Adjusted Basis

What is the adjusted basis?

Before figuring gain or loss on a sale, exchange or other disposition of property or figuring allowable depreciation, or amortization, you must make certain adjustments (increases or decreases) to the basis of the property. The result of these adjustments to the basis is the adjusted basis.

How to adjust the basis of property?

Increase the basis of any property by all items properly added to a capital account. This includes the cost of any improvements having a useful life of more than 1 year and amounts spent after a casualty to restore the damaged property.

Some items added to the basis of property are:

• the cost of extending utility service lines to the property,

• Legal fees such as the cost of defending and perfecting title,

• Legal fees for obtaining a decease in an assessment levied against property to pay for local improvements,

• Zoning costs

Add the cost of improvements to your basis in the property if they increase the value of the property, lengthen its life or adapt it to a different use.

For example, improvements include putting a recreation room in an unfinished basement, adding another bathroom or bedroom, putting up a fence, putting in new plumbing or wiring, installing a new roof, or paving your driveway. Add assessments for improvements, such as streets and sidewalks, to the basis of the property assessed if they increase the value of the property.