Adjusted Basis - Increases and Decreases

Computing a property's adjusted basis is not limited to decreases due to depreciation, amortization, and depletion. A property's basis may also have to be increased or decreased by certain items depending on the type of property and its history. Below is a list of possible increases and decreases that affect a property's basis, per IRS Publication 551 page 5:

The following items increase the basis of property:

  • The cost of extending utility service lines to the property.
  • Impact fees.
  • Legal fees, such as the cost of defending and perfecting title.
  • Legal fees for obtaining a decrease in an assessment levied against property to pay for local improvements.
  • Zoning costs.
  • The capitalized value of a redeemable ground rent.

The following are some items that reduce the basis of property:

  • Section 179 deduction.
  • Nontaxable corporate distributions.
  • Deductions previously allowed (or allowable) for amortization, depreciation, and depletion.
  • Exclusion of subsidies for energy conservation measures.
  • Certain vehicle credits.
  • Residential energy credits.
  • Postponed gain from sale of home.
  • Investment credit (part or all) taken.
  • Casualty and theft losses and insurance reimbursements.
  • Certain canceled debt excluded from income.
  • Rebates treated as adjustments to the sales price.
  • Easements.
  • Gas-guzzler tax.
  • Adoption tax benefits.
  • Credit for employer-provided child care.
  • Partial disposition of MACRS property, whether you elect to recognize the partial disposition or are required to recognize it.

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