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Publication 551 (Rev Userid: CPM Schema: tipx Leadpct: 100% Pt. size: 8 Draft Ok to Print AH XSL/XML Fileid: … ons/P551/201812/A/XML/Cycle03/source (Init. & Date) _______ Page 1 of 14 12:16 - 10-Dec-2018 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Publication 551 (Rev. December 2018) Contents Cat. No. 15094C Future Developments ............ 1 Department of the What’s New .................. 1 Treasury Internal Basis of Assets Reminder .................... 1 Revenue Service Introduction .................. 2 Cost Basis ................... 2 Stocks and Bonds ............ 2 Real Property ............... 2 Business Assets ............. 3 Allocating the Basis ........... 4 Adjusted Basis ................ 4 Increases to Basis ............ 4 Decreases to Basis ........... 5 Basis Other Than Cost ........... 7 Property Received for Services ..... 7 Taxable Exchanges ........... 7 Nontaxable Exchanges ......... 8 Property Transferred From a Spouse ................ 9 Property Received as a Gift ....... 9 Inherited Property ............ 9 Property Changed to Business or Rental Use ............ 10 How To Get Tax Help ........... 11 Glossary ................... 13 Index ..................... 14 Future Developments For the latest information about developments related to Pub. 551, such as legislation enacted after this publication was published, go to IRS.gov/Pub551. What’s New Uniform capitalization rules. Beginning in 2018, small businesses are not subject to the uniform capitalization rules if the average an- nual gross receipts are $25 million or less for the 3 preceding tax years and the business isn't a tax shelter. See Uniform Capitalization Rules, later. Like-kind exchanges. Beginning after De- cember 31, 2017, section 1031 like-kind ex- change treatment applies only to exchanges of real property held for use in a trade or business or for investment, other than real property held primarily for sale. Certain exchanges of per- sonal or intangible property started in 2017 and completed in 2018 may qualify as a like-kind ex- change. See Like-Kind Exchanges, later. Get forms and other information faster and easier at: • IRS.gov (English) • IRS.gov/Korean (한국어) • IRS.gov/Spanish (Español) • IRS.gov/Russian (Pусский) Reminder • IRS.gov/Chinese (中文) • IRS.gov/Vietnamese (TiếngViệt) Photographs of missing children. The Inter- nal Revenue Service is a proud partner with the Dec 10, 2018 Page 2 of 14 Fileid: … ons/P551/201812/A/XML/Cycle03/source 12:16 - 10-Dec-2018 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. National Center for Missing & Exploited Useful Items considered to be unstated interest. You gener- Children® (NCMEC). Photographs of missing You may want to see: ally have unstated interest if your interest rate is children selected by the Center may appear in less than the applicable federal rate. For more this publication on pages that would otherwise Publication information, see Unstated Interest and Original be blank. You can help bring these children Issue Discount in Pub. 537. home by looking at the photographs and calling 463 463 Travel, Gift, and Car Expenses 1-800-THE-LOST (1-800-843-5678) if you rec- Purchase of a business. When you purchase 523 523 Selling Your Home ognize a child. a trade or business, you generally purchase all 525 525 Taxable and Nontaxable Income assets used in the business operations, such as land, buildings, and machinery. Allocate the 527 527 Residential Rental Property Introduction price among the various assets, including any Basis is the amount of your investment in prop- 530 530 Tax Information for Homeowners section 197 intangibles. See Allocating the Ba- sis, later. erty for tax purposes. Use the basis of property 535 535 Business Expenses to figure depreciation, amortization, depletion, and casualty losses. Also use it to figure gain or 537 537 Installment Sales Stocks and Bonds loss on the sale or other disposition of property. 544 544 Sales and Other Dispositions of You must keep accurate records of all items Assets The basis of stocks or bonds you buy is gener- that affect the basis of property so you can ally the purchase price plus any costs of pur- 547 547 Casualties, Disasters, and Thefts make these computations. chase, such as commissions and recording or This publication is divided into the following 550 550 Investment Income and Expenses transfer fees. If you get stocks or bonds other sections. than by purchase, your basis is usually deter- 559 559 Survivors, Executors, and • Cost Basis mined by the fair market value (FMV) or the pre- Administrators • Adjusted Basis vious owner's adjusted basis of the stock. • Basis Other Than Cost 587 587 Business Use of Your Home You must adjust the basis of stocks for cer- The basis of property you buy is usually its 946 946 How To Depreciate Property tain events that occur after purchase. See cost. You may also have to capitalize (add to Stocks and Bonds in chapter 4 of Pub. 550 for basis) certain other costs related to buying or Form (and Instructions) more information on the basis of stock. producing the property. 706 706 United States Estate (and Your original basis in property is adjusted Identifying stock or bonds sold. If you can (increased or decreased) by certain events. If Generation-Skipping Transfer) Tax Return adequately identify the shares of stock or the you make improvements to the property, in- bonds you sold, their basis is the cost or other crease your basis. If you take deductions for de- 706-A 706-A United States Additional Estate Tax basis of the particular shares of stock or bonds. preciation or casualty losses, reduce your ba- Return If you buy and sell securities at various times in sis. varying quantities and you can't adequately 8594 8594 Asset Acquisition Statement You can't determine your basis in some as- identify the shares you sell, the basis of the se- sets by cost. This includes property you receive See How To Get Tax Help near the end of this curities you sell is the basis of the securities you as a gift or inheritance. It also applies to prop- publication for information about getting publi- acquired first. For more information about iden- erty received in an involuntary conversion and cations and forms. tifying securities you sell, see Stocks and certain other circumstances. Bonds under Basis of Investment Property in chapter 4 of Pub. 550. Comments and suggestions. We welcome Cost Basis your comments about this publication and your Mutual fund shares. If you sell mutual fund suggestions for future editions. Terms you may need to know shares acquired at different times and prices, You can send us comments through (see Glossary): you can choose to use an average basis. For IRS.gov/FormComments. Or you can write to: more information, see Pub. 550. Business assets Internal Revenue Service Real property Tax Forms and Publications Unstated interest Real Property 1111 Constitution Ave. NW, IR-6526 Washington, DC 20224 Real property, also called real estate, is land and generally anything built on or attached to it. The basis of property you buy is usually its cost. If you buy real property, certain fees and other Although we can’t respond individually to The cost is the amount you pay in cash, debt expenses become part of your cost basis in the each comment received, we do appreciate your obligations, other property, or services. Your property. feedback and will consider your comments as cost also includes amounts you pay for the fol- we revise our tax forms, instructions, and publi- lowing items. Real estate taxes. If you pay real estate taxes cations. • Sales tax. the seller owed on real property you bought, Freight. Ordering forms and publications. Visit • and the seller didn't reimburse you, treat those Installation and testing. IRS.gov/FormsPubs to download forms and • taxes as part of your basis. You can't deduct Excise taxes. publications. Otherwise, you can go to IRS.gov/ • them as taxes. Legal and accounting fees (when they OrderForms to order current and prior-year • If you reimburse the seller for taxes the must be capitalized). forms and instructions. Your order should arrive seller paid for you, you can usually deduct that Revenue stamps. within 10 business days. • amount as an expense in the year of purchase. Recording fees. • don't include that amount in the basis of the Real estate taxes (if assumed for the Tax questions. If you have a tax question • property. If you didn't reimburse the seller, you seller). not answered by this publication, check must reduce your basis by the amount of those IRS.gov and How To Get Tax Help at the end of You may also have to capitalize (add to basis) taxes. this publication. certain other costs related to buying or produc- ing property. Settlement costs. Your basis includes the set- tlement fees and closing costs for buying prop- Loans with low or no interest. If you buy erty. You can't include in your basis the fees property on a time-payment plan that charges and costs for getting a loan on property. A fee little or no interest, the basis of your property is for buying property is a cost that must be paid your stated purchase price, minus the amount even if you bought the property for cash. Page 2 Publication 551 (December 2018) Page 3 of 14 Fileid: … ons/P551/201812/A/XML/Cycle03/source 12:16 - 10-Dec-2018 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. The following items are some of the settle- Example. If you buy a building for $20,000 carried on for profit. However, see Exceptions ment fees or closing costs you can include in cash and assume a mortgage of $80,000 on it, below.
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