Publication Date - July 2006

NOTE: This guide is current through the publication date. Since changes may have occurred after the publication date that would affect the accuracy of this document, no guarantees are made concerning the technical accuracy after the publication date.

Chapter 2/ Table of Contents / Chapter 4
Tax Code, Regulations and Official Guidance Search

Chapter Three - Basis on Farm Assets

• Introduction
• Like Kind Exchanges
• Gifted Property
• Inherited Property
• Farm Sale
• Cost Recovery - Depreciation and Depletion

Introduction

Basis is the amount a property owner can recover as a lump sum when the property is sold, or can charge off as annual deductions through depreciation. The original basis can be changed through capital improvements or by claiming deductions such as depreciation and casualty losses.

Basis equals cost of purchase. This includes all expenses incurred such as freight, installation and other expenses incurred in securing the property and preparing it for service. When land is purchased, basis includes the purchase price plus legal and recording fees, abstract fees, surveys, and payments for permanent improvements.

Basis is determined by how the property was purchased. Property can be purchased, acquired in a trade, received as a gift, or inherited.