I sold my home last year. Do I have to report
the sale?
Genrally, yes, you must file Form
2119, Sale of Your Home to report the sale. There are certain
exceptions, however. For more information, refer to Publication
523, Selling Your Home.
I have investment property. Can you explain
the term "Basis of Assets"?
Basis is your investment in property for tax purposes. Before you
can figure any gain or loss on a sale, exchange, or other disposition of
property, or figure allowable depreciation, you must determine the adjusted
basis. Adjusted basis is the result of increasing or decreasing your original
basis according to certain events. Your original basis is usually your
cost to acquire the asset. More information on basis and adjusted basis
can be found in Tax Topic 704, Basis of Assets,
or Publication 551, Basis
of Assets.
What is the basis of property received as
a gift?
To figure the basis of property you get as a gift, you must know
its adjusted basis to the donor just before it was given to you. You also
must know its fair market value (FMV) at the time it was given to you and
any gift tax paid on it. Refer to Publication
551, Basis for Assets, for specific details.
May I deduct my home improvements and repairs
to my home?
Home improvements add to the value of your home, prolong its useful
life, or adapt it to new uses. You add the cost of improvements to the
basis of your property.
Examples of improvements include putting a recreation room in your
unfinished basement, adding another bathroom, or bedroom, putting up a
fence, putting in a new plumbing or wiring, putting on a new roof, or paving
your driveway.
For a list of some other examples of improvements, refer to Publication
523, Selling Your Home.
Repairs maintain your home in good condition. They do not add to
its value or prolong its life, and you do not add their cost to the basis
of your property.
Some examples of repairs include repainting your house inside or
outside, fixing your gutters or floors, repairing leaks or plastering and
replacing broken window panes.
The entire job is considered an improvement, however, if items that
would otherwise be considered repairs are done as part of an extensive
remodeling or restoration of your home.
What kinds of property can be depreciated
for tax purposes?
The kinds of property that can be depreciated include machinery,
equipment, buildings, vehicles, and furniture used in a trade or business
or to produce income. Depreciation is a very complex subject. For more
information, refer to Tax Topic 705, Depreciation,
or Publication 946, How
to Depreciate Property, or Publication
534, Depreciating Property Placed in Service Before 1987.
How do I report interest received on an installment
sale?
If you receive interest of over $400 on an installment sale, report
the entire amount on Schedule B Form
1040. For additional information on installment sales, refer to Tax
Topic 705, or Publication 537,
Installment Sales.
Are incentive stock options subject to alternative
minimum tax, and if so, how do I determine the basis for the stock?
A taxpayer generally must include in alternative minimum taxable
income the amount by which the price (if any) he paid for an incentive
stock option (ISO) is exceeded by the option's fair market value at the
time his rights to the stock are freely transferable or are not subject
to a substantial risk of forfeiture.
If a taxpayer acquires stock pursuant to the exercise of an ISO and
disposes of the stock in the same taxable year, the tax treatment for regular
taxes and the alternative minimum taxes are the same. See IRC 83; IRC 56(b)(3)
and IRC 422(c)(2).
I have capital losses of $4,000. How much
may I deduct this year?
Your allowable capital loss deduction for any tax year, figured on
Schedule D, is limited to the lesser of:
- $3,000 ($1,500 if you are married and file a separate return), or
- Your total net loss as shown on line 18 of Schedule D
If you have a total net loss on line 18 of Schedule D that is more
than the yearly limit on capital loss deductions, you can carry over the
unused part to later years until it is completely used up.
For more information about capital gains and losses, see Publication
544, Sales and Other Dispositions of Assets.
I received stock as a gift from my grandparents.
I am selling the stock this year. How can I figure the basis of the gifted
stock?
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 fair
market value (FMV) at the time it was given to you, and any gift tax paid
on it.
If the FMV of the property was less than the donor's adjusted basis,
your basis for gain on its sale or other disposition is the same as the
donor's adjusted basis plus or minus any required adjustment to basis during
the period you held the property. Your basis for loss on its sale or other
disposition is its FMV at the time you received the gift plus or minus
any required adjustment to basis during the period you held the property.
If the FMV of the property was equal to or greater than the donor's
adjusted basis, your basis is the same as the donor's adjusted basis at
the time you received the gift. Increase your basis by all or part of the
gift tax paid, depending on the date of the gift.
For complete information, see Publication
17, chapter 14.
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