org taxaide Example. Aarp org taxaide You received an acre of land as a gift. Aarp org taxaide At the time of the gift, the land had an FMV of $8,000. Aarp org taxaide The donor's adjusted basis was $10,000. Aarp org taxaide After you received the land, no events occurred to increase or decrease your basis. Aarp org taxaide If you sell the land for $12,000, you will have a $2,000 gain because you must use the donor's adjusted basis ($10,000) at the time of the gift as your basis to figure gain. Aarp org taxaide If you sell the land for $7,000, you will have a $1,000 loss because you must use the FMV ($8,000) at the time of the gift as your basis to figure a loss. Aarp org taxaide If the sales price is between $8,000 and $10,000, you have neither gain nor loss. Aarp org taxaide For instance, if the sales price was $9,000 and you tried to figure a gain using the donor's adjusted basis ($10,000), you would get a $1,000 loss. Aarp org taxaide If you then tried to figure a loss using the FMV ($8,000), you would get a $1,000 gain. Aarp org taxaide Business property. Aarp org taxaide   If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deduction is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property. Aarp org taxaide FMV Equal to or More Than Donor's Adjusted Basis 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. Aarp org taxaide Increase your basis by all or part of any gift tax paid, depending on the date of the gift. Aarp org taxaide Also, for figuring gain or loss from a sale or other disposition of the property, or for figuring depreciation, depletion, or amortization deductions on business property, you must increase or decrease your basis by any required adjustments to basis while you held the property. Aarp org taxaide See Adjusted Basis earlier. Aarp org taxaide Gift received before 1977. Aarp org taxaide   If you received a gift before 1977, increase your basis in the gift (the donor's adjusted basis) by any gift tax paid on it. Aarp org taxaide However, do not increase your basis above the FMV of the gift at the time it was given to you. Aarp org taxaide Example 1. Aarp org taxaide You were given a house in 1976 with an FMV of $21,000. Aarp org taxaide The donor's adjusted basis was $20,000. Aarp org taxaide The donor paid a gift tax of $500. Aarp org taxaide Your basis is $20,500, the donor's adjusted basis plus the gift tax paid. Aarp org taxaide Example 2. Aarp org taxaide If, in Example 1, the gift tax paid had been $1,500, your basis would be $21,000. Aarp org taxaide This is the donor's adjusted basis plus the gift tax paid, limited to the FMV of the house at the time you received the gift. Aarp org taxaide Gift received after 1976. Aarp org taxaide   If you received a gift after 1976, increase your basis in the gift (the donor's adjusted basis) by the part of the gift tax paid on it that is due to the net increase in value of the gift. Aarp org taxaide Figure the increase by multiplying the gift tax paid by a fraction. Aarp org taxaide The numerator of the fraction is the net increase in value of the gift and the denominator is the amount of the gift. Aarp org taxaide   The net increase in value of the gift is the FMV of the gift less the donor's adjusted basis. Aarp org taxaide 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. Aarp org taxaide For information on the gift tax, see Publication 950, Introduction to Estate and Gift Taxes. Aarp org taxaide Example. Aarp org taxaide In 2010, you received a gift of property from your mother that had an FMV of $50,000. Aarp org taxaide Her adjusted basis was $20,000. Aarp org taxaide The amount of the gift for gift tax purposes was $37,000 ($50,000 minus the $13,000 annual exclusion). Aarp org taxaide She paid a gift tax of $9,000. Aarp org taxaide Your basis, $27,290, is figured as follows: Fair market value $50,000 Minus: Adjusted basis 20,000 Net increase in value $30,000 Gift tax paid $9,000 Multiplied by ($30,000 ÷ $37,000) . Aarp org taxaide 81 Gift tax due to net increase in value $7,290 Adjusted basis of property to your mother 20,000 Your basis in the property $27,290 Inherited Property Special rules apply to property acquired from a decedent who died in 2010. Aarp org taxaide See Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, for details. Aarp org taxaide If you inherited property from a decedent who died before 2010, your basis in property you inherit from a decedent is generally one of the following. Aarp org taxaide The FMV of the property at the date of the individual's death. Aarp org taxaide The FMV on the alternate valuation date if the personal representative for the estate chooses to use alternate valuation. Aarp org taxaide For information on the alternate valuation date, see the Instructions for Form 706. Aarp org taxaide The value under the special-use valuation method for real property used in farming or a closely held business if chosen for estate tax purposes. Aarp org taxaide This method is discussed later. Aarp org taxaide 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. Aarp org taxaide For information on a qualified conservation easement, see the Instructions for Form 706. Aarp org taxaide 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. Aarp org taxaide For more information, see the Instructions for Form 706. Aarp org taxaide Appreciated property. Aarp org taxaide   The above rule does not apply to appreciated property you receive from a decedent if you or your spouse originally gave the property to the decedent within 1 year before the decedent's death. Aarp org taxaide Your basis in this property is the same as the decedent's adjusted basis in the property immediately before his or her death, rather than its FMV. Aarp org taxaide Appreciated property is any property whose FMV on the day it was given to the decedent is more than its adjusted basis. Aarp org taxaide Community Property 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. Aarp org taxaide 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. Aarp org taxaide For this rule to apply, at least half the value of the community property interest must be includable in the decedent's gross estate, whether or not the estate must file a return. Aarp org taxaide For example, you and your spouse owned community property that had a basis of $80,000. Aarp org taxaide When your spouse died, half the FMV of the community interest was includible in your spouse's estate. Aarp org taxaide The FMV of the community interest was $100,000. Aarp org taxaide The basis of your half of the property after the death of your spouse is $50,000 (half of the $100,000 FMV). Aarp org taxaide The basis of the other half to your spouse's heirs is also $50,000. Aarp org taxaide For more information on community property, see Publication 555, Community Property. Aarp org taxaide Property Held by Surviving Tenant The following example explains the rule for the basis of property held by a surviving tenant in joint tenancy or tenancy by the entirety. Aarp org taxaide Example. Aarp org taxaide John and Jim owned, as joint tenants with right of survivorship, business property they purchased for $30,000. Aarp org taxaide John furnished two-thirds of the purchase price and Jim furnished one-third. Aarp org taxaide Depreciation deductions allowed before John's death were $12,000. Aarp org taxaide Under local law, each had a half interest in the income from the property. Aarp org taxaide At the date of John's death, the property had an FMV of $60,000, two-thirds of which is includable in John's estate. Aarp org taxaide Jim figures his basis in the property at the date of John's death as follows: Interest Jim bought with his own funds—1/3 of $30,000 cost $10,000   Interest Jim received on John's death—2/3 of $60,000 FMV 40,000 $50,000 Minus: ½ of $12,000 depreciation before John's death 6,000 Jim's basis at the date of John's death $44,000 If Jim had not contributed any part of the purchase price, his basis at the date of John's death would be $54,000. Aarp org taxaide This is figured by subtracting from the $60,000 FMV, the $6,000 depreciation allocated to Jim's half interest before the date of death. Aarp org taxaide If under local law Jim had no interest in the income from the property and he contributed no part of the purchase price, his basis at John's death would be $60,000, the FMV of the property. Aarp org taxaide Qualified Joint Interest Include one-half of the value of a qualified joint interest in the decedent's gross estate. Aarp org taxaide It does not matter how much each spouse contributed to the purchase price. Aarp org taxaide Also, it does not matter which spouse dies first. Aarp org taxaide A qualified joint interest is any interest in property held by husband and wife as either of the following. Aarp org taxaide Tenants by the entirety, or Joint tenants with right of survivorship if husband and wife are the only joint tenants. Aarp org taxaide Basis. Aarp org taxaide   As the surviving spouse, your basis in property you owned with your spouse as a qualified joint interest is the cost of your half of the property with certain adjustments. Aarp org taxaide Decrease the cost by any deductions allowed to you for depreciation and depletion. Aarp org taxaide Increase the reduced cost by your basis in the half you inherited. Aarp org taxaide Farm or Closely Held Business Under certain conditions, when a person dies the executor or personal representative of that person's estate can choose to value the qualified real property on other than its FMV. Aarp org taxaide If so, the executor or personal representative values the qualified real property based on its use as a farm or its use in a closely held business. Aarp org taxaide If the executor or personal representative chooses this method of valuation for estate tax purposes, that value is the basis of the property for the heirs. Aarp org taxaide Qualified heirs should be able to get the necessary value from the executor or personal representative of the estate. Aarp org taxaide Special-use valuation. Aarp org taxaide   If you are a qualified heir who received special-use valuation property, your basis in the property is the estate's or trust's basis in that property immediately before the distribution. Aarp org taxaide Increase your basis by any gain recognized by the estate or trust because of post-death appreciation. Aarp org taxaide Post-death appreciation is the property's FMV on the date of distribution minus the property's FMV either on the date of the individual's death or the alternate valuation date. Aarp org taxaide Figure all FMVs without regard to the special-use valuation. Aarp org taxaide   You can elect to increase your basis in special-use valuation property if it becomes subject to the additional estate tax. Aarp org taxaide This tax is assessed if, within 10 years after the death of the decedent, you transfer the property to a person who is not a member of your family or the property stops being used as a farm or in a closely held business. Aarp org taxaide   To increase your basis in the property, you must make an irrevocable election and pay interest on the additional estate tax figured from the date 9 months after the decedent's death until the date of the payment of the additional estate tax. Aarp org taxaide If you meet these requirements, increase your basis in the property to its FMV on the date of the decedent's death or the alternate valuation date. Aarp org taxaide The increase in your basis is considered to have occurred immediately before the event that results in the additional estate tax. Aarp org taxaide   You make the election by filing with Form 706-A a statement that does all of the following. Aarp org taxaide Contains your name, address, and taxpayer identification number and those of the estate; Identifies the election as an election under section 1016(c) of the Internal Revenue Code; Specifies the property for which the election is made; and Provides any additional information required by the Instructions for Form 706-A. Aarp org taxaide   For more information, see the Instructions for Form 706 and the Instructions for Form 706-A. Aarp org taxaide Property Changed 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 must figure its basis for depreciation. Aarp org taxaide An example of changing property held for personal use to business use would be renting out your former main home. Aarp org taxaide Basis for depreciation. Aarp org taxaide   The basis for depreciation is the lesser of the following amounts. Aarp org taxaide The FMV of the property on the date of the change, or Your adjusted basis on the date of the change. Aarp org taxaide Example. Aarp org taxaide Several years ago you paid $160,000 to have your home built on a lot that cost $25,000. Aarp org taxaide 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. Aarp org taxaide Because land is not depreciable, you include only the cost of the house when figuring the basis for depreciation. Aarp org taxaide Your adjusted basis in the house when you changed its use was $178,000 ($160,000 + $20,000 − $2,000). Aarp org taxaide 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. Aarp org taxaide The basis for figuring depreciation on the house is its FMV on the date of change ($165,000) because it is less than your adjusted basis ($178,000). Aarp org taxaide Sale of property. Aarp org taxaide   If you later sell or dispose of property changed to business or rental use, the basis of the property you use will depend on whether you are figuring gain or loss. Aarp org taxaide Gain. Aarp org taxaide   The basis for figuring a gain is your adjusted basis when you sell the property. Aarp org taxaide Example. Aarp org taxaide 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. Aarp org taxaide Your adjusted basis for figuring gain is $165,500 ($178,000 + $25,000 (land) − $37,500). Aarp org taxaide Loss. Aarp org taxaide   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. Aarp org taxaide Then adjust this amount for the period after the change in the property's use, as discussed earlier under Adjusted Basis, to arrive at a basis for loss. Aarp org taxaide Example. Aarp org taxaide 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. Aarp org taxaide 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) on that date. Aarp org taxaide Reduce that amount ($180,000) by the depreciation deductions to arrive at a basis for loss of $142,500 ($180,000 − $37,500). Aarp org taxaide How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. Aarp org taxaide By selecting the method that is best for you, you will have quick and easy access to tax help. Aarp org taxaide Contacting your Taxpayer Advocate. Aarp org taxaide   The Taxpayer Advocate Service (TAS) is an independent organization within the IRS. Aarp org taxaide We help taxpayers who are experiencing economic harm, such as not being able to provide necessities like housing, transportation, or food; taxpayers who are seeking help in resolving tax problems with the IRS; and those who believe that an IRS system or procedure is not working as it should. Aarp org taxaide Here are seven things every taxpayer should know about TAS. Aarp org taxaide TAS is your voice at the IRS. Aarp org taxaide Our service is free, confidential, and tailored to meet your needs. Aarp org taxaide You may be eligible for our help if you have tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you believe an IRS procedure just isn't working as it should. Aarp org taxaide We help taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation. Aarp org taxaide This includes businesses as well as individuals. Aarp org taxaide Our employees know the IRS and how to navigate it. Aarp org taxaide If you qualify for our help, we'll assign your case to an advocate who will listen to your problem, help you understand what needs to be done to resolve it, and stay with you every step of the way until your problem is resolved. Aarp org taxaide We have at least one local taxpayer advocate in every state, the District of Columbia, and Puerto Rico. Aarp org taxaide You can call your local advocate, whose number is in your phone book, in Publication 1546, Taxpayer Advocate Service—Your Voice at the IRS, and on our website at www. Aarp org taxaide irs. Aarp org taxaide gov/advocate. Aarp org taxaide You can also call our toll-free line at 1-877-777-4778 or TTY/TDD 1-800-829-4059. Aarp org taxaide You can learn about your rights and responsibilities as a taxpayer by visiting our online tax toolkit at www. Aarp org taxaide taxtoolkit. Aarp org taxaide irs. Aarp org taxaide gov. Aarp org taxaide You can get updates on hot tax topics by visiting our YouTube channel at www. Aarp org taxaide youtube. Aarp org taxaide com/tasnta and our Facebook page at www. Aarp org taxaide facebook. Aarp org taxaide com/YourVoiceAtIRS, or by following our tweets at www. Aarp org taxaide twitter. Aarp org taxaide com/YourVoiceAtIRS. Aarp org taxaide Low Income Taxpayer Clinics (LITCs). Aarp org taxaide   The Low Income Taxpayer Clinic program serves individuals who have a problem with the IRS and whose income is below a certain level. Aarp org taxaide LITCs are independent from the IRS. Aarp org taxaide Most LITCs can provide representation before the IRS or in court on audits, tax collection disputes, and other issues for free or a small fee. Aarp org taxaide If an individual's native language is not English, some clinics can provide multilingual information about taxpayer rights and responsibilities. Aarp org taxaide For more information, see Publication 4134, Low Income Taxpayer Clinic List. Aarp org taxaide This publication is available at IRS. Aarp org taxaide gov, by calling 1-800-TAX-FORM (1-800-829-3676), or at your local IRS office. Aarp org taxaide Free tax services. Aarp org taxaide   Publication 910, IRS Guide to Free Tax Services, is your guide to IRS services and resources. Aarp org taxaide Learn about free tax information from the IRS, including publications, services, and education and assistance programs. Aarp org taxaide The publication also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on the telephone. Aarp org taxaide The majority of the information and services listed in this publication are available to you free of charge. Aarp org taxaide If there is a fee associated with a resource or service, it is listed in the publication. Aarp org taxaide   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with d