Other Basis

When I cannot use cost basis, how to calculate the basis?

There are many times when you cannot use cost as basis. For example, cost is not used as a basis in the acquisition of property in any other way than purchasing it. How you acquired the property becomes the main factor in determining its basis. In these cases, the Fair Market Value or FMV or the adjusted basis of the property may be used.

What is fair market value (FMV)?

Fair market value is the price at which the property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. Sales of similar property , on or about the same date, may be helpful in figuring the property's fair market value.

When can I not use the cost basis as the basis?

Some examples of transactions in which you cannot use cost as a basis band must use another type of basis are:

• receiving property for your services

   

• taxable exchanges

   

• Involuntary exchanges

   

• Nontaxable exchanges including:

   

  • like kind exchanges,

     

  • property received as a gift,

     

  • property transferred from a spouse,

     

  • inherited property and

     

  • property changed to business or rental use.