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State Tax Return Filing

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State Tax Return Filing

State tax return filing 6. State tax return filing   Basis of Assets Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Cost BasisReal Property Allocating the Basis Uniform Capitalization Rules Adjusted BasisIncreases to Basis Decreases to Basis Basis Other Than CostTaxable Exchanges Involuntary Conversions Nontaxable Exchanges Property Received as a Gift Property Transferred From a Spouse Inherited Property Property Distributed From a Partnership or Corporation Introduction Your basis is the amount of your investment in property for tax purposes. State tax return filing Use basis to figure the gain or loss on the sale, exchange, or other disposition of property. State tax return filing Also use basis to figure depreciation, amortization, depletion, and casualty losses. State tax return filing If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. State tax return filing Only the basis allocated to the business or investment use of the property can be depreciated. State tax return filing Your original basis in property is adjusted (increased or decreased) by certain events. State tax return filing For example, if you make improvements to the property, increase your basis. State tax return filing If you take deductions for depreciation, or casualty losses, or claim certain credits, reduce your basis. State tax return filing Keep accurate records of all items that affect the basis of your assets. State tax return filing For information on keeping records, see chapter 1. State tax return filing Topics - This chapter discusses: Cost basis Adjusted basis Basis other than cost Useful Items - You may want to see: Publication 535 Business Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 946 How To Depreciate Property See chapter 16 for information about getting publications and forms. State tax return filing Cost Basis The basis of property you buy is usually its cost. State tax return filing Cost is the amount you pay in cash, debt obligations, other property, or services. State tax return filing Your cost includes amounts you pay for sales tax, freight, installation, and testing. State tax return filing The basis of real estate and business assets will include other items, discussed later. State tax return filing Basis generally does not include interest payments. State tax return filing However, see Carrying charges and Capitalized interest in chapter 4 of Publication 535. State tax return filing You also may have to capitalize (add to basis) certain other costs related to buying or producing property. State tax return filing Under the uniform capitalization rules, discussed later, you may have to capitalize direct costs and certain indirect costs of producing property. State tax return filing Loans with low or no interest. State tax return filing   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. State tax return filing You generally have unstated interest if your interest rate is less than the applicable federal rate. State tax return filing See the discussion of unstated interest in Publication 537, Installment Sales. State tax return filing Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. State tax return filing If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. State tax return filing Some of these expenses are discussed next. State tax return filing Lump sum purchase. State tax return filing   If you buy improvements, such as buildings, and the land on which they stand for a lump sum, allocate your cost basis between the land and improvements. State tax return filing Allocate the cost basis according to the respective fair market values (FMVs) of the land and improvements at the time of purchase. State tax return filing Figure the basis of each asset by multiplying the lump sum by a fraction. State tax return filing The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. State tax return filing Fair market value (FMV). State tax return filing   FMV is the price at which 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 necessary facts. State tax return filing Sales of similar property on or about the same date may help in figuring the FMV of the property. State tax return filing If you are not certain of the FMV of the land and improvements, you can allocate the basis according to their assessed values for real estate tax purposes. State tax return filing Real estate taxes. State tax return filing   If you pay the 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. State tax return filing   If you reimburse the seller for taxes the seller paid for you, you generally can deduct that amount as a tax expense. State tax return filing Whether or not you reimburse the seller, do not include that amount in the basis of your property. State tax return filing Settlement costs. State tax return filing   Your basis includes the settlement fees and closing costs for buying the property. State tax return filing See Publication 551 for a detailed list of items you can and cannot include in basis. State tax return filing   Do not include fees and costs for getting a loan on the property. State tax return filing Also, do not include amounts placed in escrow for the future payment of items such as taxes and insurance. State tax return filing Points. State tax return filing   If you pay points to get a loan (including a mortgage, second mortgage, or line-of-credit), do not add the points to the basis of the related property. State tax return filing You may be able to deduct the points currently or over the term of the loan. State tax return filing For more information about deducting points, see Points in chapter 4 of Publication 535. State tax return filing Assumption of a mortgage. State tax return filing   If you buy property and assume (or buy the property subject to) an existing mortgage, your basis includes the amount you pay for the property plus the amount you owe on the mortgage. State tax return filing Example. State tax return filing If you buy a farm for $100,000 cash and assume a mortgage of $400,000, your basis is $500,000. State tax return filing Constructing assets. State tax return filing   If you build property or have assets built for you, your expenses for this construction are part of your basis. State tax return filing Some of these expenses include the following costs: Land, Labor and materials, Architect's fees, Building permit charges, Payments to contractors, Payments for rental equipment, and Inspection fees. State tax return filing   In addition, if you use your own employees, farm materials, and equipment to build an asset, do not deduct the following expenses. State tax return filing You must capitalize them (include them in the asset's basis). State tax return filing Employee wages paid for the construction work, reduced by any employment credits allowed. State tax return filing Depreciation on equipment you own while it is used in the construction. State tax return filing Operating and maintenance costs for equipment used in the construction. State tax return filing The cost of business supplies and materials used in the construction. State tax return filing    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. State tax return filing Allocating the Basis In some instances, the rules for determining basis apply to a group of assets acquired in the same transaction or to property that consists of separate items. State tax return filing To determine the basis of these assets or separate items, there must be an allocation of basis. State tax return filing Group of assets acquired. State tax return filing   If you buy multiple assets for a lump sum, allocate the amount you pay among the assets. State tax return filing Use this allocation to figure your basis for depreciation and gain or loss on a later disposition of any of these assets. State tax return filing You and the seller may agree in the sales contract to a specific allocation of the purchase price among the assets. State tax return filing 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. State tax return filing Farming business acquired. State tax return filing   If you buy a group of assets that makes up a farming business, there are special rules you must use to allocate the purchase price among the assets. State tax return filing Generally, reduce the purchase price by any cash received. State tax return filing Allocate the remaining purchase price to the other business assets received in proportion to (but not more than) their FMV and in a certain order. State tax return filing See Trade or Business Acquired under Allocating the Basis in Publication 551 for more information. State tax return filing Transplanted embryo. State tax return filing   If you buy a cow that is pregnant with a transplanted embryo, allocate to the basis of the cow the part of the purchase price equal to the FMV of the cow without the implant. State tax return filing Allocate the rest of the purchase price to the basis of the calf. State tax return filing Neither the cost allocated to the cow nor the cost allocated to the calf is deductible as a current business expense. State tax return filing Uniform Capitalization Rules Under the uniform capitalization rules, you must include certain direct and indirect costs in the basis of property you produce or in your inventory costs, rather than claim them as a current deduction. State tax return filing You recover these costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. State tax return filing Generally, you are subject to the uniform capitalization rules if you do any of the following: Produce real or tangible personal property, or Acquire property for resale. State tax return filing However, this rule does not apply to personal property if your average annual gross receipts for the 3-tax-year period ending with the year preceding the current tax year are $10 million or less. State tax return filing You produce property if you construct, build, install, manufacture, develop, improve, or create the property. State tax return filing You are not subject to the uniform capitalization rules if the property is produced for personal use. State tax return filing In a farming business, you produce property if you raise or grow any agricultural or horticultural commodity, including plants and animals. State tax return filing Plants. State tax return filing   A plant produced in a farming business includes the following items: A fruit, nut, or other crop-bearing tree; An ornamental tree; A vine; A bush; Sod; and The crop or yield of a plant that will have more than one crop or yield. State tax return filing Animals. State tax return filing   An animal produced in a farming business includes any stock, poultry or other bird, and fish or other sea life. State tax return filing The direct and indirect costs of producing plants or animals include preparatory costs and preproductive period costs. State tax return filing Preparatory costs include the acquisition costs of the seed, seedling, plant, or animal. State tax return filing For plants, preproductive period costs include the costs of items such as irrigation, pruning, frost protection, spraying, and harvesting. State tax return filing For animals, preproductive period costs include the costs of items such as feed, maintaining pasture or pen areas, breeding, veterinary services, and bedding. State tax return filing Exceptions. State tax return filing   In a farming business, the uniform capitalization rules do not apply to: Any animal, Any plant with a preproductive period of 2 years or less, or Any costs of replanting certain plants lost or damaged due to casualty. State tax return filing   Exceptions (1) and (2) do not apply to a corporation, partnership, or tax shelter required to use an accrual method of accounting. State tax return filing See Accrual Method Required under Accounting Methods in chapter 2. State tax return filing   In addition, you can elect not to use the uniform capitalization rules for plants with a preproductive period of more than 2 years. State tax return filing If you make this election, special rules apply. State tax return filing This election cannot be made by a corporation, partnership, or tax shelter required to use an accrual method of accounting. State tax return filing This election also does not apply to any costs incurred for the planting, cultivation, maintenance, or development of any citrus or almond grove (or any part thereof) within the first 4 years the trees were planted. State tax return filing    If you elect not to use the uniform capitalization rules, you must use the alternative depreciation system for all property used in any of your farming businesses and placed in service in any tax year during which the election is in effect. State tax return filing See chapter 7, for additional information on depreciation. State tax return filing Example. State tax return filing You grow trees that have a preproductive period of more than 2 years. State tax return filing The trees produce an annual crop. State tax return filing You are an individual and the uniform capitalization rules apply to your farming business. State tax return filing You must capitalize the direct costs and an allocable part of indirect costs incurred due to the production of the trees. State tax return filing You are not required to capitalize the costs of producing the annual crop because its preproductive period is 2 years or less. State tax return filing Preproductive period of more than 2 years. State tax return filing   The preproductive period of plants grown in commercial quantities in the United States is based on their nationwide weighted average preproductive period. State tax return filing Plants producing the crops or yields shown in Table 6-1 have a nationwide weighted average preproductive period of more than 2 years. State tax return filing Other plants (not shown in Table 6-1) may also have a nationwide weighted average preproductive period of more than 2 years. State tax return filing More information. State tax return filing   For more information on the uniform capitalization rules that apply to property produced in a farming business, see Regulations section 1. State tax return filing 263A-4. State tax return filing Table 6-1. State tax return filing Plants With a Preproductive Period of More Than 2 Years Plants producing the following crops or yields have a nationwide weighted average preproductive period of more than 2 years. State tax return filing Almonds Apples Apricots Avocados Blueberries Cherries Chestnuts Coffee beans Currants Dates Figs Grapefruit Grapes Guavas Kiwifruit Kumquats Lemons Limes Macadamia nuts Mangoes Nectarines Olives Oranges Peaches Pears Pecans Persimmons Pistachio nuts Plums Pomegranates Prunes Tangelos Tangerines Tangors Walnuts 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 cost basis or basis other than cost (discussed later) of the property. State tax return filing The adjustments to the original basis are increases or decreases to the cost basis or other basis which result in the adjusted basis of the property. State tax return filing Increases to Basis Increase the basis of any property by all items properly added to a capital account. State tax return filing These include the cost of any improvements having a useful life of more than 1 year. State tax return filing The following costs increase the basis of property. State tax return filing The cost of extending utility service lines to property. State tax return filing Legal fees, such as the cost of defending and perfecting title. State tax return filing Legal fees for seeking a decrease in an assessment levied against property to pay for local improvements. State tax return filing Assessments for items such as paving roads and building ditches that increase the value of the property assessed. State tax return filing Do not deduct these expenses as taxes. State tax return filing However, you can deduct as taxes amounts assessed for maintenance or repairs, or for meeting interest charges related to the improvements. State tax return filing If you make additions or improvements to business property, depreciate the basis of each addition or improvement as separate depreciable property using the rules that would apply to the original property if you had placed it in service at the same time you placed the addition or improvement in service. State tax return filing See chapter 7. State tax return filing Deducting vs. State tax return filing capitalizing costs. State tax return filing   Do not add to your basis costs you can deduct as current expenses. State tax return filing For example, amounts paid for incidental repairs or maintenance are deductible as business expenses and are not added to basis. State tax return filing However, you can elect either to deduct or to capitalize certain other costs. State tax return filing See chapter 7 in Publication 535. State tax return filing Decreases to Basis The following are some items that reduce the basis of property. State tax return filing Section 179 deduction. State tax return filing Deductions previously allowed or allowable for amortization, depreciation, and depletion. State tax return filing Alternative motor vehicle credit. State tax return filing See Form 8910. State tax return filing Alternative fuel vehicle refueling property credit. State tax return filing See Form 8911. State tax return filing Residential energy efficient property credits. State tax return filing See Form 5695. State tax return filing Investment credit (part or all) taken. State tax return filing Casualty and theft losses and insurance reimbursements. State tax return filing Payments you receive for granting an easement. State tax return filing Exclusion from income of subsidies for energy conservation measures. State tax return filing Certain canceled debt excluded from income. State tax return filing Rebates from a manufacturer or seller. State tax return filing Patronage dividends received from a cooperative association as a result of a purchase of property. State tax return filing See Patronage Dividends in chapter 3. State tax return filing Gas-guzzler tax. State tax return filing See Form 6197. State tax return filing Some of these items are discussed next. State tax return filing For a more detailed list of items that decrease basis, see section 1016 of the Internal Revenue Code and Publication 551. State tax return filing Depreciation and section 179 deduction. State tax return filing   The adjustments you must make to the basis of the property if you take the section 179 deduction or depreciate the property are explained next. State tax return filing For more information on these deductions, see chapter 7. State tax return filing Section 179 deduction. State tax return filing   If you take the section 179 expense deduction for all or part of the cost of qualifying business property, decrease the basis of the property by the deduction. State tax return filing Depreciation. State tax return filing   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. State tax return filing 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. State tax return filing If you did not take a depreciation deduction, reduce the basis by the full amount of the depreciation you could have taken. State tax return filing   If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted plus the part of the excess depreciation you deducted that actually reduced your tax liability for any year. State tax return filing   See chapter 7 for information on figuring the depreciation you should have claimed. State tax return filing   In decreasing your basis for depreciation, take into account the amount deducted on your tax returns as depreciation and any depreciation you must capitalize under the uniform capitalization rules. State tax return filing Casualty and theft losses. State tax return filing   If you have a casualty or theft loss, decrease the basis of the property by any insurance or other reimbursement. State tax return filing Also, decrease it by any deductible loss not covered by insurance. State tax return filing See chapter 11 for information about figuring your casualty or theft loss. State tax return filing   You must increase your basis in the property by the amount you spend on clean-up costs (such as debris removal) and repairs that restore the property to its pre-casualty condition. State tax return filing To make this determination, compare the repaired property to the property before the casualty. State tax return filing Easements. State tax return filing   The amount you receive for granting an easement is usually considered to be proceeds from the sale of an interest in the real property. State tax return filing It reduces the basis of the affected part of the property. State tax return filing 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. State tax return filing See Easements and rights-of-way in chapter 3. State tax return filing Exclusion from income of subsidies for energy conservation measures. State tax return filing   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. State tax return filing Reduce the basis of the property by the excluded amount. State tax return filing Canceled debt excluded from income. State tax return filing   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. State tax return filing A debt includes any indebtedness for which you are liable or which attaches to property you hold. State tax return filing   You can exclude your canceled debt from income if the debt is any of the following. State tax return filing Debt canceled in a bankruptcy case or when you are insolvent. State tax return filing Qualified farm debt. State tax return filing Qualified real property business debt (provided you are not a C corporation). State tax return filing Qualified principal residence indebtedness. State tax return filing Discharge of certain indebtedness of a qualified individual because of Midwestern disasters. State tax return filing If you exclude canceled debt described in (1) or (2), you may have to reduce the basis of your depreciable and nondepreciable property. State tax return filing If you exclude canceled debt described in (3), you must only reduce the basis of your depreciable property by the excluded amount. State tax return filing   For more information about canceled debt in a bankruptcy case, see Publication 908, Bankruptcy Tax Guide. State tax return filing For more information about insolvency and canceled debt that is qualified farm debt or qualified principal residence indebtedness, see chapter 3. State tax return filing For more information about qualified real property business debt, see Publication 334, Tax Guide for Small Business. State tax return filing For more information about canceled debt in Midwestern disaster areas, see Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. State tax return filing Basis Other Than Cost There are times when you cannot use cost as basis. State tax return filing In these situations, the fair market value or the adjusted basis of property may be used. State tax return filing Examples are discussed next. State tax return filing Property changed from personal to business or rental use. State tax return filing   When 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. State tax return filing An example of changing property from personal to business use would be changing the use of your pickup truck that you originally purchased for your personal use to use in your farming business. State tax return filing   The basis for depreciation is the lesser of: The FMV of the property on the date of the change, or Your adjusted basis on the date of the change. State tax return filing   If you later sell or dispose of this property, the basis you use will depend on whether you are figuring a gain or loss. State tax return filing The basis for figuring a gain is your adjusted basis in the property when you sell the property. State tax return filing 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. State tax return filing Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . State tax return filing Property received for services. State tax return filing   If you receive property for services, include the property's FMV in income. State tax return filing The amount you include in income becomes your basis. State tax return filing 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. State tax return filing Example. State tax return filing George Smith is an accountant and also operates a farming business. State tax return filing George agreed to do some accounting work for his neighbor in exchange for a dairy cow. State tax return filing The accounting work and the cow are each worth $1,500. State tax return filing George must include $1,500 in income for his accounting services. State tax return filing George's basis in the cow is $1,500. State tax return filing Taxable Exchanges A taxable exchange is one in which the gain is taxable, or the loss is deductible. State tax return filing A taxable gain or deductible loss also is known as a recognized gain or loss. State tax return filing A taxable exchange occurs when you receive cash or get property that is not similar or related in use to the property exchanged. State tax return filing 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. State tax return filing Example. State tax return filing You trade a tract of farmland with an adjusted basis of $2,000 for a tractor that has an FMV of $6,000. State tax return filing You must report a taxable gain of $4,000 for the land. State tax return filing The tractor has a basis of $6,000. State tax return filing Involuntary Conversions If you receive property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, figure the basis of the replacement property you receive using the basis of the converted property. State tax return filing Similar or related property. State tax return filing   If the replacement property is similar or related in service or use to the converted property, the replacement property's basis is the same as the old property's basis on the date of the conversion. State tax return filing However, make the following adjustments. State tax return filing Decrease the basis by the following amounts. State tax return filing Any loss you recognize on the involuntary conversion. State tax return filing Any money you receive that you do not spend on similar property. State tax return filing Increase the basis by the following amounts. State tax return filing Any gain you recognize on the involuntary conversion. State tax return filing Any cost of acquiring the replacement property. State tax return filing Money or property not similar or related. State tax return filing   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 involuntary conversion. State tax return filing Allocating the basis. State tax return filing   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. State tax return filing Basis for depreciation. State tax return filing   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. State tax return filing For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. State tax return filing For more information about involuntary conversions, see chapter 11. State tax return filing Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. State tax return filing A nontaxable gain or loss also is known as an unrecognized gain or loss. State tax return filing If you receive property in a nontaxable exchange, its basis is usually the same as the basis of the property you transferred. State tax return filing Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. State tax return filing For an exchange 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. State tax return filing There must also be an exchange of like-kind property. State tax return filing For more information, see Like-Kind Exchanges in  chapter 8. State tax return filing The basis of the property you receive generally is the same as the adjusted basis of the property you gave up. State tax return filing Example 1. State tax return filing You traded a truck you used in your farming business for a new smaller truck to use in farming. State tax return filing The adjusted basis of the old truck was $10,000. State tax return filing The FMV of the new truck is $30,000. State tax return filing Because this is a nontaxable exchange, you do not recognize any gain, and your basis in the new truck is $10,000, the same as the adjusted basis of the truck you traded. State tax return filing Example 2. State tax return filing You trade a field cultivator (adjusted basis of $8,000) for a planter (FMV of $9,000). State tax return filing You use both the field cultivator and the planter in your farming business. State tax return filing The basis of the planter you receive is $8,000, the same as the field cultivator traded Exchange expenses. State tax return filing   Exchange expenses generally are the closing costs that you pay. State tax return filing They include such items as brokerage commissions, attorney fees, and deed preparation fees. State tax return filing Add them to the basis of the like-kind property you receive. State tax return filing Property plus cash. State tax return filing   If you trade property in a like-kind exchange and also pay money, the basis of the property you receive is the adjusted basis of the property you gave up plus the money you paid. State tax return filing Example. State tax return filing You trade in a truck (adjusted basis of $3,000) for another truck (FMV of $7,500) and pay $4,000. State tax return filing Your basis in the new truck is $7,000 (the $3,000 adjusted basis of the old truck plus the $4,000 cash). State tax return filing Special rules for related persons. State tax return filing   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. State tax return filing Each person must report any gain or loss not recognized on the original exchange unless the loss is not deductible under the related party rules. State tax return filing Each person reports it on the tax return filed for the year in which the later disposition occurred. State tax return filing If this rule applies, the basis of the property received in the original exchange will be its FMV. State tax return filing For more information, see chapter 8. State tax return filing Exchange of business property. State tax return filing   Exchanging the property of one business for the property of another business generally is a multiple property exchange. State tax return filing For information on figuring basis, see Multiple Property Exchanges in chapter 1 of Publication 544. State tax return filing Basis for depreciation. State tax return filing   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind transaction. State tax return filing For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. State tax return filing Partially Nontaxable Exchanges A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. State tax return filing The basis of the property you receive is the same as the adjusted basis of the property you gave up with the following adjustments. State tax return filing Decrease the basis by the following amounts. State tax return filing Any money you receive. State tax return filing Any loss you recognize on the exchange. State tax return filing Increase the basis by the following amounts. State tax return filing Any additional costs you incur. State tax return filing Any gain you recognize on the exchange. State tax return filing If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. State tax return filing Example 1. State tax return filing You trade farmland (basis of $100,000) for another tract of farmland (FMV of $110,000) and $30,000 cash. State tax return filing You realize a gain of $40,000. State tax return filing This is the FMV of the land received plus the cash minus the basis of the land you traded ($110,000 + $30,000 − $100,000). State tax return filing Include your gain in income (recognize gain) only to the extent of the cash received. State tax return filing Your basis in the land you received is figured as follows. State tax return filing Basis of land traded $100,000 Minus: Cash received (adjustment 1(a)) − 30,000   $70,000 Plus: Gain recognized (adjustment 2(b)) + 30,000 Basis of land received $100,000 Example 2. State tax return filing You trade a truck (adjusted basis of $22,750) for another truck (FMV of $20,000) and $10,000 cash. State tax return filing You realize a gain of $7,250. State tax return filing This is the FMV of the truck received plus the cash minus the adjusted basis of the truck you traded ($20,000 + $10,000 − $22,750). State tax return filing You include all the gain in your income (recognize gain) because the gain is less than the cash you received. State tax return filing Your basis in the truck you received is figured as follows. State tax return filing Adjusted basis of truck traded $22,750 Minus: Cash received (adjustment 1(a)) −10,000   $12,750 Plus: Gain recognized (adjustment 2(b)) + 7,250 Basis of truck received $20,000 Allocation of basis. State tax return filing   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. State tax return filing The rest is the basis of the like-kind property. State tax return filing Example. State tax return filing You traded a tractor with an adjusted basis of $15,000 for another tractor that had an FMV of $12,500. State tax return filing You also received $1,000 cash and a truck that had an FMV of $3,000. State tax return filing The truck is unlike property. State tax return filing You realized a gain of $1,500. State tax return filing This is the FMV of the tractor received plus the FMV of the truck received plus the cash minus the adjusted basis of the tractor you traded ($12,500 + $3,000 + $1,000 − $15,000). State tax return filing 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. State tax return filing Your basis in the properties you received is figured as follows. State tax return filing Adjusted basis of old tractor $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). State tax return filing This is the truck's FMV. State tax return filing The rest ($12,500) is the basis of the tractor. State tax return filing 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. State tax return filing Example. State tax return filing You used a tractor on your farm for 3 years. State tax return filing Its adjusted basis is $22,000 and its FMV is $40,000. State tax return filing You are interested in a new tractor, which sells for $60,000. State tax return filing Ordinarily, you would trade your old tractor for the new one and pay the dealer $20,000. State tax return filing Your basis for depreciating the new tractor would then be $42,000 ($20,000 + $22,000, the adjusted basis of your old tractor). State tax return filing However, you want a higher basis for depreciating the new tractor, so you agree to pay the dealer $60,000 for the new tractor if he will pay you $40,000 for your old tractor. State tax return filing Because the two transactions are dependent on each other, you are treated as having exchanged your old tractor for the new one and paid $20,000 ($60,000 − $40,000). State tax return filing Your basis for depreciating the new tractor is $42,000, the same as if you traded the old tractor. State tax return filing 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. State tax return filing You also must know its FMV at the time it was given to you and any gift tax paid on it. State tax return filing FMV equal to or greater than donor's adjusted basis. State tax return filing   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 when you received the gift. State tax return filing Increase your basis by all or part of any gift tax paid, depending on the date of the gift. State tax return filing   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 (the donor's adjusted basis) by any required adjustments to basis while you held the property. State tax return filing See Adjusted Basis , earlier. State tax return filing   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. State tax return filing Figure the increase by multiplying the gift tax paid by the following fraction. State tax return filing Net increase in value of the gift Amount of the gift   The net increase in value of the gift is the FMV of the gift minus the donor's adjusted basis. State tax return filing 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. State tax return filing Example. State tax return filing In 2013, you received a gift of property from your mother that had an FMV of $50,000. State tax return filing Her adjusted basis was $20,000. State tax return filing The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). State tax return filing She paid a gift tax of $7,320. State tax return filing Your basis, $26,076, is figured as follows. State tax return filing 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) × . State tax return filing 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. State tax return filing If you received a gift before 1977, your basis in the gift (the donor's adjusted basis) includes any gift tax paid on it. State tax return filing However, your basis cannot exceed the FMV of the gift when it was given to you. State tax return filing FMV less than donor's adjusted basis. State tax return filing   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. State tax return filing Your basis for figuring gain is the donor's adjusted basis plus or minus any required adjustments to basis while you held the property. State tax return filing 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. State tax return filing (See Adjusted Basis , earlier. State tax return filing )   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 get a gain, you have neither gain nor loss on the sale or other disposition of the property. State tax return filing Example. State tax return filing You received farmland as a gift from your parents when they retired from farming. State tax return filing At the time of the gift, the land had an FMV of $80,000. State tax return filing Your parents' adjusted basis was $100,000. State tax return filing After you received the land, no events occurred that would increase or decrease your basis. State tax return filing If you sell the land for $120,000, you will have a $20,000 gain because you must use the donor's adjusted basis at the time of the gift ($100,000) as your basis to figure a gain. State tax return filing If you sell the land for $70,000, you will have a $10,000 loss because you must use the FMV at the time of the gift ($80,000) as your basis to figure a loss. State tax return filing If the sales price is between $80,000 and $100,000, you have neither gain nor loss. State tax return filing For instance, if the sales price was $90,000 and you tried to figure a gain using the donor's adjusted basis ($100,000), you would get a $10,000 loss. State tax return filing If you then tried to figure a loss using the FMV ($80,000), you would get a $10,000 gain. State tax return filing Business property. State tax return filing   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. State tax return filing 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. State tax return filing The same rule applies to a transfer by your former spouse if the transfer is incident to divorce. State tax return filing 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. State tax return filing 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. State tax return filing For more information, see Property Settlements in Publication 504, Divorced or Separated Individuals. State tax return filing 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. State tax return filing If a federal estate return is filed, you can use its appraised value. State tax return filing The FMV on the alternate valuation date, if the personal representative for the estate elects to use alternate valuation. State tax return filing For information on the alternate valuation, see the Instructions for Form 706. State tax return filing The decedent's adjusted basis in land to the extent of the value that is excluded from the decedent's taxable estate as a qualified conservation easement. State tax return filing 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. State tax return filing Special-use valuation method. State tax return filing   Under certain conditions, when a person dies, the executor or personal representative of that person's estate may elect to value qualified real property at other than its FMV. State tax return filing If so, the executor or personal representative values the qualified real property based on its use as a farm or other closely held business. State tax return filing If the executor or personal representative elects this method of valuation for estate tax purposes, this value is the basis of the property for the qualified heirs. State tax return filing The qualified heirs should be able to get the necessary value from the executor or personal representative of the estate. State tax return filing   If you are a qualified heir who received special-use valuation property, increase your basis by any gain recognized by the estate or trust because of post-death appreciation. State tax return filing 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 on the alternate valuation date. State tax return filing Figure all FMVs without regard to the special-use valuation. State tax return filing   You may be liable for an additional estate tax if, within 10 years after the death of the decedent, you transfer the property or the property stops being used as a farm. State tax return filing This tax does not apply if you dispose of the property in a like-kind exchange or in an involuntary conversion in which all of the proceeds are reinvested in qualified replacement property. State tax return filing The tax also does not apply if you transfer the property to a member of your family and certain requirements are met. State tax return filing   You can elect to increase your basis in special-use valuation property if it becomes subject to the additional estate tax. State tax return filing To increase your basis, 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 payment of the additional estate tax. State tax return filing 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. State tax return filing The increase in your basis is considered to have occurred immediately before the event that resulted in the additional estate tax. State tax return filing   You make the election by filing, with Form 706-A, United States Additional Estate Tax Return, a statement that: Contains your (and the estate's) name, address, and taxpayer identification number; Identifies the election as an election under section 1016(c) of the Internal Revenue Code; Specifies the property for which you are making the election; and Provides any additional information required by the Form 706-A instructions. State tax return filing   For more information, see Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, Form 706-A, and the related instructions. State tax return filing Property inherited from a decedent who died in 2010. State tax return filing   If you inherited property from a decedent who died in 2010, different rules may apply. State tax return filing See Publication 4895, Tax Treatment of Property Acquired From a Decendent Dying in 2010, for details. State tax return filing Property Distributed From a Partnership or Corporation The following rules apply to determine a partner's basis and a shareholder's basis in property distributed respectively from a partnership to the partner with respect to the partner's interest in the partnership and from a corporation to the shareholder with respect to the shareholder's ownership of stock in the corporation. State tax return filing Partner's basis. State tax return filing   Unless there is a complete liquidation of a partner's interest, the basis of property (other than money) distributed by a partnership to the partner is its adjusted basis to the partnership immediately before the distribution. State tax return filing However, the basis of the property to the partner cannot be more than the adjusted basis of his or her interest in the partnership reduced by any money received in the same transaction. State tax return filing For more information, see Partner's Basis for Distributed Property in Publication 541, Partnerships. State tax return filing Shareholder's basis. State tax return filing   The basis of property distributed by a corporation to a shareholder is its fair market value. State tax return filing For more information about corporate distributions, see Distributions to Shareholders in Publication 542, Corporations. State tax return filing Prev  Up  Next   Home   More Online Publications
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Contact My Local Office in New Mexico

Face-to-face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

City  Street Address  Days/Hours of Service  Telephone* 
Albuquerque  5338 Montgomery Blvd. N.E.
Albuquerque, NM 87109 

Monday-Friday - 8:30 a.m. - 4:30 p.m.

 

Services Provided

(505) 837-5631 
Farmington  800 E. 30th St.
Farmington, NM 87401 

Wednesday & Thursday - 8:30 a.m.- 4:30 p.m.; Friday - 8:30 a.m.-11:30 a.m. 
(Closed for lunch 11:30 a.m. - 12:30 p.m.)
 

**This office will be open 2/12-2/14, 2/26-2/28, 3/12-3/14, 3/26-3/28, 4/09-4/11, 4/23-4/25, 5/07-5/09 and 5/21-5/23. Closed all other days/times.**


Services Provided

(505) 327-7906 
Las Cruces  505 S. Main, Ste. 149
Las Cruces, NM 88001 

Monday-Friday - 8:30 a.m. - 4:30 p.m.
 

Services Provided

(575) 526-0161 
Roswell  500 N. Richardson
Roswell, NM 88201 

This Office is Temporarily Closed

 

(575) 624-9442 
Roswell/remote Taxpayer Assistance
available at New
Mexico Legal Aid
200 E. 4th Street
Suite 200
Roswell, NM 88202

Monday-Friday - 8:30 a.m. - 3:00 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.)

 

Virtual Services Provided

(575) 624-9442
Santa Fe  2945 Rodeo Park Dr. East
Santa Fe, NM  87505 

Monday-Friday - 8:30 a.m. - 4:30 p.m. 
(Closed for lunch 11:30 a.m.- 12:30 p.m.)

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(505) 424-5961

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If  face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses).

For information on where to file your tax return please see Where to File Addresses.

The Taxpayer Advocate Service: Call (505) 837-5505 in Albuquerque or 1-877-777-4778 elsewhere, or see Publication 1546, The Taxpayer Advocate Service of the IRS.

For further information, see Tax Topic 104.

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
5338 Montgomery Blvd., NE
MS 4040ALB
Albuquerque, NM 87109

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The State Tax Return Filing

State tax return filing It's easy, accurate and fast. So why would you file your taxes any other way? State tax return filing Old fashioned paper tax forms have been around for decades, but it might be time for them to go the way of the dodo. Who wants to wait for weeks to get their check in the mail when you can just efile your tax return electronically with the IRS and start enjoying your refund in as little as 7 days. State tax return filing If you consider the money the IRS holds on to while you wait for your refund as an interest free loan, then you’ll realize that you are losing money. No one other than the IRS can get an interest free loan and that doesn’t seem fair, does it? Enter the internet age. Commercial companies have been moving online for years now - when was the last time you've mailed a check or received a paper statement from your bank? Now, even the government sites are starting to get with the program and are offering quick and easy efile to everyone. Here are a few reasons why I switched to efile; maybe it’s time you do to!