Overview Whenever property is disposed of by sale, gift, trade or inheritance, a potential tax consequence exists. The gain or loss from the disposition of the property is determined by comparing the sale price to the adjusted basis in the property. The original basis of the property is adjusted by deductions, such as depreciation, or by additions, such as capital improvements.
Adjusted basis is the new basis after additions or deductions to the original basis have been made.
This NebFact will address how basis is initially determined by looking at each of the major ways of acquiring property. It will also briefly define adjusted basis. This NebFact is intended to be used as a supplementary aid in the publications that deal with estate planning, though the methods are not limited to use in estate planning. The basis of purchased property is the purchase price plus payments such as freight, installation, option premiums paid, and other expenses of securing the property and preparing it for service. The basis of land includes the purchase price plus legal and recording fees, abstract fees, survey costs, and payments for nondepreciable permanent improvements.