Cost Basis

[chaslou]

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?

[KurtL1]

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)

[chaslou]

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?

[KurtL1]

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

[chaslou]

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?