1. Exchange
1.1. Original Basis = FMV of property received
2. Gifts
2.1. Original Basis
2.1.1. Gains: Adjusted Basis of Donor on date of gift
2.1.2. Losses: The LOWER of Adj. Basis of Donor OR FMV on date of gift
2.1.3. No Effect: Basis for Loss < Amount Realized < Basis for Gain
2.1.4. Depreciation: Donor's Adj. Basis
3. Purchase
3.1. Original Basis = Cost
4. Inheritance
4.1. Originl Basis
4.1.1. FMV on the date of death
4.1.2. Acquisition date (if sooner)
4.1.3. FMV on the Alternate Valuation date
4.1.3.1. Executor must elect the Alternate date
4.1.3.2. Filing an Estate Tax return is required (value over
5. Other Transactions
5.1. SeveralLots of Stock
5.1.1. Specific identification
5.1.2. FIFO method
5.2. Stock Dividends
5.2.1. non-taxable
5.2.2. Original Basis for existing shares is allocated to the new total
5.3. Death Bed Gift
5.3.1. Deceased received a gift w/i year of death AND willed the property to the original donor
5.3.1.1. If gift appreciated in value, original basis is the Adj. Basis on date of original gift
5.4. Property Converted
5.4.1. Basis for Gain: Adj. Basis on conversion date
5.4.2. Basis for Loss: LOWER of Adj. Basis or FMV on date of conversion
5.4.3. Basis for Depreciation: see Basis for Loss
6. Holding Period
6.1. Purchases and Exchanges
6.1.1. Short Term < 1 year from transaction date
6.1.2. Long Term > 1 year from transaction date
6.2. Gifts
6.2.1. If Adj. Basis is used - holding carries over
6.2.2. If FMV is used - holding period starts on gift date
6.3. Inheritance
6.3.1. Automatically Long Term
7. Gain or Loss = Amount Realized - Adjusted Basis
7.1. Amount Realized
7.1.1. The value of everything received in a transaction
7.1.2. Cash+FMV of Property Reveived+ FMV Services Received+Any Assumed Liabilities-Selling Expenses
7.1.3. Include Property Taxes paid by the buyer (Real Estate)
7.2. Adjusted Basis
7.2.1. Original Basis
7.2.2. +Captial Additions
7.2.3. +Capital Recoveries
7.2.3.1. Depreciation, amortization, depreciation, casualty losses, insurance recoveries
8. Disallowed Losses
8.1. Personal Use Assets
8.2. Unrealized decline in value (not transaction)
8.3. Loss from Related Party Transaction
8.3.1. Family members, stock holders with majority ownership, Partners with majority ownership
8.3.2. Unrecognized loss is carried over to recipient to offset any future gains
8.4. Wash Sale
8.4.1. Sale of securities at a loss and re-acquisition of the same security w/i 30 days
8.4.2. Basis for Remaining Stock: Cost + Disallowed Loss