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

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

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

3. E-File for FREE

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

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

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

File Taxes For Free 2011

1040Tax Act 2012Can I Efile 2011 TaxesAmending Tax Return1040 Ez FormFree 1040ez Tax FormFree Tax Help For SeniorsVisit Www Irs Gov FreefileIrs Free Tax FilingAmend My 2012 Tax ReturnFile Tax Extension FreeAmended Michigan Tax Return1040ez Fill In Form2009 Tax AmendmentHow Can I File 2012 Taxes OnlineMyfreetax.comH And R Block 1040xStudent Tax Return 2011H&r Block Online Tax ReturnE-file State Tax For Free2012 Free Taxes OnlineTax Unemployed1040 Ez Form 20101040nr SoftwareFile 2012 Taxes Online FreeHand R Block Taxes1040 Ez Forms For 2012Tax 1040ezIrs Gov Form 1040File Taxes Online 1040ez FreeWww Free1040taxreturn ComTax Amendment DeadlineDoes A Full Time Student Have To File TaxesFiling 2011 Tax Returns Free1040ez Printable FormPrint 1040ezForm 1040nr SoftwareForm 1040nr2012 1040 EzTax Act 2010 Download

File Taxes For Free 2011

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

Sale of Assets Financed with Tax-Exempt Bonds by State and Local Governments and 501(c)(3) Organizations

Tax Exempt Bonds (“TEB”) focuses on providing participants in the municipal bond industry with quality service to assist issuers and conduit borrowers in understanding their tax responsibilities. TEB has initiated an outreach and educational services program to increase understanding and compliance with tax law applicable to tax-exempt bonds. As part of this service TEB is providing the following information with respect to the sale of property financed by tax-exempt bonds. Governmental issuers and 501(c)(3) organizations may use this information to establish practices to monitor tax compliance throughout the period that their bonds are outstanding. This information is not intended to be cited as an authoritative source. TEB recommends that issuers and 501(c)(3) organizations review this basic information concerning remedial actions in consultation with their counsel.

For remedial action with respect to exempt facility bonds, see section 1.142-2 of the Income Tax Regulations (the “Regulations”), and for build America bonds, see IRM 7.2.3.1.2.3.

Generally

To raise needed funds, state and local governments and 501(c)(3) organizations may plan to sell property financed with tax-exempt bonds. The sale of such property could cause the bond issue to become taxable. A timely remedial action, if necessary, will help ensure that the interest on the bond issue remains tax-exempt.

There are three basic remedial action options as generally described below:

  • Redemption or defeasance of nonqualified bonds
  • Alternative use of disposition proceeds
  • Alternative use of facility

Governmental Bonds Example

A governmental bond is one that is not a private activity bond. A bond is a private activity bond if both: (i) more than 10% of the proceeds of a bond issue are used for a private business use (the private business use test); and (ii) more than 10% of the debt service on the bonds is directly or indirectly secured by an interest in property or payments with respect to property used for a private business use or derived from payments in respect of property used for a private business use (the private security or payment test). The sale of bond-financed property, a “deliberate action,” may cause the bond issue to meet both of these tests.

Private business use, generally, is use directly or indirectly in a trade or business carried on by any person other than a governmental unit. The result of meeting both the private business use test and the private security or payment test (together, the private business tests) is that the tax-exempt bond issue becomes a taxable private activity bond.

An example of when governmental bonds are likely to meet the private business tests is the sale of a tax-exempt bond financed facility to a corporation. The sale is a deliberate action because the sale was within the issuer’s control. Depending on how much of the proceeds of the bond issue that the issuer used to construct or acquire the facility and how long after the bonds are issued that the sale occurs, the private business use test may be met since the purchaser is not a governmental entity. If the present value of the sales price is greater than 10% of the present value of the debt service on the bonds, the private security or payment test is met. If the revenues from the facility were pledged as security for the payment of debt service on the bonds and are expected to be more than 10% of the present value of the debt service, the private security or payment test is met (regardless of the sales price to the new purchaser). If the bond issue meets both the private business use test and the private security or payment test, the bonds are taxable unless remedial action is taken as described below.

Qualified 501(c)(3) Bonds Example

If the bonds financing the property are qualified 501(c)(3) bonds, the private business use test threshold of 10% is reduced to 5%. The 5% is further reduced by the percentage of proceeds of the bonds used to pay costs of issuance. (Up to 2% of the proceeds may be used for costs of issuance.) Additionally, use of tax-exempt bond financed property in an unrelated trade or business of any 501(c)(3) organization, as described in section 513 of the Internal Revenue Code (the “Code”), is considered private business use and counts toward the 5% limit.

An example of qualified 501(c)(3) bonds likely to meet the private business tests is the sale of tax-exempt bond financed land to a taxable corporation. The sale is a deliberate action because the sale was within the issuer’s (or 501(c)(3) borrower’s) control. Depending on how much of the proceeds of the bond issue that the issuer or 501(c)(3) borrower used to construct or acquire the facility and how long after the bonds are issued that the sale occurs, the private business use test may be met since the purchaser is not a governmental entity or a 501(c)(3) organization. If the parcel of land sold was pledged as security for the payment of debt service on the bonds, the private security or payment test is met if the sales price is more than 5% of the present value of the debt service on the bonds. If the revenues from the facility were pledged as security for the payment of debt service on the bonds and are expected to be more than 5% of the present value of the debt service, the private security or payment test is met (regardless of the sales price to the new purchaser). If the bond issue meets both the private business use test and the private security or payment test, the bonds are taxable unless remedial action is taken as described below.

A qualified 501(c)(3) bond is one where, among other requirements, the tax-exempt bond financed property is owned by a 501(c)(3) organization or a governmental unit. An example of qualified 501(c)(3) bonds failing to meet this requirement is the sale of the tax-exempt bond financed land to a taxable corporation. Accordingly, the bonds are taxable unless remedial action is taken as described below.

Remedial Action under the Treasury Regulations

The Regulations permit an issuer to take remedial action to preclude the sale of tax-exempt bond financed assets from causing the bonds to become taxable bonds. There are five basic conditions that an issuer must meet to qualify to take a remedial action. The conditions are:

  • The issuer must have reasonably expected on the issue date that the bonds would not meet either the applicable private business tests (including the ownership test for qualified 501(c)(3) bonds) or the private loan financing test for the entire term of the bonds.
  • The term of the bonds must not be longer than reasonably necessary for the qualified purposes of the issue (as a guideline, the term is not greater than 120% of the average reasonably expected economic life of the financed property).
  • Generally, the terms of a sale must be a bona fide and arm’s-length arrangement for fair market value.
  • Disposition proceeds must be treated as gross proceeds for arbitrage and rebate purposes. Disposition proceeds are any amounts, including property, derived from the sale, exchange or other disposition of the tax-exempt bond financed property.
  • Except for a remedial action involving the redemption or defeasance of nonqualified bonds, the proceeds must have been spent on a qualified purpose before the date of the deliberate action, that is, the sale of the bond-financed assets.

Redemption or Defeasance of Nonqualified Bonds

Generally, in the case of a sale of bond-financed property, the nonqualified bonds are the portion of the outstanding bonds equal to the percentage of the proceeds of the bond issue that financed that property. For example, if 50% of the proceeds of a bond issue financed the sold property, the nonqualified bonds equal 50% of the outstanding bonds of the issue at the time of the sale.

The first type of remedial action available is the redemption or defeasance of all of the nonqualified bonds within 90 days of the deliberate action. (Generally, proceeds of another issue of tax-exempt bonds may not be used for this redemption.) If the disposition proceeds are all cash, the issuer need not redeem or defease all of the nonqualified bonds, but must use all of the disposition proceeds to redeem a pro rata portion of nonqualified bonds. The redemption must be on the earliest call date after the deliberate action, or if the earliest call date is more than 90 days after the deliberate action, the issuer must establish a defeasance escrow within 90 days of the deliberate action. Defeasance is only permitted as a remedial action if the first call date is no more than 10 ½ years from the issue date of the bonds. The issuer must provide written notice to the Commissioner of the escrow within 90 days of its establishment.

Alternative Use of Disposition Proceeds

The second type of remedial action, available when the seller receives only cash, allows the issuer to spend the disposition proceeds within two years of the date of the sale for an alternative qualifying use. The issuer must treat the disposition proceeds as proceeds of the bonds, and must not take any action after the date of the sale to cause either the applicable private business use tests or the private loan financing test to be met. (If the bonds are qualified 501(c)(3) bonds, the disposition proceeds must be used for a qualified purpose under section 145 of the Code.) If the issuer does not expect the full amount of the disposition proceeds to be spent for a qualifying purpose within the two year period, it must use the balance of disposition proceeds to redeem (or defease) nonqualified bonds as allowed for the first type of remedial action described above.

Note: If the proceeds of a governmental bond issue are to be subsequently used by a 501(c)(3) organization, remediation by spending the disposition proceeds for an alternate use requires that the nonqualified bonds satisfy all the requirements for qualified 501(c)(3) bonds beginning on the date of the sale.

Alternative Use of Facility

The third type of remedial action available to the issuer is when the tax-exempt financed facility will be used after the sale for a purpose that is a qualifying purpose for another type of tax-exempt bonds (provided that the purchaser of the facility does not use tax-exempt bond proceeds for its purchase). The nonqualified bonds must satisfy all the requirements for the alternate type of tax-exempt bonds beginning on the date of the sale. The issuer must either apply any disposition proceeds resulting from the sale to pay the debt service on the bonds on the next available payment date or deposit the proceeds into an escrow within 90 days of their receipt. If the issuer must establish an escrow, the investment yield on the disposition proceeds must be restricted to the yield on the bonds and the escrow used to pay debt service on the next available payment date.

Allocation of Disposition Proceeds

For all three remedial actions, if the property was financed by different sources, the issuer must first allocate disposition proceeds to the outstanding bonds in proportion to the principal amounts of the outstanding bonds. If the disposition proceeds are not greater than the principal amount of outstanding bonds allocated to the sold property, the proceeds must first be allocated to the outstanding bonds before allocating to bonds no longer outstanding or to sources not derived from borrowing (such as revenues of the issuer).

Remedial Actions-Examples

The following examples assume that the above-described five conditions for remedial action are satisfied. Also, in these examples, no bond proceeds were used for costs of issuance or to fund a reserve fund.


Example 1. - Disposition proceeds are less than the principal amount of the outstanding bonds allocated to the sold property.

Issuer issues $10 million of bonds to finance the construction of a community center. Issuer later sells the center for $5 million, its fair market value. At this time, all $10 million of the bonds are still outstanding. The issuer may choose to remediate by using all $5 million of disposition proceeds to redeem within 90 days or establish a defeasance escrow for a pro rata portion of the $10 million of nonqualified bonds. The remaining outstanding $5 million of bonds would not be private activity bonds because the issuer has remediated as required by the Regulations.

Or, the issuer could remediate by using the alternative use of disposition proceeds option. Under this option, the issuer must apply the total amount of disposition proceeds, $5 million, to a qualifying alternative use within two years (or use a combination of the alternative use of disposition proceeds and redemption or defeasance options).

The disposition proceeds are considered gross proceeds of the bonds and as such are subject to the applicable yield restriction and arbitrage rebate rules pending their use as described above.

Example 2.- Disposition proceeds are greater than the principal amount of the outstanding bonds allocated to the sold property.

Issuer issues $10 million of bonds to finance a school and land. Issuer subsequently sells a portion of the land for $3 million. At this time, all $10 million of the bonds are still outstanding. The principal amount of outstanding bonds allocated to the sold property is $2 million. If the issuer chooses to remediate by redeeming bonds, it must redeem $2 million of outstanding bonds leaving the issuer with $1 million of gross proceeds.

Or, the issuer could remediate by using the alternative use of disposition proceeds option. If so, the Issuer must apply the total amount of the disposition proceeds, $3 million, to a qualifying use within two years (or use a combination of the alternative use of disposition proceeds and redemption or defeasance options).

The disposition proceeds are considered gross proceeds of the bonds and as such are subject to the applicable yield restriction and arbitrage rebate rules pending their use as described above.

Example 3. - Disposition proceeds are greater than the principal amount of the outstanding bonds allocated to the sold property and the conduit borrower finances the project in part with tax-exempt bond proceeds and in part with an equity contribution.

A 501(c)(3) conduit borrower contributed $4 million of cash from its revenues and used $6 million of tax-exempt bonds to finance a $10 million acquisition of a continuing care facility. Subsequently, the conduit borrower sells the facility for $12 million. At this time, all $6 million of the bonds are still outstanding. Thus the issuer has $6 million of nonqualified bonds. The issuer may remediate by either redeeming all of the $6 million nonqualified bonds or by requiring the conduit borrower to use $12 million of disposition proceeds for an alternative use within two years (provided all requirements of qualified 501(c)(3) bonds are met).

Of the $12 million of disposition proceeds, $6 million are considered gross proceeds of the bonds and as such are subject to the applicable yield restriction and arbitrage rebate rules pending their use as described above.

Gross Proceeds - Example 2 versus Example 3

When the tax-exempt bond financed property is sold for an amount in excess of the principal amount of the outstanding bonds allocated to that property, a different result occurs with respect to that excess amount depending on whether all the bonds of the issue have been redeemed. In Example 3, where the issuer redeemed all of the outstanding bonds, the remaining disposition proceeds are not gross proceeds of the bonds and, therefore, are no longer subject to the federal tax restrictions. This is because the amount of gross proceeds cannot exceed the amount of the outstanding bonds of the issue. Whereas in Example 2, although the issuer has redeemed the nonqualified bonds, the issuer still has bonds of the issue outstanding and thus the additional disposition proceeds are gross proceeds of the bonds and subject to the applicable yield restriction and arbitrage rebate rules pending their use.

Correction of Violations Using TEB Voluntary Closing Agreement Program (VCAP)

If an issuer or conduit borrower discovers that it has sold bond financed assets causing the applicable private business tests to be met but is ineligible to self-correct through a remedial action provision, TEB encourages the issuer to take advantage of its Voluntary Closing Agreement Program (TEB VCAP) to resolve federal tax violations relating to bonds as described in Notice 2008-31 and IRM section 7.2.3.

Page Last Reviewed or Updated: 04-Sep-2013

The File Taxes For Free 2011

File taxes for free 2011 Index A Addition to property, Additions and Improvements Adjusted basis, Adjusted Basis Alternative Depreciation System (ADS) Recovery periods, Recovery Periods Under ADS Required use, Required use of ADS. File taxes for free 2011 Amended return, Filing an Amended Return Apartment Cooperative, Cooperative apartments. File taxes for free 2011 Rental, Which Property Class Applies Under GDS? Automobile (see Passenger automobile) B Basis Adjustments, Basis adjustment for depreciation allowed or allowable. File taxes for free 2011 , Adjustment of partner's basis in partnership. File taxes for free 2011 , Basis adjustment due to recapture of clean-fuel vehicle deduction or credit. File taxes for free 2011 , Basis adjustment due to casualty loss. File taxes for free 2011 Basis for depreciation, What Is the Basis for Depreciation? Casualty loss, Basis adjustment due to casualty loss. File taxes for free 2011 Change in use, Property changed from personal use. File taxes for free 2011 Cost, Cost as Basis Depreciable basis, Depreciable basis. File taxes for free 2011 Other than cost, Other Basis Recapture of clean-fuel vehicle deduction or credit, Basis adjustment due to recapture of clean-fuel vehicle deduction or credit. File taxes for free 2011 Term interest, Basis adjustments. File taxes for free 2011 Unadjusted, Figuring the Unadjusted Basis of Your Property Business use of property, partial, Partial business or investment use. File taxes for free 2011 Business-use limit, recapture of Section 179 deduction, When Must You Recapture the Deduction? Business-use requirement, listed property, What Is the Business-Use Requirement? C Car (see Passenger automobile) Carryover of section 179 deduction, Carryover of disallowed deduction. File taxes for free 2011 Casualty loss, effect of, Basis adjustment due to casualty loss. File taxes for free 2011 Changing accounting method, Changing Your Accounting Method Communication equipment (see Listed property) Commuting, Commuting use. File taxes for free 2011 Computer (see Listed property) Computer software, Computer software. File taxes for free 2011 , Off-the-shelf computer software. File taxes for free 2011 Containers, Containers. File taxes for free 2011 Conventions, Which Convention Applies? Cooperative apartment, Cooperative apartments. File taxes for free 2011 Copyright, Patents and copyrights. File taxes for free 2011 (see also Section 197 intangibles) Correcting depreciation deductions, How Do You Correct Depreciation Deductions? Cost basis, Cost as Basis D Declining balance Method, Declining Balance Method Rates, Declining balance rate. File taxes for free 2011 Deduction limit Automobile, Do the Passenger Automobile Limits Apply? Section 179, How Much Can You Deduct? Depreciation Deduction Employee, Can Employees Claim a Deduction? Listed property, Can Employees Claim a Deduction? Determinable useful life, Property Having a Determinable Useful Life Excepted property, Excepted Property Incorrect amount deducted, How Do You Correct Depreciation Deductions? Methods, Which Depreciation Method Applies? Property lasting more than one year, Property Lasting More Than One Year Property owned, Property You Own Property used in business, Property Used in Your Business or Income-Producing Activity Recapture, Revoking an election. File taxes for free 2011 , Recapture of Excess Depreciation Depreciation allowable, Basis adjustment for depreciation allowed or allowable. File taxes for free 2011 Depreciation allowed, Basis adjustment for depreciation allowed or allowable. File taxes for free 2011 Depreciation deduction Listed property, What Is the Business-Use Requirement? Determinable useful life, Property Having a Determinable Useful Life Disposition Before recovery period ends, Sale or Other Disposition Before the Recovery Period Ends General asset account property, Disposing of GAA Property Section 179 deduction, When Must You Recapture the Deduction? E Election ADS, Electing ADS. File taxes for free 2011 , Election of ADS. File taxes for free 2011 Declining balance (150% DB) method, 150% election. File taxes for free 2011 Exclusion from MACRS, Election To Exclude Property From MACRS General asset account, Electing To Use a GAA Not to claim special depreciation allowance, How Can You Elect Not To Claim an Allowance? Section 179 deduction, How Do You Elect the Deduction? Straight line method, Straight line election. File taxes for free 2011 Electric vehicle, Electric Vehicles Employee Depreciation deduction, Can Employees Claim a Deduction? How to claim depreciation, Employee. File taxes for free 2011 Employee deduction, listed property, Can Employees Claim a Deduction? Energy property, Energy property. File taxes for free 2011 Exchange of MACRS property, Property Acquired in a Like-kind Exchange or Involuntary Conversion F Farm Property, Depreciation Methods for Farm Property Figuring MACRS Using percentage tables, How Is the Depreciation Deduction Figured? Without using percentage tables, Figuring the Deduction Without Using the Tables Films, Films, video tapes, and recordings. File taxes for free 2011 Free tax services, Free help with your tax return. File taxes for free 2011 G General asset account Abusive transaction, Abusive transactions. File taxes for free 2011 Disposing of property, Disposing of GAA Property Grouping property in, Grouping Property Nonrecognition transaction, Nonrecognition transactions. File taxes for free 2011 General Depreciation System (GDS), recovery periods, Recovery Periods Under GDS Gift (see Basis, other than cost) H Help (see Tax help) I Idle property, Idle Property Improvements, How Do You Treat Repairs and Improvements?, Additions and Improvements Income forecast method, Income Forecast Method Incorrect depreciation deductions, How Do You Correct Depreciation Deductions? Indian reservation Defined, Indian reservation. File taxes for free 2011 Qualified infrastructure property, Qualified infrastructure property. File taxes for free 2011 Qualified property, Qualified property. File taxes for free 2011 Recovery periods for qualified property, Indian Reservation Property Related person, Related person. File taxes for free 2011 Inheritance (see Basis, other than cost) Intangible property Depreciation method, Intangible Property, Income Forecast Method Income forecast method, Income Forecast Method Straight line method, Intangible Property Inventory, Inventory. File taxes for free 2011 Investment use of property, partial, Partial business or investment use. File taxes for free 2011 Involuntary conversion of MACRS property, Property Acquired in a Like-kind Exchange or Involuntary Conversion L Land Not depreciable, Land Preparation costs, Land Leased property, Leased property. File taxes for free 2011 Leasehold improvement property, defined, Qualified leasehold improvement property. File taxes for free 2011 , Qualified leasehold improvement property. File taxes for free 2011 Life tenant, Life tenant. File taxes for free 2011 (see also Term interests) Limit on deduction Automobile, Do the Passenger Automobile Limits Apply? Section 179, How Much Can You Deduct? Listed property 5% owner, 5% owner. File taxes for free 2011 Computer, Computers and Related Peripheral Equipment Condition of employment, Condition of employment. File taxes for free 2011 Defined, What Is Listed Property? Employee deduction, Can Employees Claim a Deduction? Employer convenience, Employer's convenience. File taxes for free 2011 Improvements to, Improvements to listed property. File taxes for free 2011 Leased, Lessee's Inclusion Amount Passenger automobile, Passenger Automobiles Qualified business use, Qualified Business Use Recordkeeping, Adequate Records Related person, Related persons. File taxes for free 2011 Reporting on Form 4562, How Is Listed Property Information Reported? Lodging, Property used for lodging. File taxes for free 2011 M Maximum deduction Electric vehicles, Electric Vehicles Passenger automobiles, Maximum Depreciation Deduction Trucks, Trucks and Vans Vans, Trucks and Vans Mobile home (see Residential rental property) Modified ACRS (MACRS) Addition or improvement, Additions and Improvements Alternative Depreciation System (ADS), Which Depreciation System (GDS or ADS) Applies? Conventions, Which Convention Applies? Declining balance method, Declining Balance Method Depreciation methods, Which Depreciation Method Applies? Farm property, Depreciation Methods for Farm Property Figuring, short tax year, Property Placed in Service in a Short Tax Year General Depreciation System (GDS), Which Depreciation System (GDS or ADS) Applies? Percentage tables, Using the MACRS Percentage Tables Property classes, Which Property Class Applies Under GDS? Recovery periods, Which Recovery Period Applies? Short tax year, Figuring the Deduction for a Short Tax Year Straight line method, Straight Line Method N Nonresidential real property, Which Property Class Applies Under GDS? Nontaxable transfer of MACRS property, Property Acquired in a Nontaxable Transfer O Office in the home, Office in the home. File taxes for free 2011 , Office in the home. File taxes for free 2011 Ownership, incidents of, Incidents of ownership. File taxes for free 2011 P Partial business use, Partial business use. File taxes for free 2011 Passenger automobile Defined, Passenger Automobiles Electric vehicles, Electric Vehicles Limit on, Do the Passenger Automobile Limits Apply? Maximum depreciation deduction, Maximum Depreciation Deduction Trucks, Trucks and Vans Vans, Trucks and Vans Patent, Patents and copyrights. File taxes for free 2011 (see also Section 197 intangibles) Personal property, Personal property. File taxes for free 2011 Phonographic equipment (see Listed property) Photographic equipment (see Listed property) Placed in service Before 1987, Property You Placed in Service Before 1987 Date, What Is the Placed in Service Date? Rule, Placed in Service Property Classes, Which Property Class Applies Under GDS? Depreciable, What Property Can Be Depreciated? Idle, Idle Property Improvements, How Do You Treat Repairs and Improvements? Leased, Leased property. File taxes for free 2011 , Leased property. File taxes for free 2011 Listed, What Is Listed Property? Personal, Personal property. File taxes for free 2011 Real, Real property. File taxes for free 2011 Retired from service, Retired From Service Tangible personal, Tangible personal property. File taxes for free 2011 Term interest, Certain term interests in property. File taxes for free 2011 Q Qualified leasehold improvement property, defined, Qualified leasehold improvement property. File taxes for free 2011 , Qualified leasehold improvement property. File taxes for free 2011 Qualified property, special depreciation allowance, What Is Qualified Property? R Real property, Real property. File taxes for free 2011 Recapture Clean-fuel vehicle deduction or credit, Basis adjustment due to recapture of clean-fuel vehicle deduction or credit. File taxes for free 2011 General asset account, abusive transaction, Abusive transactions. File taxes for free 2011 Listed property, Recapture of Excess Depreciation MACRS depreciation, Revoking an election. File taxes for free 2011 Section 179 deduction, When Must You Recapture the Deduction? Special depreciation allowance, When Must You Recapture an Allowance? Recordkeeping Listed property, Adequate Records Section 179, How Do You Elect the Deduction? Recovery periods ADS, Recovery Periods Under ADS GDS, Recovery Periods Under GDS Related persons, Related persons. File taxes for free 2011 , Related persons. File taxes for free 2011 , Related persons. File taxes for free 2011 , Related persons. File taxes for free 2011 , Related person. File taxes for free 2011 , Related persons. File taxes for free 2011 Rent-to-own property, defined, Qualified rent-to-own property. File taxes for free 2011 Rental home (see Residential rental property) Rented property, improvements, Improvements to rented property. File taxes for free 2011 Repairs, How Do You Treat Repairs and Improvements? Residential rental property, Which Property Class Applies Under GDS? Retail motor fuels outlet, Retail motor fuels outlet. File taxes for free 2011 Revoking ADS election, Electing ADS. File taxes for free 2011 General asset account election, Revoking an election. File taxes for free 2011 Section 179 election, Revoking an election. File taxes for free 2011 S Sale of property, Sale or Other Disposition Before the Recovery Period Ends Section 179 deduction Business use required, Partial business use. File taxes for free 2011 Carryover, Carryover of disallowed deduction. File taxes for free 2011 Dispositions, When Must You Recapture the Deduction? Electing, How Do You Elect the Deduction? Limits Business (taxable) income, Business Income Limit Business-use, recapture, When Must You Recapture the Deduction? Dollar, Dollar Limits Enterprise zone business, Enterprise Zone Businesses Partial business use, Partial business use. File taxes for free 2011 Married filing separate returns, Married Individuals Partnership rules, Partnerships and Partners Property Eligible, Eligible Property Excepted, Excepted Property Purchase required, Property Acquired by Purchase Recapture, When Must You Recapture the Deduction? Recordkeeping, How Do You Elect the Deduction? S corporation rules, S Corporations Settlement fees, Settlement costs. File taxes for free 2011 Short tax year Figuring depreciation, Property Placed in Service in a Short Tax Year Figuring placed-in-service date, Using the Applicable Convention in a Short Tax Year Software, computer, Computer software. File taxes for free 2011 , Off-the-shelf computer software. File taxes for free 2011 Sound recording, Films, video tapes, and recordings. File taxes for free 2011 Special depreciation allowance Election not to claim, How Can You Elect Not To Claim an Allowance? Qualified property, What Is Qualified Property? Recapture, When Must You Recapture an Allowance? Stock, constructive ownership of, Constructive ownership of stock or partnership interest. File taxes for free 2011 Straight line method, Intangible Property, Straight Line Method Created intangibles, Certain created intangibles. File taxes for free 2011 T Tangible personal property, Tangible personal property. File taxes for free 2011 Term interest, Certain term interests in property. File taxes for free 2011 Trade-in of property, Trade-in of other property. File taxes for free 2011 Trucks, Trucks and Vans U Unadjusted basis, Figuring the Unadjusted Basis of Your Property Useful life, Property Having a Determinable Useful Life V Vans, Trucks and Vans Video tape, Films, video tapes, and recordings. File taxes for free 2011 Video-recording equipment (see Listed property) W When to use ADS, Which Depreciation System (GDS or ADS) Applies? Worksheet Leased listed property, Inclusion amount worksheet. File taxes for free 2011 MACRS, MACRS Worksheet Prev  Up     Home   More Online Publications