What is my asset's original cost or basis?

The original basis of property is usually the price you paid to buy the property. This includes the amount you paid in cash, debt obligations, other property, or services. Your basis also includes amounts you paid for the following items:

• Sales tax
• Freight
• Installation and testing
• Excise taxes
• Legal and accounting fees (when they must be capitalized),
• Revenue stamps
• Recording fees
• Real estate taxes (if assumed for the seller)

You may also have to capitalize (add to basis) certain other costs related to buying or producing property.

Your original basis is almost always going to be more than zero. If you have the very rare situation where your asset's original basis is zero, you can create a depreciable asset record for the asset and enter $0 for the asset's Original Cost or Basis.

If you hold property for personal use and then change it to business use or use it to produce rent, you must figure its basis for depreciation. An example of changing property held for personal use to business use would be renting out your former main home. The basis for depreciation is the lesser of the following amounts:

• The FMV of the property on the date of the change, or
• Your adjusted basis on the date of the change."

For more information, see IRS Publication 551 .