• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Home
  • Who We Are
    • About Our Firm
    • Career Opportunities
    • Meet Our Team
    • News and Events
    • Seniors Rock Radio
  • Estate Planning
    • Elder Law & Medicaid Planning
    • Estate Planning Services
    • Estate and Gift Tax Figures
    • Family Farm Succession Planning
    • Family-Owned Businesses & Farms
    • IRA Planning
      • Planning With An IRA
      • IRA & Retirement Planning
    • Legacy Planning Services
    • LGBTQ Estate Planning
    • Pet Planning
    • SECURE Act
    • Special Needs Planning
    • Trust Administration & Probate
    • Young Families
  • Elder Law
    • Coping With Alzheimer’s
    • Elder Law Resources
      • Elder Law Reports
    • Guardianship & Conservatorship
    • Hospice Care
    • Veteran’s Benefits
  • Resources
    • Definitions
    • FREE Estate Planning Worksheet
    • FREE Webinars
    • Estate Administration Legal Guide
    • Estate Planning Articles
      • Questions for Your Estate Planning Attorney Before Creating Your First Estate Plan
      • How to Create Your First Estate Plan in 2022
      • How to Choose a Guardian for Your Child
      • Address These Three Questions in Your First Estate Plan
    • Estate and Gift Tax Figures
    • Frequently Asked Questions
      • Adult Guardianship
      • Alzheimer’s Care
      • Custodial Accounts for Minors
      • Estate Planning
      • FAQs for Families Without an Estate Plan
      • Elder Law
      • IRA & Retirement Planning
      • Is Your Estate Plan Outdated?
      • Legacy Planning
      • LGBTQ Estate Planning
      • Medicare and Social Security
      • Probate
      • Probate Avoidance
      • Irrevocable Trusts
      • Trust Administration
      • Trusts
      • Veterans’ Benefits
      • Wills
    • Newsletters
    • Reports
      • Advanced Estate Planning
      • Basic Estate Planning
      • Estate Planning for Niches
      • Trust Administration
    • Top Estate Planning Techniques
  • Reviews
    • Our Reviews
    • Review Us
  • Medicaid Planning
    • Medicaid Planning
    • Emergency Medicaid & Nursing Home Planning
    • Medicaid Frequently Asked Questions
    • Medicaid Resources
  • Blog
  • Contact Us

Law Office of Michael Robinson, P.C.

Estate Planning Services in Rochester, New York and the Finger Lakes Area

Connect With Us Today

(585) 374-5210
Law Pay Button
Attend a Free Webinar
Home » Estate Planning Articles » A Quick Guide for Basis

A Quick Guide for Basis

April 30, 2012

Compliments of Our Law Firm,
By: The American Academy of Estate Planning Attorneys

The word basis can have a lot of different meanings. When we’re talking about taxes, though, it has one very specific definition. Basis is the yardstick used by the Internal Revenue Service to determine how much tax you pay on an asset when you sell or otherwise dispose of it. Sell property for more than your basis, and you have a gain that might result in a tax bill. Sell property for less than your basis, and you may be able to claim a tax loss.

To determine your basis in an asset, you have to go back to the point at which you first acquired it. If you bought the property, your basis is the amount you paid for it. Your basis can increase if you make certain qualifying improvements to the property, or it can decrease along with tax depreciation of the property.

Property you receive as a gift comes to you with the donor’s basis. Imagine your Uncle Joe gives you the beach cottage he bought for $20,000 back in 1974. If you decide to sell the property, you’ll pay tax on the amount by which your selling price exceeds the amount Uncle Joe originally paid for it (plus certain amounts spent on improvements).

Inherited property is subject to special rules. It gets what is called a step-up in basis. Imagine you inherit Uncle Joe’s beach cottage after his death rather than receiving it as a gift during his lifetime. In this situation, your basis in the property is not the amount your uncle originally paid for it. Instead, your basis is normally the value of the property at the date of Uncle Joe’s death. So, if the property is worth $200,000 when Uncle Joe passes away, this is your basis, rather than the $20,000 he originally paid for it.

An understanding of basis can help you decide which assets to gift during your lifetime, and which to wait and distribute using your Will or Trust. It makes sense to gift property with a basis that is close to its fair market value. This minimizes the recipient’s potential tax bill should he or she decide to sell the asset.

On the other hand, you might want to hold on to property that has a basis much smaller than its fair market value. Transferring this property after you are gone means closing the gap between basis and fair market value, and could result in significant tax savings to the recipient.

An experienced estate planning attorney can help you evaluate the potential tax issues facing you and your beneficiaries and structure a plan that best accomplishes your goals.

Primary Sidebar

Law Office of Michael Robinson, P.C.

Free Estate Planning Worksheet

There's a lot that goes into setting up a comprehensive estate plan, but with our FREE worksheet, you'll be one step closer to getting yourself and your family on the path to a secure and happy future.
  • This field is for validation purposes and should be left unchanged.

Follow Us

  • Facebook
  • Twitter
  • Linkdin
  • Youtube

TESTIMONIALS

News & Events

Seniors Rock Radio Show Recording 5-1-21

https://drive.google.com/file/d/1U7UkQbEGy-xY7XFAXvX9Qz7pKSVDVV3D/view?usp=drive_web   Read more →

Pittsford Office

1163 Pittsford-Victor Road, Suite 120 (Powder Mill Office Park)
Pittsford, NY 14534-3817
Phone: (585) 374-5210
Fax: (585) 485-0394

See Larger Map Get Directions

Map

mrobinson_sidbr_map

Footer

  • Advantages of Working With Our Firm
  • About The American Academy
  • Disclaimer
  • Privacy Policy
  • Sitemap
  • Contact Us

Connect with Us

  • Facebook
  • Twitter
  • Linkdin
  • Youtube
robinson law logo

The Law Office of Michael Robinson, P.C.

Attorney Advertisement


© 2023 American Academy of Estate Planning Attorneys, Inc.