Also, for figuring gain or loss, you must increase or decrease your basis by any required adjustments to basis while you held the property. To figure out the basis of property you receive as a gift, you must know three amounts: The adjusted cost basis to the donor just before the donor made the gift to you.
The fair market value FMV at the time the donor made the gift. Your basis for figuring a gain is the same as the donor's adjusted basis, plus or minus any required adjustments to basis while you held the property. Your basis for figuring a loss is the FMV of the property when you received the gift, plus or minus any required adjustments to basis while you held the property.
You are required to estimate, with respect to each separate timber account established, the total units bd. If cutting has occurred the volume removed must be figured into the original volume. In essence you are growing the forest in reverse to the date of acquisition. Once the volume by type has been established the fair market value of the timber on the date of acquisition must be determined.
The best available evidence of timber values on this date must be used. The price actually paid for timber similar in character and quality in the location of the subject property on or near the valuation date can be used. Such information can usually be obtained from consulting foresters or timber buyers. Published price reports may be used if the average prices are adjusted to reflect differences for the timber quality.
If timber has been disposed of since the acquisition the basis must be reduced by the basis allowed for any previous sales or other disposals. While the short-term capital gains tax rate is about as much as ordinary income, if you hold an asset in your portfolio for a while, you can qualify for the long-term capital gains tax rate, which is much lower. Now that you understand what a cost basis is, the next step is to learn about the difference between the two different types of cost basis that you can use for tax purposes.
There is an adjusted basis and an unadjusted basis. With an adjusted tax basis, you can adjust the cost basis to account for any increases or decreases to its original value. For example, you can subtract any costs that you took as deductions on your tax return.
Alternatively, if you made any capital improvements to the asset, you can use those to increase its tax basis. On the other hand, an unadjusted basis does not get adjusted over time. In this case, your original basis, or the amount that you paid for the asset when you first bought it, remains the same for the entire time that the asset is kept in your portfolio.
There are three main instances where an adjusted tax basis can be used in place of an unadjusted tax basis:. To start calculating an adjusted basis, it's important to have a clear idea of what adjustments can be made to the tax basis.
We've listed them for you below. To calculate adjusted basis, you first need to know the original basis for the asset. However, let's say that you then held on to the property for five years. It's important for investors to know that understanding how to calculate an adjusted cost basis will benefit them on their tax return. Having a higher basis will help you when you're ready to sell a rental property because it will reduce your amount of capital gain.
That said, if you have specific questions about basis adjustment or your tax liability, it's best to reach out to a tax professional for advice.
Our team of analysts agrees. These 10 real estate plays are the best ways to invest in real estate right now. Find out how you can get started with Real Estate Winners by clicking here. Tara Mastroeni is a real estate and personal finance writer. Her work has been published on sites like Forbes, Business … Learn More. Advertiser Disclosure We do receive compensation from some affiliate partners whose offers appear here. Millionacres Logo. Tax Deductions Depreciation Capital Gains.
0コメント