Basis and Recordkeeping

Basis is the amount of your investment in property for tax purposes. The basis of property you buy is usually its cost. There are special rules for certain kinds of property, such as inherited property. You need to know your basis to figure any gain or loss on the sale or other disposition of the property. You must keep accurate records that show the basis and, if applicable, adjusted basis of your property. Your records should show the purchase price, including commissions; increases to basis, such as the cost of improvements; and decreases to basis, such as depreciation, nondividend distributions on stock, and stock splits.

If you received Schedule A (Form 8971) from an executor of an estate or other person required to file an estate tax return, you may be required to report a basis consistent with the estate tax value of the property.

For more information on consistent basis reporting and basis generally, see Column (e)—Cost or Other Basis in the Instructions for Form 8949, and the following publications.

Pub. 551.

Pub. 550.