topic Cost Basis in Deductions & credits

Cost Basis

chaslou — Wed, 12 Feb 2020 18:06:20 GMT

Inherited property; Assessed value $161,000. Donated conservation easement 12 years later; assessed value before donation was $200,000.00; after donation: $110,000.00. What do I show for cost basis on Form 8283, line 5(f)? Also for Schedule D if I sell property?

Re: Cost Basis

KurtL1 — Wed, 12 Feb 2020 20:29:42 GMT

The basis of the property would be the Inherited basis reduced by the percentage of the square footage donated times the inherited basis of the property.

Inherited Basis - (Sq. Footage % of donated property x Inherited basis)

Re: Cost Basis

chaslou — Thu, 13 Feb 2020 15:55:06 GMT

I didn't donate the property, only a conservation easement. Assessed value after donation is $110,000.00. Does that become my adjusted cost basis?

Re: Cost Basis

KurtL1 — Thu, 13 Feb 2020 21:09:13 GMT

The assessed value of the property is not your new adjusted basis. This example could help explain the process.

Inherited Property Assessed Value at the time it was inherited - $161,000

Total square footage of the Property - 3,500

Square footage of donated easement - 1,050.

New adjusted basis after the donation:

Square footage of donation / total square footage = Percentage donated:

1,050 / 3,500 = 30%

Percentage donated x Inherited basis = basis of donated easement

30% x $161,000 = $48,300

Original basis of your property - Basis of donated easement = New adjusted basis of your property

$161,000 - $48,300 = $112,700

Re: Cost Basis

chaslou — Thu, 13 Feb 2020 22:32:07 GMT

I understand your calculation, but that seems to indicate I have given up ownership of the donated property. In my case, I still own the property and have use of it and can sell it. However, I cannot subdivide it or build on it. I can still farm it, cut timber etc. In my case, I have placed an easement 22.3 acres of a 24.3 acre parcel. The value of the parcel dropped $90,000.00 when the easement was executed. Maybe my original cost basis should drop by a proportional amount?