Updated October 21, 2026. Quick answer: Publication 551 is the IRS guide to the basis of property, the number used to figure depreciation, casualty losses and gain or loss on a sale. The IRS title carries the edition label 12/2025, and the page says revised December 2025. It is divided into cost basis, adjusted basis, and basis other than cost.
Quick reference
| Item | As the IRS publication states it |
|---|---|
| Small businesses exempt from uniform capitalization if average annual gross receipts are at or under (Uniform Capitalization Rules) | $31 million |
| Gross receipts averaging period (Uniform Capitalization Rules) | 3 preceding tax years |
| Example of a purchased building with an assumed mortgage, basis (Cost Basis) | $100,000 |
| Related persons, like-kind exchange disposed of within (Like-Kind Exchanges of Real Property) | 2 years |
| Appreciated property given to a decedent within (Inherited Property) | 1 year |
What the publication covers
The introduction says “Basis is the amount of your investment in property for tax purposes.” It continues “Use the basis of property to figure depreciation, amortization, depletion, and casualty losses.” The edition line on the IRS page reads “Revised: December 2025”.
On records, the introduction says “You must keep accurate records of all items that affect the basis of property so you can make these computations.”
Parts of the publication in plain words
- Cost Basis: stocks and bonds, real property (taxes, settlement costs, points), business assets, uniform capitalization rules, intangible assets, and allocating the basis among a group of assets.
- Adjusted Basis: increases to basis, decreases to basis, and examples of adjustments.
- Basis Other Than Cost: property received for services, bargain purchases, restricted property, taxable and nontaxable exchanges, property from a spouse, gifts, inherited property, community property, property from a trust, and property changed to business or rental use.
The three-part split is described this way: “The basis of property you buy is usually its cost.” and “If you make improvements to the property, increase your basis.” and “If you take deductions for depreciation or casualty losses, reduce your basis.”
Tables inside it
- Table 1, Examples of Increases and Decreases to Basis
On this site, Form 1099-B boxes 1d and 1e covers the cost basis a broker reports.
The figures that matter
On a purchase with an assumed mortgage, the example reads “If you buy a building for $20,000 cash and assume a mortgage of $80,000 on it, your basis is $100,000.”
On the uniform capitalization rules, the publication says “For tax years beginning in 2025, you’re not subject to the uniform capitalization rules if your average annual gross receipts are $31 million or less for the 3 preceding tax years and you’re not a tax shelter.”
For gifts, the source says “If the FMV of the property is equal to or greater than the donor’s adjusted basis, your basis is the donor’s adjusted basis at the time you received the gift.”
For inherited property, “Generally, the basis of property inherited from a decedent is one of the following.” The first item is “The FMV of the property at the date of the individual’s death.”
The inherited property rule has an exception: “The above rule doesn’t apply to appreciated property you receive from a decedent if you or your spouse originally gave the property to the decedent within 1 year before the decedent’s death.”
For like-kind exchanges between related persons, the source says “If a like-kind exchange takes place directly or indirectly between related persons and either party disposes of the property within 2 years after the exchange, the exchange no longer qualifies for like-kind exchange treatment.”
Where it points elsewhere
The publication lists related publications, including Pub. 523 on selling your home, Pub. 544 on sales and other dispositions of assets, and Pub. 547 on casualties, disasters and thefts. On this site, see Form 8971 for the estate tax value reported to beneficiaries and community property double step up.
Where this comes from
The IRS page About Publication 551 opens with “Publication 551 discusses basis, the amount of your investment in property for tax purposes.” It links the PDF and eBook editions and the earlier revisions of the publication.
This page describes the web edition of Publication 551 (12/2025), Basis of Assets, as served on irs.gov on October 21, 2026. The IRS can revise a publication after we read it, and the IRS page controls. General information, not tax or legal advice.
Common mistakes
- Using cost as the basis for everything. The publication says “You can’t determine your basis in some assets by cost.”
- Using one basis for a gift when the value has dropped. The publication says “Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustment to basis while you held the property (see Adjusted Basis, earlier).”
- Leaving out improvements. The publication says “If you make improvements to the property, increase your basis.”
- Treating basis as a sale topic only. The introduction ties it to depreciation, amortization, depletion, and casualty losses as well.
Related: IRS publications by number, Form 8949, Schedule D (Form 1040), Form 8971, Community property double step up, A step up can also be a step down, Carryover basis in divorce, and Do you pay tax on gifts received.
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Answer againSources
- IRS, Publication 551 (12/2025), Basis of Assets (irs.gov): https://www.irs.gov/publications/p551
- IRS, About Publication 551, Basis of Assets (irs.gov): https://www.irs.gov/forms-pubs/about-publication-551
Read from the IRS pages linked above on October 21, 2026. General information, not tax or legal advice. The IRS publication and the instructions for your own form control, and your own facts decide the outcome.