Per Diem Rates from the U.S. General Services Administration
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Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").
What is Basis?
It's important to know your basis in property because it's used to determine depreciation deductions for the property and computing gain or loss when the property is disposed of. The original value assigned to property when first acquired is referred to as its unadjusted basis.
Unadjusted Basis
The unadjusted basis (original cost) of property you buy generally includes the following:
- Cash you pay
- Debt obligations you assume
- Fair market value of property or services you provide
- Sales tax
- Freight
- Installation and testing
- Excise taxes
- Commissions (i.e. real estate purchases)
- Transfer taxes to acquire real estate
- Legal and accounting fees
- Survey costs
- Revenue stamps
- Title insurance
- Recording fees
- Real estate taxes (if assumed for the seller)
Adjusted Basis
Increasing or decreasing the unadjusted basis of property results in its adjusted basis.
Examples of increases to basis to your personal residence and business property include:
Capital improvements, such as:
- Adding an addition
- Replacing an entire roof
- Paving the driveway
- Installing central air conditioning
- Rewiring the structure
Assessments for local improvements:
- Water connections
- Sidewalks
- Roads
Casualty losses:
- Restoring damaged property
Legal fees:
- Cost of defending and perfecting a title
- Zoning costs
Examples of decreases to basis include:
- Depreciation
- First-year expensing deduction (Section 179 deduction)
- Nontaxable S corporation distributions (reduces stock basis)
- Exclusion from income of subsidies for energy conservation measures
- Casualty or theft loss deductions and insurance reimbursements
- Certain vehicle credits
Basis of Inherited Property
Your basis in property you inherit is its Fair Market Value (FMV) on the date of the decedent's death or alternate valuation date after the date of death (the six-month anniversary of death), if the executor elects to us this date, regardless of when you actually acquired the property.
By law, inherited property automatically gets a holding period of more than one year.
If you sell inherited property, you report the transaction on Schedule D to report gain or loss. The word Inherited is entered in column (b) as the date of acquisition.
Stepped up basis:
The advantage of leaving appreciated property to an heir is that, the heir's basis for the inherited property is the fair market value at the decedent's death. As a result, income tax on the appreciation in value during the decedent's life is completely avoided.
For example, if the market value of the property went from $20,000 to $30,000 while the decedent owned the property, the $10,000 increase in value is tax free to you, as the heir.
Your basis would be the fair market value of $30,000, the value at the date of death of the decedent (or alternate valuation date, if this was elected).
If you were to sell the property for $30,000, you would have no gain or loss (proceeds $30,000 minus your basis of $30,000).
If you sold the property for $35,000, you would have a long-term gain of $5,000 ($35,000 minus your basis of $30,000).
If you sold the property for $25,000 you would have a capital loss of $5,000 ($25,000 minus your basis of 30,000).