I sold my home last year. Do I have to report the sale?
Yes. Use Form 2119, Sale of Your Home. You must report
the sale even if you sold your home at a loss. You must also report the sale even if you
are eligible to exclude or postpone part or all of the gain or you replaced your home. For
more information, refer to:
I have investment property. Can you explain the term "Basis
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
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 706, 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
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
For complete information, see Publication 17, chapter 14.
Tax Topics & FAQs | Tax Help Archives | Home