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Useful Items
Introduction Fileid: … ons/p551/202212/a/xml/cycle03/source your stated purchase price, minus the amount
considered to be unstated interest. You gener-
You may want to see:
Basis is the amount of your investment in prop- ally have unstated interest if your interest rate is
less than the applicable federal rate. For more
erty for tax purposes. Use the basis of property Publication information, see Unstated Interest and Original
to figure depreciation, amortization, depletion, 463 463 Travel, Gift, and Car Expenses Issue Discount in Pub. 537.
and casualty losses. Also use it to figure gain or
loss on the sale or other disposition of property. 523 523 Selling Your Home Purchase of a business. When you purchase
You must keep accurate records of all items 525 525 Taxable and Nontaxable Income a trade or business, you generally purchase all
that affect the basis of property so you can assets used in the business operations, such as
make these computations. 527 527 Residential Rental Property land, buildings, and machinery. Allocate the
This publication is divided into the following 530 530 Tax Information for Homeowners price among the various assets, including any
sections. section 197 intangibles. See Allocating the Ba-
• Cost Basis 535 535 Business Expenses sis, later.
• Adjusted Basis 537 537 Installment Sales
• Basis Other Than Cost Stocks and Bonds
The basis of property you buy is usually its 544 544 Sales and Other Dispositions of
Assets
cost. You may also have to capitalize (add to
basis) certain other costs related to buying or 547 547 Casualties, Disasters, and Thefts The basis of stocks or bonds you buy is gener-
producing the property. 550 550 Investment Income and Expenses ally the purchase price plus any costs of pur-
Your original basis in property is adjusted chase, such as commissions and recording or
(increased or decreased) by certain events. If 559 559 Survivors, Executors, and transfer fees. If you get stocks or bonds other
you make improvements to the property, in- Administrators than by purchase, your basis is usually deter-
crease your basis. If you take deductions for de- 587 587 Business Use of Your Home mined by the fair market value (FMV) or the pre-
preciation or casualty losses, reduce your ba- vious owner's adjusted basis of the stock.
sis. 946 946 How To Depreciate Property
You can't determine your basis in some as- You must adjust the basis of stocks for cer-
sets by cost. This includes property you receive Form (and Instructions) tain events that occur after purchase. See
as a gift or inheritance. It also applies to prop- 706 706 United States Estate (and Stocks and Bonds in chapter 4 of Pub. 550 for
erty received in an involuntary conversion and Generation-Skipping Transfer) Tax more information on the basis of stock.
certain other circumstances. Return Identifying stock or bonds sold. If you can
Comments and suggestions. We welcome 706-A 706-A United States Additional Estate Tax adequately identify the shares of stock or the
your comments about this publication and sug- Return bonds you sold, their basis is the cost or other
gestions for future editions. 8594 8594 Asset Acquisition Statement basis of the particular shares of stock or bonds.
You can send us comments through If you buy and sell securities at various times in
IRS.gov/FormComments Or, you can write to See How To Get Tax Help near the end of this varying quantities and you can't adequately
the Internal Revenue Service, Tax Forms and publication for information about getting publi- identify the shares you sell, the basis of the se-
Publications, 1111 Constitution Ave. NW, cations and forms. curities you sell is the basis of the securities you
IR-6526, Washington, DC 20224. acquired first. For more information about iden-
tifying securities you sell, see Stocks and
Although we can’t respond individually to
each comment received, we do appreciate your Cost Basis Bonds under Basis of Investment Property in
feedback and will consider your comments and chapter 4 of Pub. 550.
suggestions as we revise our tax forms, instruc- Mutual fund shares. If you sell mutual fund
tions, and publications. Don’t send tax ques- Terms you may need to know shares acquired at different times and prices,
tions, tax returns, or payments to the above ad- (see Glossary): you can choose to use an average basis. For
dress. Business assets more information, see Pub. 550.
Getting answers to your tax questions. Real property
If you have a tax question not answered by this Unstated interest Real Property
publication or the How To Get Tax Help section
at the end of this publication, go to the IRS In-
teractive Tax Assistant page at IRS.gov/ The basis of property you buy is usually its cost. Real property, also called real estate, is land
Help/ITA where you can find topics by using the The cost is the amount you pay in cash, debt and generally anything built on or attached to it.
search feature or viewing the categories listed. obligations, other property, or services. Your If you buy real property, certain fees and other
expenses become part of your cost basis in the
Getting tax forms, instructions, and pub­ cost also includes amounts you pay for the fol- property.
lications. Go to IRS.gov/Forms to download lowing items.
current and prior-year forms, instructions, and • Sales tax. Real estate taxes. If you pay real estate taxes
publications. • Freight. the seller owed on real property you bought,
• Installation and testing.
Ordering tax forms, instructions, and • Excise taxes. and the seller didn't reimburse you, treat those
taxes as part of your basis. You can't deduct
publications. Go to IRS.gov/OrderForms to • Legal and accounting fees (when they them as taxes.
order current forms, instructions, and publica- must be capitalized). If you reimburse the seller for taxes the
tions; call 800-829-3676 to order prior-year • Revenue stamps. seller paid for you, you can usually deduct that
forms and instructions. The IRS will process • Recording fees. amount as an expense in the year of purchase.
your order for forms and publications as soon • Real estate taxes (if assumed for the Don't include that amount in the basis of the
as possible. Don’t resubmit requests you’ve al- seller). property. If you didn't reimburse the seller, you
ready sent us. You can get forms and publica- You may also have to capitalize (add to basis) must reduce your basis by the amount of those
tions faster online. certain other costs related to buying or produc- taxes.
ing property.
Settlement costs. Your basis includes the set-
Loans with low or no interest. If you buy tlement fees and closing costs for buying prop-
property on a time-payment plan that charges erty. You can't include in your basis the fees
little or no interest, the basis of your property is and costs for getting a loan on property. A fee
Page 2 Publication 551 (December 2022)