Determining Tax Basis of Property (Currently Unavailable)

Author: Jennifer Kowal

Understand Intricacies of Tax Basis for Property Acquired by Exchanges, Gift, Inheritance or Other Means

The tax code defines basis as the "cost" of property, but in many cases it can be difficult to determine what this means. Of course it means the amount paid when property is purchased for cash, but what if property is acquired in an exchange, a non-recognition transaction, in exchange for services, or received by inheritance? Special basis rules apply in all of these scenarios. Additionally, special rules regarding allocation of basis when only part of a property is sold may surprise taxpayers. Finally, the effects on basis of depreciation and bonus depreciation are significant.

Publication Date: June 2020

Designed For
Tax practitioners at all levels who provide advice and return preparation involving sales of property.

Topics Covered

• General Tax Basis Rules -- definition of "cost" basis
• Special Rules re: basis of property received by gift or bequest
• Rules re: allocation of basis when not all the property is sold
• Basis of property received in exchanges, including non”recognition exchanges
• Basis effects of depreciation, including failing to claim allowable depreciation

Learning Objectives

• Describe general tax basis rules and outcome of common "cost" basis situations
• Identify rules that apply in determining how to allocate basis, or determine which basis to use, when not all of a taxpayer's property is sold
• Explain the special rules that apply to property received by gift or inheritance
• Recognize the effects of depreciation and non-recognition exchanges on calculating basis
• Identify correct statements with respect to the basis of property acquired by debt
• Describe bequests upon death
• Identify the appropriate formula for calculating the basis of property received in a like-kind exchange
• Recognize the steps in the ordering rules with respect to adjustments
• Differentiate IRS Section 197, goodwill and over how many years it may be amortized
• Recognize which type of property is generally exempt from the rules outlined by IRC Section 263A
• Identify correct statements regarding cash contributions to S Corporation stock
• Describe examples of classes and how they apply

Level
Intermediate

Instructional Method
Self-Study

NASBA Field of Study
Taxes (4 hours)

Program Prerequisites
Basic understanding of tax basis.

Advance Preparation
None