The cost basis of property is usually the amount you paid to buy it. Adjusted basis is found by adjusting the cost basis up or down to reflect the current state of the property. Capital gains or losses are usually determined by using adjusted basis instead of cost basis.
The basis is increased by improvements to the property. For example, a new roof or addition will increase the basis of a house. Legal fees and zoning costs can also increase property basis.
Property basis will usually go down if there's any casualty or theft loss. Easements and deductions previously allowed for amortization, depreciation and depletion will also reduce the basis of property.
Capital losses can't be deducted on personal use property. However, they can be deducted on investment property.
You can't deduct an unlimited amount of capital losses on your tax return. You can only deduct up to $3,000 a year. You can carry over losses to the next year if you reach the deduction limit.
Most people can exclude the gain from a home. However, in order to do this, you must meet the ownership and use tests. To pass the ownership test, you must have owned your house for at least 2 years during the last 5 years. The 2 years don't have to be in a row.
To pass the use test, you must have lived in the house for at least 2 years during the last 5 years. The 2 years also don't have to be in a row.
If you pass these tests, a gain up to $250,000 can be excluded. If you're married and filing jointly, you can exclude up to $500,000.
No, you can't deduct the loss. It's considered a nondeductible personal loss.
You're required to report capital gains on Form 1040, Schedule D.
No, there's no capital gain. The monetary worth of your stock stayed the same. It only increased in number, not in value.
Yes, you have to report any capital gains from your gift. However, the basis for the property is more difficult to determine. You have to figure out the fair market value of the property when it was given to you and the adjusted basis to the donor to know your property basis. For more details, look at IRS Publication 551, Basis of Assets.