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1040ez Instructions

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1040ez Instructions

1040ez instructions Publication 541 - Main Content Table of Contents Forming a PartnershipOrganizations Classified as Partnerships Family Partnership Partnership Agreement Terminating a PartnershipIRS e-file (Electronic Filing) Exclusion From Partnership Rules Partnership Return (Form 1065) Partnership DistributionsSubstantially appreciated inventory items. 1040ez instructions Partner's Gain or Loss Partner's Basis for Distributed Property Transactions Between Partnership and PartnersGuaranteed Payments Sale or Exchange of Property Contribution of Property Contribution of Services Basis of Partner's InterestAdjusted Basis Effect of Partnership Liabilities Disposition of Partner's InterestSale, Exchange, or Other Transfer Payments for Unrealized Receivables and Inventory Items Liquidation at Partner's Retirement or Death Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)Partnership Item. 1040ez instructions Small Partnerships and the Small Partnership Exception Small Partnership TEFRA Election Role of Tax Matters Partner (TMP) in TEFRA Proceedings Statute of Limitations and TEFRA Amended Returns and Administrative Adjustment Requests (AARs) How To Get Tax Help Forming a Partnership The following sections contain general information about partnerships. 1040ez instructions Organizations Classified as Partnerships An unincorporated organization with two or more members is generally classified as a partnership for federal tax purposes if its members carry on a trade, business, financial operation, or venture and divide its profits. 1040ez instructions However, a joint undertaking merely to share expenses is not a partnership. 1040ez instructions For example, co-ownership of property maintained and rented or leased is not a partnership unless the co-owners provide services to the tenants. 1040ez instructions The rules you must use to determine whether an organization is classified as a partnership changed for organizations formed after 1996. 1040ez instructions Organizations formed after 1996. 1040ez instructions   An organization formed after 1996 is classified as a partnership for federal tax purposes if it has two or more members and it is none of the following. 1040ez instructions An organization formed under a federal or state law that refers to it as incorporated or as a corporation, body corporate, or body politic. 1040ez instructions An organization formed under a state law that refers to it as a joint-stock company or joint-stock association. 1040ez instructions An insurance company. 1040ez instructions Certain banks. 1040ez instructions An organization wholly owned by a state, local, or foreign government. 1040ez instructions An organization specifically required to be taxed as a corporation by the Internal Revenue Code (for example, certain publicly traded partnerships). 1040ez instructions Certain foreign organizations identified in section 301. 1040ez instructions 7701-2(b)(8) of the regulations. 1040ez instructions A tax-exempt organization. 1040ez instructions A real estate investment trust. 1040ez instructions An organization classified as a trust under section 301. 1040ez instructions 7701-4 of the regulations or otherwise subject to special treatment under the Internal Revenue Code. 1040ez instructions Any other organization that elects to be classified as a corporation by filing Form 8832. 1040ez instructions For more information, see the instructions for Form 8832. 1040ez instructions Limited liability company. 1040ez instructions   A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. 1040ez instructions Unlike a partnership, none of the members of an LLC are personally liable for its debts. 1040ez instructions An LLC may be classified for federal income tax purposes as either a partnership, a corporation, or an entity disregarded as an entity separate from its owner by applying the rules in Regulations section 301. 1040ez instructions 7701-3. 1040ez instructions See Form 8832 and section 301. 1040ez instructions 7701-3 of the regulations for more details. 1040ez instructions A domestic LLC with at least two members that does not file Form 8832 is classified as a partnership for federal income tax purposes. 1040ez instructions Organizations formed before 1997. 1040ez instructions   An organization formed before 1997 and classified as a partnership under the old rules will generally continue to be classified as a partnership as long as the organization has at least two members and does not elect to be classified as a corporation by filing Form 8832. 1040ez instructions Community property. 1040ez instructions    Spouses who own a qualified entity (defined later) can choose to classify the entity as a partnership for federal tax purposes by filing the appropriate partnership tax returns. 1040ez instructions They can choose to classify the entity as a sole proprietorship by filing a Schedule C (Form 1040) listing one spouse as the sole proprietor. 1040ez instructions A change in reporting position will be treated for federal tax purposes as a conversion of the entity. 1040ez instructions   A qualified entity is a business entity that meets all the following requirements. 1040ez instructions The business entity is wholly owned by spouses as community property under the laws of a state, a foreign country, or a possession of the United States. 1040ez instructions No person other than one or both spouses would be considered an owner for federal tax purposes. 1040ez instructions The business entity is not treated as a corporation. 1040ez instructions   For more information about community property, see Publication 555, Community Property. 1040ez instructions Publication 555 discusses the community property laws of Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 1040ez instructions Family Partnership Members of a family can be partners. 1040ez instructions However, family members (or any other person) will be recognized as partners only if one of the following requirements is met. 1040ez instructions If capital is a material income-producing factor, they acquired their capital interest in a bona fide transaction (even if by gift or purchase from another family member), actually own the partnership interest, and actually control the interest. 1040ez instructions If capital is not a material income-producing factor, they joined together in good faith to conduct a business. 1040ez instructions They agreed that contributions of each entitle them to a share in the profits, and some capital or service has been (or is) provided by each partner. 1040ez instructions Capital is material. 1040ez instructions   Capital is a material income-producing factor if a substantial part of the gross income of the business comes from the use of capital. 1040ez instructions Capital is ordinarily an income-producing factor if the operation of the business requires substantial inventories or investments in plants, machinery, or equipment. 1040ez instructions Capital is not material. 1040ez instructions   In general, capital is not a material income-producing factor if the income of the business consists principally of fees, commissions, or other compensation for personal services performed by members or employees of the partnership. 1040ez instructions Capital interest. 1040ez instructions   A capital interest in a partnership is an interest in its assets that is distributable to the owner of the interest in either of the following situations. 1040ez instructions The owner withdraws from the partnership. 1040ez instructions The partnership liquidates. 1040ez instructions   The mere right to share in earnings and profits is not a capital interest in the partnership. 1040ez instructions Gift of capital interest. 1040ez instructions   If a family member (or any other person) receives a gift of a capital interest in a partnership in which capital is a material income-producing factor, the donee's distributive share of partnership income is subject to both of the following restrictions. 1040ez instructions It must be figured by reducing the partnership income by reasonable compensation for services the donor renders to the partnership. 1040ez instructions The donee's distributive share of partnership income attributable to donated capital must not be proportionately greater than the donor's distributive share attributable to the donor's capital. 1040ez instructions Purchase. 1040ez instructions   For purposes of determining a partner's distributive share, an interest purchased by one family member from another family member is considered a gift from the seller. 1040ez instructions The fair market value of the purchased interest is considered donated capital. 1040ez instructions For this purpose, members of a family include only spouses, ancestors, and lineal descendants (or a trust for the primary benefit of those persons). 1040ez instructions Example. 1040ez instructions A father sold 50% of his business to his son. 1040ez instructions The resulting partnership had a profit of $60,000. 1040ez instructions Capital is a material income-producing factor. 1040ez instructions The father performed services worth $24,000, which is reasonable compensation, and the son performed no services. 1040ez instructions The $24,000 must be allocated to the father as compensation. 1040ez instructions Of the remaining $36,000 of profit due to capital, at least 50%, or $18,000, must be allocated to the father since he owns a 50% capital interest. 1040ez instructions The son's share of partnership profit cannot be more than $18,000. 1040ez instructions Business owned and operated by spouses. 1040ez instructions   If spouses carry on a business together and share in the profits and losses, they may be partners whether or not they have a formal partnership agreement. 1040ez instructions If so, they should report income or loss from the business on Form 1065. 1040ez instructions They should not report the income on a Schedule C (Form 1040) in the name of one spouse as a sole proprietor. 1040ez instructions However, the spouses can elect not to treat the joint venture as a partnership by making a Qualified Joint Venture Election. 1040ez instructions Qualified Joint Venture Election. 1040ez instructions   A "qualified joint venture," whose only members are spouses filing a joint return, can elect not to be treated as a partnership for federal tax purposes. 1040ez instructions A qualified joint venture conducts a trade or business where: the only members of the joint venture are spouses filing jointly; both spouses elect not to be treated as a partnership; both spouses materially participate in the trade or business (see Passive Activity Limitations in the Instructions for Form 1065 for a definition of material participation); and the business is co-owned by both spouses and is not held in the name of a state law entity such as a partnership or LLC. 1040ez instructions   Under this election, a qualified joint venture conducted by spouses who file a joint return is not treated as a partnership for federal tax purposes and therefore does not have a Form 1065 filing requirement. 1040ez instructions All items of income, gain, deduction, loss, and credit are divided between the spouses based on their respective interests in the venture. 1040ez instructions Each spouse takes into account his or her respective share of these items as a sole proprietor. 1040ez instructions Each spouse would account for his or her respective share on the appropriate form, such as Schedule C (Form 1040). 1040ez instructions For purposes of determining net earnings from self-employment, each spouse's share of income or loss from a qualified joint venture is taken into account just as it is for federal income tax purposes (i. 1040ez instructions e. 1040ez instructions , based on their respective interests in the venture). 1040ez instructions   If the spouses do not make the election to treat their respective interests in the joint venture as sole proprietorships, each spouse should carry his or her share of the partnership income or loss from Schedule K-1 (Form 1065) to their joint or separate Form(s) 1040. 1040ez instructions Each spouse should include his or her respective share of self-employment income on a separate Schedule SE (Form 1040), Self-Employment Tax. 1040ez instructions   This generally does not increase the total tax on the return, but it does give each spouse credit for social security earnings on which retirement benefits are based. 1040ez instructions However, this may not be true if either spouse exceeds the social security tax limitation. 1040ez instructions   For more information on qualified joint ventures, go to IRS. 1040ez instructions gov, enter “Election for Qualified Joint Ventures” in the search box and select the link reading “Election for Husband and Wife Unincorporated Businesses. 1040ez instructions ” Partnership Agreement The partnership agreement includes the original agreement and any modifications. 1040ez instructions The modifications must be agreed to by all partners or adopted in any other manner provided by the partnership agreement. 1040ez instructions The agreement or modifications can be oral or written. 1040ez instructions Partners can modify the partnership agreement for a particular tax year after the close of the year but not later than the date for filing the partnership return for that year. 1040ez instructions This filing date does not include any extension of time. 1040ez instructions If the partnership agreement or any modification is silent on any matter, the provisions of local law are treated as part of the agreement. 1040ez instructions Terminating a Partnership A partnership terminates when one of the following events takes place. 1040ez instructions All its operations are discontinued and no part of any business, financial operation, or venture is continued by any of its partners in a partnership. 1040ez instructions At least 50% of the total interest in partnership capital and profits is sold or exchanged within a 12-month period, including a sale or exchange to another partner. 1040ez instructions Unlike other partnerships, an electing large partnership does not terminate on the sale or exchange of 50% or more of the partnership interests within a 12-month period. 1040ez instructions See section 1. 1040ez instructions 708-1(b) of the regulations for more information on the termination of a partnership. 1040ez instructions For special rules that apply to a merger, consolidation, or division of a partnership, see sections 1. 1040ez instructions 708-1(c) and 1. 1040ez instructions 708-1(d) of the regulations. 1040ez instructions Date of termination. 1040ez instructions   The partnership's tax year ends on the date of termination. 1040ez instructions For the event described in (1), above, the date of termination is the date the partnership completes the winding up of its affairs. 1040ez instructions For the event described in (2), above, the date of termination is the date of the sale or exchange of a partnership interest that, by itself or together with other sales or exchanges in the preceding 12 months, transfers an interest of 50% or more in both capital and profits. 1040ez instructions Short period return. 1040ez instructions   If a partnership is terminated before the end of what would otherwise be its tax year, Form 1065 must be filed for the short period, which is the period from the beginning of the tax year through the date of termination. 1040ez instructions The return is due the 15th day of the fourth month following the date of termination. 1040ez instructions See Partnership Return (Form 1065), later, for information about filing Form 1065. 1040ez instructions Conversion of partnership into limited liability company (LLC). 1040ez instructions   The conversion of a partnership into an LLC classified as a partnership for federal tax purposes does not terminate the partnership. 1040ez instructions The conversion is not a sale, exchange, or liquidation of any partnership interest; the partnership's tax year does not close; and the LLC can continue to use the partnership's taxpayer identification number. 1040ez instructions   However, the conversion may change some of the partners' bases in their partnership interests if the partnership has recourse liabilities that become nonrecourse liabilities. 1040ez instructions Because the partners share recourse and nonrecourse liabilities differently, their bases must be adjusted to reflect the new sharing ratios. 1040ez instructions If a decrease in a partner's share of liabilities exceeds the partner's basis, he or she must recognize gain on the excess. 1040ez instructions For more information, see Effect of Partnership Liabilities under Basis of Partner's Interest, later. 1040ez instructions   The same rules apply if an LLC classified as a partnership is converted into a partnership. 1040ez instructions IRS e-file (Electronic Filing) Please click here for the text description of the image. 1040ez instructions e-file Certain partnerships with more than 100 partners are required to file Form 1065, Schedules K-1, and related forms and schedules electronically (e-file). 1040ez instructions Other partnerships generally have the option to file electronically. 1040ez instructions For details about IRS e-file, see the Form 1065 instructions. 1040ez instructions Exclusion From Partnership Rules Certain partnerships that do not actively conduct a business can choose to be completely or partially excluded from being treated as partnerships for federal income tax purposes. 1040ez instructions All the partners must agree to make the choice, and the partners must be able to compute their own taxable income without computing the partnership's income. 1040ez instructions However, the partners are not exempt from the rule that limits a partner's distributive share of partnership loss to the adjusted basis of the partner's partnership interest. 1040ez instructions Nor are they exempt from the requirement of a business purpose for adopting a tax year for the partnership that differs from its required tax year. 1040ez instructions Investing partnership. 1040ez instructions   An investing partnership can be excluded if the participants in the joint purchase, retention, sale, or exchange of investment property meet all the following requirements. 1040ez instructions They own the property as co-owners. 1040ez instructions They reserve the right separately to take or dispose of their shares of any property acquired or retained. 1040ez instructions They do not actively conduct business or irrevocably authorize some person acting in a representative capacity to purchase, sell, or exchange the investment property. 1040ez instructions Each separate participant can delegate authority to purchase, sell, or exchange his or her share of the investment property for the time being for his or her account, but not for a period of more than a year. 1040ez instructions Operating agreement partnership. 1040ez instructions   An operating agreement partnership group can be excluded if the participants in the joint production, extraction, or use of property meet all the following requirements. 1040ez instructions They own the property as co-owners, either in fee or under lease or other form of contract granting exclusive operating rights. 1040ez instructions They reserve the right separately to take in kind or dispose of their shares of any property produced, extracted, or used. 1040ez instructions They do not jointly sell services or the property produced or extracted. 1040ez instructions Each separate participant can delegate authority to sell his or her share of the property produced or extracted for the time being for his or her account, but not for a period of time in excess of the minimum needs of the industry, and in no event for more than one year. 1040ez instructions However, this exclusion does not apply to an unincorporated organization one of whose principal purposes is cycling, manufacturing, or processing for persons who are not members of the organization. 1040ez instructions Electing the exclusion. 1040ez instructions   An eligible organization that wishes to be excluded from the partnership rules must make the election not later than the time for filing the partnership return for the first tax year for which exclusion is desired. 1040ez instructions This filing date includes any extension of time. 1040ez instructions See Regulations section 1. 1040ez instructions 761-2(b) for the procedures to follow. 1040ez instructions Partnership Return (Form 1065) Every partnership that engages in a trade or business or has gross income must file an information return on Form 1065 showing its income, deductions, and other required information. 1040ez instructions The partnership return must show the names and addresses of each partner and each partner's distributive share of taxable income. 1040ez instructions The return must be signed by a general partner. 1040ez instructions If a limited liability company is treated as a partnership, it must file Form 1065 and one of its members must sign the return. 1040ez instructions A partnership is not considered to engage in a trade or business, and is not required to file a Form 1065, for any tax year in which it neither receives income nor pays or incurs any expenses treated as deductions or credits for federal income tax purposes. 1040ez instructions See the Instructions for Form 1065 for more information about who must file Form 1065. 1040ez instructions Partnership Distributions Partnership distributions include the following. 1040ez instructions A withdrawal by a partner in anticipation of the current year's earnings. 1040ez instructions A distribution of the current year's or prior years' earnings not needed for working capital. 1040ez instructions A complete or partial liquidation of a partner's interest. 1040ez instructions A distribution to all partners in a complete liquidation of the partnership. 1040ez instructions A partnership distribution is not taken into account in determining the partner's distributive share of partnership income or loss. 1040ez instructions If any gain or loss from the distribution is recognized by the partner, it must be reported on his or her return for the tax year in which the distribution is received. 1040ez instructions Money or property withdrawn by a partner in anticipation of the current year's earnings is treated as a distribution received on the last day of the partnership's tax year. 1040ez instructions Effect on partner's basis. 1040ez instructions   A partner's adjusted basis in his or her partnership interest is decreased (but not below zero) by the money and adjusted basis of property distributed to the partner. 1040ez instructions See Adjusted Basis under Basis of Partner's Interest, later. 1040ez instructions Effect on partnership. 1040ez instructions   A partnership generally does not recognize any gain or loss because of distributions it makes to partners. 1040ez instructions The partnership may be able to elect to adjust the basis of its undistributed property. 1040ez instructions Certain distributions treated as a sale or exchange. 1040ez instructions   When a partnership distributes the following items, the distribution may be treated as a sale or exchange of property rather than a distribution. 1040ez instructions Unrealized receivables or substantially appreciated inventory items distributed in exchange for any part of the partner's interest in other partnership property, including money. 1040ez instructions Other property (including money) distributed in exchange for any part of a partner's interest in unrealized receivables or substantially appreciated inventory items. 1040ez instructions   See Payments for Unrealized Receivables and Inventory Items under Disposition of Partner's Interest, later. 1040ez instructions   This treatment does not apply to the following distributions. 1040ez instructions A distribution of property to the partner who contributed the property to the partnership. 1040ez instructions Payments made to a retiring partner or successor in interest of a deceased partner that are the partner's distributive share of partnership income or guaranteed payments. 1040ez instructions Substantially appreciated inventory items. 1040ez instructions   Inventory items of the partnership are considered to have appreciated substantially in value if, at the time of the distribution, their total fair market value is more than 120% of the partnership's adjusted basis for the property. 1040ez instructions However, if a principal purpose for acquiring inventory property is to avoid ordinary income treatment by reducing the appreciation to less than 120%, that property is excluded. 1040ez instructions Partner's Gain or Loss A partner generally recognizes gain on a partnership distribution only to the extent any money (and marketable securities treated as money) included in the distribution exceeds the adjusted basis of the partner's interest in the partnership. 1040ez instructions Any gain recognized is generally treated as capital gain from the sale of the partnership interest on the date of the distribution. 1040ez instructions If partnership property (other than marketable securities treated as money) is distributed to a partner, he or she generally does not recognize any gain until the sale or other disposition of the property. 1040ez instructions For exceptions to these rules, see Distribution of partner's debt and Net precontribution gain, later. 1040ez instructions Also, see Payments for Unrealized Receivables and Inventory Items under Disposition of Partner's Interest, later. 1040ez instructions Example. 1040ez instructions The adjusted basis of Jo's partnership interest is $14,000. 1040ez instructions She receives a distribution of $8,000 cash and land that has an adjusted basis of $2,000 and a fair market value of $3,000. 1040ez instructions Because the cash received does not exceed the basis of her partnership interest, Jo does not recognize any gain on the distribution. 1040ez instructions Any gain on the land will be recognized when she sells or otherwise disposes of it. 1040ez instructions The distribution decreases the adjusted basis of Jo's partnership interest to $4,000 [$14,000 − ($8,000 + $2,000)]. 1040ez instructions Marketable securities treated as money. 1040ez instructions   Generally, a marketable security distributed to a partner is treated as money in determining whether gain is recognized on the distribution. 1040ez instructions This treatment, however, does not generally apply if that partner contributed the security to the partnership or an investment partnership made the distribution to an eligible partner. 1040ez instructions   The amount treated as money is the security's fair market value when distributed, reduced (but not below zero) by the excess (if any) of: The partner's distributive share of the gain that would be recognized had the partnership sold all its marketable securities at their fair market value immediately before the transaction resulting in the distribution, over The partner's distributive share of the gain that would be recognized had the partnership sold all such securities it still held after the distribution at the fair market value in (1). 1040ez instructions   For more information, including the definition of marketable securities, see section 731(c) of the Internal Revenue Code. 1040ez instructions Loss on distribution. 1040ez instructions   A partner does not recognize loss on a partnership distribution unless all the following requirements are met. 1040ez instructions The adjusted basis of the partner's interest in the partnership exceeds the distribution. 1040ez instructions The partner's entire interest in the partnership is liquidated. 1040ez instructions The distribution is in money, unrealized receivables, or inventory items. 1040ez instructions   There are exceptions to these general rules. 1040ez instructions See the following discussions. 1040ez instructions Also, see Liquidation at Partner's Retirement or Death under Disposition of Partner's Interest, later. 1040ez instructions Distribution of partner's debt. 1040ez instructions   If a partnership acquires a partner's debt and extinguishes the debt by distributing it to the partner, the partner will recognize capital gain or loss to the extent the fair market value of the debt differs from the basis of the debt (determined under the rules discussed in Partner's Basis for Distributed Property, later). 1040ez instructions   The partner is treated as having satisfied the debt for its fair market value. 1040ez instructions If the issue price (adjusted for any premium or discount) of the debt exceeds its fair market value when distributed, the partner may have to include the excess amount in income as canceled debt. 1040ez instructions   Similarly, a deduction may be available to a corporate partner if the fair market value of the debt at the time of distribution exceeds its adjusted issue price. 1040ez instructions Net precontribution gain. 1040ez instructions   A partner generally must recognize gain on the distribution of property (other than money) if the partner contributed appreciated property to the partnership during the 7-year period before the distribution. 1040ez instructions   The gain recognized is the lesser of the following amounts. 1040ez instructions The excess of: The fair market value of the property received in the distribution, over The adjusted basis of the partner's interest in the partnership immediately before the distribution, reduced (but not below zero) by any money received in the distribution. 1040ez instructions The “net precontribution gain” of the partner. 1040ez instructions This is the net gain the partner would recognize if all the property contributed by the partner within 7 years of the distribution, and held by the partnership immediately before the distribution, were distributed to another partner, other than a partner who owns more than 50% of the partnership. 1040ez instructions For information about the distribution of contributed property to another partner, see Contribution of Property , under Transactions Between Partnership and Partners, later. 1040ez instructions   The character of the gain is determined by reference to the character of the net precontribution gain. 1040ez instructions This gain is in addition to any gain the partner must recognize if the money distributed is more than his or her basis in the partnership. 1040ez instructions For these rules, the term “money” includes marketable securities treated as money, as discussed earlier. 1040ez instructions Effect on basis. 1040ez instructions   The adjusted basis of the partner's interest in the partnership is increased by any net precontribution gain recognized by the partner. 1040ez instructions Other than for purposes of determining the gain, the increase is treated as occurring immediately before the distribution. 1040ez instructions See Basis of Partner's Interest , later. 1040ez instructions   The partnership must adjust its basis in any property the partner contributed within 7 years of the distribution to reflect any gain that partner recognizes under this rule. 1040ez instructions Exceptions. 1040ez instructions   Any part of a distribution that is property the partner previously contributed to the partnership is not taken into account in determining the amount of the excess distribution or the partner's net precontribution gain. 1040ez instructions For this purpose, the partner's previously contributed property does not include a contributed interest in an entity to the extent its value is due to property contributed to the entity after the interest was contributed to the partnership. 1040ez instructions   Recognition of gain under this rule also does not apply to a distribution of unrealized receivables or substantially appreciated inventory items if the distribution is treated as a sale or exchange, as discussed earlier. 1040ez instructions Partner's Basis for Distributed Property Unless there is a complete liquidation of a partner's interest, the basis of property (other than money) distributed to the partner by a partnership is its adjusted basis to the partnership immediately before the distribution. 1040ez instructions However, the basis of the property to the partner cannot be more than the adjusted basis of his or her interest in the partnership reduced by any money received in the same transaction. 1040ez instructions Example 1. 1040ez instructions The adjusted basis of Emily's partnership interest is $30,000. 1040ez instructions She receives a distribution of property that has an adjusted basis of $20,000 to the partnership and $4,000 in cash. 1040ez instructions Her basis for the property is $20,000. 1040ez instructions Example 2. 1040ez instructions The adjusted basis of Steve's partnership interest is $10,000. 1040ez instructions He receives a distribution of $4,000 cash and property that has an adjusted basis to the partnership of $8,000. 1040ez instructions His basis for the distributed property is limited to $6,000 ($10,000 − $4,000, the cash he receives). 1040ez instructions Complete liquidation of partner's interest. 1040ez instructions   The basis of property received in complete liquidation of a partner's interest is the adjusted basis of the partner's interest in the partnership reduced by any money distributed to the partner in the same transaction. 1040ez instructions Partner's holding period. 1040ez instructions   A partner's holding period for property distributed to the partner includes the period the property was held by the partnership. 1040ez instructions If the property was contributed to the partnership by a partner, then the period it was held by that partner is also included. 1040ez instructions Basis divided among properties. 1040ez instructions   If the basis of property received is the adjusted basis of the partner's interest in the partnership (reduced by money received in the same transaction), it must be divided among the properties distributed to the partner. 1040ez instructions For property distributed after August 5, 1997, allocate the basis using the following rules. 1040ez instructions Allocate the basis first to unrealized receivables and inventory items included in the distribution by assigning a basis to each item equal to the partnership's adjusted basis in the item immediately before the distribution. 1040ez instructions If the total of these assigned bases exceeds the allocable basis, decrease the assigned bases by the amount of the excess. 1040ez instructions Allocate any remaining basis to properties other than unrealized receivables and inventory items by assigning a basis to each property equal to the partnership's adjusted basis in the property immediately before the distribution. 1040ez instructions If the allocable basis exceeds the total of these assigned bases, increase the assigned bases by the amount of the excess. 1040ez instructions If the total of these assigned bases exceeds the allocable basis, decrease the assigned bases by the amount of the excess. 1040ez instructions Allocating a basis increase. 1040ez instructions   Allocate any basis increase required in rule (2), above, first to properties with unrealized appreciation to the extent of the unrealized appreciation. 1040ez instructions If the basis increase is less than the total unrealized appreciation, allocate it among those properties in proportion to their respective amounts of unrealized appreciation. 1040ez instructions Allocate any remaining basis increase among all the properties in proportion to their respective fair market values. 1040ez instructions Example. 1040ez instructions Eun's basis in her partnership interest is $55,000. 1040ez instructions In a distribution in liquidation of her entire interest, she receives properties A and B, neither of which is inventory or unrealized receivables. 1040ez instructions Property A has an adjusted basis to the partnership of $5,000 and a fair market value of $40,000. 1040ez instructions Property B has an adjusted basis to the partnership of $10,000 and a fair market value of $10,000. 1040ez instructions To figure her basis in each property, Eun first assigns bases of $5,000 to property A and $10,000 to property B (their adjusted bases to the partnership). 1040ez instructions This leaves a $40,000 basis increase (the $55,000 allocable basis minus the $15,000 total of the assigned bases). 1040ez instructions She first allocates $35,000 to property A (its unrealized appreciation). 1040ez instructions The remaining $5,000 is allocated between the properties based on their fair market values. 1040ez instructions $4,000 ($40,000/$50,000) is allocated to property A and $1,000 ($10,000/$50,000) is allocated to property B. 1040ez instructions Eun's basis in property A is $44,000 ($5,000 + $35,000 + $4,000) and her basis in property B is $11,000 ($10,000 + $1,000). 1040ez instructions Allocating a basis decrease. 1040ez instructions   Use the following rules to allocate any basis decrease required in rule (1) or rule (2), earlier. 1040ez instructions Allocate the basis decrease first to items with unrealized depreciation to the extent of the unrealized depreciation. 1040ez instructions If the basis decrease is less than the total unrealized depreciation, allocate it among those items in proportion to their respective amounts of unrealized depreciation. 1040ez instructions Allocate any remaining basis decrease among all the items in proportion to their respective assigned basis amounts (as decreased in (1)). 1040ez instructions Example. 1040ez instructions Armando's basis in his partnership interest is $20,000. 1040ez instructions In a distribution in liquidation of his entire interest, he receives properties C and D, neither of which is inventory or unrealized receivables. 1040ez instructions Property C has an adjusted basis to the partnership of $15,000 and a fair market value of $15,000. 1040ez instructions Property D has an adjusted basis to the partnership of $15,000 and a fair market value of $5,000. 1040ez instructions To figure his basis in each property, Armando first assigns bases of $15,000 to property C and $15,000 to property D (their adjusted bases to the partnership). 1040ez instructions This leaves a $10,000 basis decrease (the $30,000 total of the assigned bases minus the $20,000 allocable basis). 1040ez instructions He allocates the entire $10,000 to property D (its unrealized depreciation). 1040ez instructions Armando's basis in property C is $15,000 and his basis in property D is $5,000 ($15,000 − $10,000). 1040ez instructions Distributions before August 6, 1997. 1040ez instructions   For property distributed before August 6, 1997, allocate the basis using the following rules. 1040ez instructions Allocate the basis first to unrealized receivables and inventory items included in the distribution to the extent of the partnership's adjusted basis in those items. 1040ez instructions If the partnership's adjusted basis in those items exceeded the allocable basis, allocate the basis among the items in proportion to their adjusted bases to the partnership. 1040ez instructions Allocate any remaining basis to other distributed properties in proportion to their adjusted bases to the partnership. 1040ez instructions Partner's interest more than partnership basis. 1040ez instructions   If the basis of a partner's interest to be divided in a complete liquidation of the partner's interest is more than the partnership's adjusted basis for the unrealized receivables and inventory items distributed, and if no other property is distributed to which the partner can apply the remaining basis, the partner has a capital loss to the extent of the remaining basis of the partnership interest. 1040ez instructions Special adjustment to basis. 1040ez instructions   A partner who acquired any part of his or her partnership interest in a sale or exchange or upon the death of another partner may be able to choose a special basis adjustment for property distributed by the partnership. 1040ez instructions To choose the special adjustment, the partner must have received the distribution within 2 years after acquiring the partnership interest. 1040ez instructions Also, the partnership must not have chosen the optional adjustment to basis when the partner acquired the partnership interest. 1040ez instructions   If a partner chooses this special basis adjustment, the partner's basis for the property distributed is the same as it would have been if the partnership had chosen the optional adjustment to basis. 1040ez instructions However, this assigned basis is not reduced by any depletion or depreciation that would have been allowed or allowable if the partnership had previously chosen the optional adjustment. 1040ez instructions   The choice must be made with the partner's tax return for the year of the distribution if the distribution includes any property subject to depreciation, depletion, or amortization. 1040ez instructions If the choice does not have to be made for the distribution year, it must be made with the return for the first year in which the basis of the distributed property is pertinent in determining the partner's income tax. 1040ez instructions   A partner choosing this special basis adjustment must attach a statement to his or her tax return that the partner chooses under section 732(d) of the Internal Revenue Code to adjust the basis of property received in a distribution. 1040ez instructions The statement must show the computation of the special basis adjustment for the property distributed and list the properties to which the adjustment has been allocated. 1040ez instructions Example. 1040ez instructions Chin Ho purchased a 25% interest in X partnership for $17,000 cash. 1040ez instructions At the time of the purchase, the partnership owned inventory having a basis to the partnership of $14,000 and a fair market value of $16,000. 1040ez instructions Thus, $4,000 of the $17,000 he paid was attributable to his share of inventory with a basis to the partnership of $3,500. 1040ez instructions Within 2 years after acquiring his interest, Chin Ho withdrew from the partnership and for his entire interest received cash of $1,500, inventory with a basis to the partnership of $3,500, and other property with a basis of $6,000. 1040ez instructions The value of the inventory received was 25% of the value of all partnership inventory. 1040ez instructions (It is immaterial whether the inventory he received was on hand when he acquired his interest. 1040ez instructions ) Since the partnership from which Chin Ho withdrew did not make the optional adjustment to basis, he chose to adjust the basis of the inventory received. 1040ez instructions His share of the partnership's basis for the inventory is increased by $500 (25% of the $2,000 difference between the $16,000 fair market value of the inventory and its $14,000 basis to the partnership at the time he acquired his interest). 1040ez instructions The adjustment applies only for purposes of determining his new basis in the inventory, and not for purposes of partnership gain or loss on disposition. 1040ez instructions The total to be allocated among the properties Chin Ho received in the distribution is $15,500 ($17,000 basis of his interest − $1,500 cash received). 1040ez instructions His basis in the inventory items is $4,000 ($3,500 partnership basis + $500 special adjustment). 1040ez instructions The remaining $11,500 is allocated to his new basis for the other property he received. 1040ez instructions Mandatory adjustment. 1040ez instructions   A partner does not always have a choice of making this special adjustment to basis. 1040ez instructions The special adjustment to basis must be made for a distribution of property (whether or not within 2 years after the partnership interest was acquired) if all the following conditions existed when the partner received the partnership interest. 1040ez instructions The fair market value of all partnership property (other than money) was more than 110% of its adjusted basis to the partnership. 1040ez instructions If there had been a liquidation of the partner's interest immediately after it was acquired, an allocation of the basis of that interest under the general rules (discussed earlier under Basis divided among properties) would have decreased the basis of property that could not be depreciated, depleted, or amortized and increased the basis of property that could be. 1040ez instructions The optional basis adjustment, if it had been chosen by the partnership, would have changed the partner's basis for the property actually distributed. 1040ez instructions Required statement. 1040ez instructions   Generally, if a partner chooses a special basis adjustment and notifies the partnership, or if the partnership makes a distribution for which the special basis adjustment is mandatory, the partnership must provide a statement to the partner. 1040ez instructions The statement must provide information necessary for the partner to compute the special basis adjustment. 1040ez instructions Marketable securities. 1040ez instructions   A partner's basis in marketable securities received in a partnership distribution, as determined in the preceding discussions, is increased by any gain recognized by treating the securities as money. 1040ez instructions See Marketable securities treated as money under Partner's Gain or Loss, earlier. 1040ez instructions The basis increase is allocated among the securities in proportion to their respective amounts of unrealized appreciation before the basis increase. 1040ez instructions Transactions Between Partnership and Partners For certain transactions between a partner and his or her partnership, the partner is treated as not being a member of the partnership. 1040ez instructions These transactions include the following. 1040ez instructions Performing services for, or transferring property to, a partnership if: There is a related allocation and distribution to a partner, and The entire transaction, when viewed together, is properly characterized as occurring between the partnership and a partner not acting in the capacity of a partner. 1040ez instructions Transferring money or other property to a partnership if: There is a related transfer of money or other property by the partnership to the contributing partner or another partner, and The transfers together are properly characterized as a sale or exchange of property. 1040ez instructions Payments by accrual basis partnership to cash basis partner. 1040ez instructions   A partnership that uses an accrual method of accounting cannot deduct any business expense owed to a cash basis partner until the amount is paid. 1040ez instructions However, this rule does not apply to guaranteed payments made to a partner, which are generally deductible when accrued. 1040ez instructions Guaranteed Payments Guaranteed payments are those made by a partnership to a partner that are determined without regard to the partnership's income. 1040ez instructions A partnership treats guaranteed payments for services, or for the use of capital, as if they were made to a person who is not a partner. 1040ez instructions This treatment is for purposes of determining gross income and deductible business expenses only. 1040ez instructions For other tax purposes, guaranteed payments are treated as a partner's distributive share of ordinary income. 1040ez instructions Guaranteed payments are not subject to income tax withholding. 1040ez instructions The partnership generally deducts guaranteed payments on line 10 of Form 1065 as a business expense. 1040ez instructions They are also listed on Schedules K and K-1 of the partnership return. 1040ez instructions The individual partner reports guaranteed payments on Schedule E (Form 1040) as ordinary income, along with his or her distributive share of the partnership's other ordinary income. 1040ez instructions Guaranteed payments made to partners for organizing the partnership or syndicating interests in the partnership are capital expenses. 1040ez instructions Generally, organizational and syndication expenses are not deductible by the partnership. 1040ez instructions However, a partnership can elect to deduct a portion of its organizational expenses and amortize the remaining expenses (see Business start-up and organizational costs in the Instructions for Form 1065). 1040ez instructions Organizational expenses (if the election is not made) and syndication expenses paid to partners must be reported on the partners' Schedule K-1 as guaranteed payments. 1040ez instructions Minimum payment. 1040ez instructions   If a partner is to receive a minimum payment from the partnership, the guaranteed payment is the amount by which the minimum payment is more than the partner's distributive share of the partnership income before taking into account the guaranteed payment. 1040ez instructions Example. 1040ez instructions Under a partnership agreement, Divya is to receive 30% of the partnership income, but not less than $8,000. 1040ez instructions The partnership has net income of $20,000. 1040ez instructions Divya's share, without regard to the minimum guarantee, is $6,000 (30% × $20,000). 1040ez instructions The guaranteed payment that can be deducted by the partnership is $2,000 ($8,000 − $6,000). 1040ez instructions Divya's income from the partnership is $8,000, and the remaining $12,000 of partnership income will be reported by the other partners in proportion to their shares under the partnership agreement. 1040ez instructions If the partnership net income had been $30,000, there would have been no guaranteed payment since her share, without regard to the guarantee, would have been greater than the guarantee. 1040ez instructions Self-employed health insurance premiums. 1040ez instructions   Premiums for health insurance paid by a partnership on behalf of a partner, for services as a partner, are treated as guaranteed payments. 1040ez instructions The partnership can deduct the payments as a business expense, and the partner must include them in gross income. 1040ez instructions However, if the partnership accounts for insurance paid for a partner as a reduction in distributions to the partner, the partnership cannot deduct the premiums. 1040ez instructions   A partner who qualifies can deduct 100% of the health insurance premiums paid by the partnership on his or her behalf as an adjustment to income. 1040ez instructions The partner cannot deduct the premiums for any calendar month, or part of a month, in which the partner is eligible to participate in any subsidized health plan maintained by any employer of the partner, the partner's spouse, the partner's dependents, or any children under age 27 who are not dependents. 1040ez instructions For more information on the self-employed health insurance deduction, see chapter 6 in Publication 535. 1040ez instructions Including payments in partner's income. 1040ez instructions   Guaranteed payments are included in income in the partner's tax year in which the partnership's tax year ends. 1040ez instructions Example 1. 1040ez instructions Under the terms of a partnership agreement, Erica is entitled to a fixed annual payment of $10,000 without regard to the income of the partnership. 1040ez instructions Her distributive share of the partnership income is 10%. 1040ez instructions The partnership has $50,000 of ordinary income after deducting the guaranteed payment. 1040ez instructions She must include ordinary income of $15,000 ($10,000 guaranteed payment + $5,000 ($50,000 × 10%) distributive share) on her individual income tax return for her tax year in which the partnership's tax year ends. 1040ez instructions Example 2. 1040ez instructions Lamont is a calendar year taxpayer who is a partner in a partnership. 1040ez instructions The partnership uses a fiscal year that ended January 31, 2013. 1040ez instructions Lamont received guaranteed payments from the partnership from February 1, 2012, until December 31, 2012. 1040ez instructions He must include these guaranteed payments in income for 2013 and report them on his 2013 income tax return. 1040ez instructions Payments resulting in loss. 1040ez instructions   If guaranteed payments to a partner result in a partnership loss in which the partner shares, the partner must report the full amount of the guaranteed payments as ordinary income. 1040ez instructions The partner separately takes into account his or her distributive share of the partnership loss, to the extent of the adjusted basis of the partner's partnership interest. 1040ez instructions Sale or Exchange of Property Special rules apply to a sale or exchange of property between a partnership and certain persons. 1040ez instructions Losses. 1040ez instructions   Losses will not be allowed from a sale or exchange of property (other than an interest in the partnership) directly or indirectly between a partnership and a person whose direct or indirect interest in the capital or profits of the partnership is more than 50%. 1040ez instructions   If the sale or exchange is between two partnerships in which the same persons directly or indirectly own more than 50% of the capital or profits interests in each partnership, no deduction of a loss is allowed. 1040ez instructions   The basis of each partner's interest in the partnership is decreased (but not below zero) by the partner's share of the disallowed loss. 1040ez instructions   If the purchaser later sells the property, only the gain realized that is greater than the loss not allowed will be taxable. 1040ez instructions If any gain from the sale of the property is not recognized because of this rule, the basis of each partner's interest in the partnership is increased by the partner's share of that gain. 1040ez instructions Gains. 1040ez instructions   Gains are treated as ordinary income in a sale or exchange of property directly or indirectly between a person and a partnership, or between two partnerships, if both of the following tests are met. 1040ez instructions More than 50% of the capital or profits interest in the partnership(s) is directly or indirectly owned by the same person(s). 1040ez instructions The property in the hands of the transferee immediately after the transfer is not a capital asset. 1040ez instructions Property that is not a capital asset includes accounts receivable, inventory, stock-in-trade, and depreciable or real property used in a trade or business. 1040ez instructions More than 50% ownership. 1040ez instructions   To determine if there is more than 50% ownership in partnership capital or profits, the following rules apply. 1040ez instructions An interest directly or indirectly owned by, or for, a corporation, partnership, estate, or trust is considered to be owned proportionately by, or for, its shareholders, partners, or beneficiaries. 1040ez instructions An individual is considered to own the interest directly or indirectly owned by, or for, the individual's family. 1040ez instructions For this rule, “family” includes only brothers, sisters, half-brothers, half-sisters, spouses, ancestors, and lineal descendants. 1040ez instructions If a person is considered to own an interest using rule (1), that person (the “constructive owner”) is treated as if actually owning that interest when rules (1) and (2) are applied. 1040ez instructions However, if a person is considered to own an interest using rule (2), that person is not treated as actually owning that interest in reapplying rule (2) to make another person the constructive owner. 1040ez instructions Example. 1040ez instructions Individuals A and B and Trust T are equal partners in Partnership ABT. 1040ez instructions A's husband, AH, is the sole beneficiary of Trust T. 1040ez instructions Trust T's partnership interest will be attributed to AH only for the purpose of further attributing the interest to A. 1040ez instructions As a result, A is a more-than-50% partner. 1040ez instructions This means that any deduction for losses on transactions between her and ABT will not be allowed, and gain from property that in the hands of the transferee is not a capital asset is treated as ordinary, rather than capital, gain. 1040ez instructions More information. 1040ez instructions   For more information on these special rules, see Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. 1040ez instructions Contribution of Property Usually, neither the partner nor the partnership recognizes a gain or loss when property is contributed to the partnership in exchange for a partnership interest. 1040ez instructions This applies whether a partnership is being formed or is already operating. 1040ez instructions The partnership's holding period for the property includes the partner's holding period. 1040ez instructions The contribution of limited partnership interests in one partnership for limited partnership interests in another partnership qualifies as a tax-free contribution of property to the second partnership if the transaction is made for business purposes. 1040ez instructions The exchange is not subject to the rules explained later under Disposition of Partner's Interest. 1040ez instructions Disguised sales. 1040ez instructions   A contribution of money or other property to the partnership followed by a distribution of different property from the partnership to the partner is treated not as a contribution and distribution, but as a sale of property, if both of the following tests are met. 1040ez instructions The distribution would not have been made but for the contribution. 1040ez instructions The partner's right to the distribution does not depend on the success of partnership operations. 1040ez instructions   All facts and circumstances are considered in determining if the contribution and distribution are more properly characterized as a sale. 1040ez instructions However, if the contribution and distribution occur within 2 years of each other, the transfers are presumed to be a sale unless the facts clearly indicate that the transfers are not a sale. 1040ez instructions If the contribution and distribution occur more than 2 years apart, the transfers are presumed not to be a sale unless the facts clearly indicate that the transfers are a sale. 1040ez instructions Form 8275 required. 1040ez instructions   A partner must attach Form 8275, Disclosure Statement, (or other statement) to his or her return if the partner contributes property to a partnership and, within 2 years (before or after the contribution), the partnership transfers money or other consideration to the partner. 1040ez instructions For exceptions to this requirement, see section 1. 1040ez instructions 707-3(c)(2) of the regulations. 1040ez instructions   A partnership must attach Form 8275 (or other statement) to its return if it distributes property to a partner, and, within 2 years (before or after the distribution), the partner transfers money or other consideration to the partnership. 1040ez instructions   Form 8275 must include the following information. 1040ez instructions A caption identifying the statement as a disclosure under section 707 of the Internal Revenue Code. 1040ez instructions A description of the transferred property or money, including its value. 1040ez instructions A description of any relevant facts in determining if the transfers are properly viewed as a disguised sale. 1040ez instructions See section 1. 1040ez instructions 707-3(b)(2) of the regulations for a description of the facts and circumstances considered in determining if the transfers are a disguised sale. 1040ez instructions Contribution to partnership treated as investment company. 1040ez instructions   Gain is recognized when property is contributed (in exchange for an interest in the partnership) to a partnership that would be treated as an investment company if it were incorporated. 1040ez instructions   A partnership is generally treated as an investment company if over 80% of the value of its assets is held for investment and consists of certain readily marketable items. 1040ez instructions These items include money, stocks and other equity interests in a corporation, and interests in regulated investment companies and real estate investment trusts. 1040ez instructions For more information, see section 351(e)(1) of the Internal Revenue Code and the related regulations. 1040ez instructions Whether a partnership is treated as an investment company under this test is ordinarily determined immediately after the transfer of property. 1040ez instructions   This rule applies to limited partnerships and general partnerships, regardless of whether they are privately formed or publicly syndicated. 1040ez instructions Contribution to foreign partnership. 1040ez instructions   A domestic partnership that contributed property after August 5, 1997, to a foreign partnership in exchange for a partnership interest may have to file Form 8865 if either of the following apply. 1040ez instructions Immediately after the contribution, the partnership owned, directly or indirectly, at least a 10% interest in the foreign partnership. 1040ez instructions The fair market value of the property contributed to the foreign partnership, when added to other contributions of property made to the partnership during the preceding 12-month period, is greater than $100,000. 1040ez instructions   The partnership may also have to file Form 8865, even if no contributions are made during the tax year, if it owns a 10% or more interest in a foreign partnership at any time during the year. 1040ez instructions See the form instructions for more information. 1040ez instructions Basis of contributed property. 1040ez instructions   If a partner contributes property to a partnership, the partnership's basis for determining depreciation, depletion, gain, or loss for the property is the same as the partner's adjusted basis for the property when it was contributed, increased by any gain recognized by the partner at the time of contribution. 1040ez instructions Allocations to account for built-in gain or loss. 1040ez instructions   The fair market value of property at the time it is contributed may be different from the partner's adjusted basis. 1040ez instructions The partnership must allocate among the partners any income, deduction, gain, or loss on the property in a manner that will account for the difference. 1040ez instructions This rule also applies to contributions of accounts payable and other accrued but unpaid items of a cash basis partner. 1040ez instructions   The partnership can use different allocation methods for different items of contributed property. 1040ez instructions A single reasonable method must be consistently applied to each item, and the overall method or combination of methods must be reasonable. 1040ez instructions See section 1. 1040ez instructions 704-3 of the regulations for allocation methods generally considered reasonable. 1040ez instructions   If the partnership sells contributed property and recognizes gain or loss, built-in gain or loss is allocated to the contributing partner. 1040ez instructions If contributed property is subject to depreciation or other cost recovery, the allocation of deductions for these items takes into account built-in gain or loss on the property. 1040ez instructions However, the total depreciation, depletion, gain, or loss allocated to partners cannot be more than the depreciation or depletion allowable to the partnership or the gain or loss realized by the partnership. 1040ez instructions Example. 1040ez instructions Areta and Sofia formed an equal partnership. 1040ez instructions Areta contributed $10,000 in cash to the partnership and Sofia contributed depreciable property with a fair market value of $10,000 and an adjusted basis of $4,000. 1040ez instructions The partnership's basis for depreciation is limited to the adjusted basis of the property in Sofia's hands, $4,000. 1040ez instructions In effect, Areta purchased an undivided one-half interest in the depreciable property with her contribution of $10,000. 1040ez instructions Assuming that the depreciation rate is 10% a year under the General Depreciation System (GDS), she would have been entitled to a depreciation deduction of $500 per year, based on her interest in the partnership, if the adjusted basis of the property equaled its fair market value when contributed. 1040ez instructions To simplify this example, the depreciation deductions are determined without regard to any first-year depreciation conventions. 1040ez instructions However, since the partnership is allowed only $400 per year of depreciation (10% of $4,000), no more than $400 can be allocated between the partners. 1040ez instructions The entire $400 must be allocated to Areta. 1040ez instructions Distribution of contributed property to another partner. 1040ez instructions   If a partner contributes property to a partnership and the partnership distributes the property to another partner within 7 years of the contribution, the contributing partner must recognize gain or loss on the distribution. 1040ez instructions   The recognized gain or loss is the amount the contributing partner would have recognized if the property had been sold for its fair market value when it was distributed. 1040ez instructions This amount is the difference between the property's basis and its fair market value at the time of contribution. 1040ez instructions The character of the gain or loss will be the same as the character of the gain or loss that would have resulted if the partnership had sold the property to the distributee partner. 1040ez instructions Appropriate adjustments must be made to the adjusted basis of the contributing partner's partnership interest and to the adjusted basis of the property distributed to reflect the recognized gain or loss. 1040ez instructions Disposition of certain contributed property. 1040ez instructions   The following rules determine the character of the partnership's gain or loss on a disposition of certain types of contributed property. 1040ez instructions Unrealized receivables. 1040ez instructions If the property was an unrealized receivable in the hands of the contributing partner, any gain or loss on its disposition by the partnership is ordinary income or loss. 1040ez instructions Unrealized receivables are defined later under Payments for Unrealized Receivables and Inventory Items. 1040ez instructions When reading the definition, substitute “partner” for “partnership. 1040ez instructions ” Inventory items. 1040ez instructions If the property was an inventory item in the hands of the contributing partner, any gain or loss on its disposition by the partnership within 5 years after the contribution is ordinary income or loss. 1040ez instructions Inventory items are defined later in Payments for Unrealized Receivables and Inventory Items. 1040ez instructions Capital loss property. 1040ez instructions If the property was a capital asset in the contributing partner's hands, any loss on its disposition by the partnership within 5 years after the contribution is a capital loss. 1040ez instructions The capital loss is limited to the amount by which the partner's adjusted basis for the property exceeded the property's fair market value immediately before the contribution. 1040ez instructions Substituted basis property. 1040ez instructions If the disposition of any of the property listed in (1), (2), or (3) is a nonrecognition transaction, these rules apply when the recipient of the property disposes of any substituted basis property (other than certain corporate stock) resulting from the transaction. 1040ez instructions Contribution of Services A partner can acquire an interest in partnership capital or profits as compensation for services performed or to be performed. 1040ez instructions Capital interest. 1040ez instructions   A capital interest is an interest that would give the holder a share of the proceeds if the partnership's assets were sold at fair market value and the proceeds were distributed in a complete liquidation of the partnership. 1040ez instructions This determination generally is made at the time of receipt of the partnership interest. 1040ez instructions The fair market value of such an interest received by a partner as compensation for services must generally be included in the partner's gross income in the first tax year in which the partner can transfer the interest or the interest is not subject to a substantial risk of forfeiture. 1040ez instructions The capital interest transferred as compensation for services is subject to the rules for restricted property discussed in Publication 525 under Employee Compensation. 1040ez instructions   The fair market value of an interest in partnership capital transferred to a partner as payment for services to the partnership is a guaranteed payment, discussed earlier. 1040ez instructions Profits interest. 1040ez instructions   A profits interest is a partnership interest other than a capital interest. 1040ez instructions If a person receives a profits interest for providing services to, or for the benefit of, a partnership in a partner capacity or in anticipation of being a partner, the receipt of such an interest is not a taxable event for the partner or the partnership. 1040ez instructions However, this does not apply in the following situations. 1040ez instructions The profits interest relates to a substantially certain and predictable stream of income from partnership assets, such as income from high-quality debt securities or a high-quality net lease. 1040ez instructions Within 2 years of receipt, the partner disposes of the profits interest. 1040ez instructions The profits interest is a limited partnership interest in a publicly traded partnership. 1040ez instructions   A profits interest transferred as compensation for services is not subject to the rules for restricted property that apply to capital interests. 1040ez instructions Basis of Partner's Interest The basis of a partnership interest is the money plus the adjusted basis of any property the partner contributed. 1040ez instructions If the partner must recognize gain as a result of the contribution, this gain is included in the basis of his or her interest. 1040ez instructions Any increase in a partner's individual liabilities because of an assumption of partnership liabilities is considered a contribution of money to the partnership by the partner. 1040ez instructions Interest acquired by gift, etc. 1040ez instructions   If a partner acquires an interest in a partnership by gift, inheritance, or under any circumstance other than by a contribution of money or property to the partnership, the partner's basis must be determined using the basis rules described in Publication 551. 1040ez instructions Adjusted Basis There is a worksheet for adjusting the basis of a partner's interest in the partnership in the Partner's Instructions for Schedule K-1 (Form 1065). 1040ez instructions The basis of an interest in a partnership is increased or decreased by certain items. 1040ez instructions Increases. 1040ez instructions   A partner's basis is increased by the following items. 1040ez instructions The partner's additional contributions to the partnership, including an increased share of, or assumption of, partnership liabilities. 1040ez instructions The partner's distributive share of taxable and nontaxable partnership income. 1040ez instructions The partner's distributive share of the excess of the deductions for depletion over the basis of the depletable property, unless the property is oil or gas wells whose basis has been allocated to partners. 1040ez instructions Decreases. 1040ez instructions   The partner's basis is decreased (but never below zero) by the following items. 1040ez instructions The money (including a decreased share of partnership liabilities or an assumption of the partner's individual liabilities by the partnership) and adjusted basis of property distributed to the partner by the partnership. 1040ez instructions The partner's distributive share of the partnership losses (including capital losses). 1040ez instructions The partner's distributive share of nondeductible partnership expenses that are not capital expenditures. 1040ez instructions This includes the partner's share of any section 179 expenses, even if the partner cannot deduct the entire amount on his or her individual income tax return. 1040ez instructions The partner's deduction for depletion for any partnership oil and gas wells, up to the proportionate share of the adjusted basis of the wells allocated to the partner. 1040ez instructions Partner's liabilities assumed by partnership. 1040ez instructions   If contributed property is subject to a debt or if a partner's liabilities are assumed by the partnership, the basis of that partner's interest is reduced (but not below zero) by the liability assumed by the other partners. 1040ez instructions This partner must reduce his or her basis because the assumption of the liability is treated as a distribution of money to that partner. 1040ez instructions The other partners' assumption of the liability is treated as a contribution by them of money to the partnership. 1040ez instructions See Effect of Partnership Liabilities , later. 1040ez instructions Example 1. 1040ez instructions Ivan acquired a 20% interest in a partnership by contributing property that had an adjusted basis to him of $8,000 and a $4,000 mortgage. 1040ez instructions The partnership assumed payment of the mortgage. 1040ez instructions The basis of Ivan's interest is: Adjusted basis of contributed property $8,000 Minus: Part of mortgage assumed by other partners (80% × $4,000) 3,200 Basis of Ivan's partnership interest $4,800 Example 2. 1040ez instructions If, in Example 1, the contributed property had a $12,000 mortgage, the basis of Ivan's partnership interest would be zero. 1040ez instructions The $1,600 difference between the mortgage assumed by the other partners, $9,600 (80% × $12,000), and his basis of $8,000 would be treated as capital gain from the sale or exchange of a partnership interest. 1040ez instructions However, this gain would not increase the basis of his partnership interest. 1040ez instructions Book value of partner's interest. 1040ez instructions   The adjusted basis of a partner's interest is determined without considering any amount shown in the partnership books as a capital, equity, or similar account. 1040ez instructions Example. 1040ez instructions Enzo contributes to his partnership property that has an adjusted basis of $400 and a fair market value of $1,000. 1040ez instructions His partner contributes $1,000 cash. 1040ez instructions While each partner has increased his capital account by $1,000, which will be re
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You can now enroll in health insurance through your state's Health Insurance Marketplace. The Marketplace can help you compare plans and find one that fits your needs and budget.

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Medicaid

States decide on the benefits provided under Medicaid, but Medicaid usually provides health care for low-income children and families, and people with disabilities. Covered services usually include doctor visits, hospital care, vaccinations, prescription drugs, vision, hearing, long-term care, and preventive care for children.

  • State Medicaid Programs – Learn about the Medicaid program in your state, and how to apply. Note that if you're not eligible for Medicaid now, you may qualify in 2014, when new rules take effect in most states. 
  • Medicaid and the Health Insurance Marketplace – If you are eligible for Medicaid, you don't need to buy coverage through the Health Insurance Marketplace.

Medicare

Medicare is a government health insurance plan for people 65 or older, people under 65 with certain disabilities, and people with end-stage renal disease. Medicare helps to pay for care in hospitals, skilled nursing facilities, hospice care, and some home health care. Coverage can also include doctors’ services and prescription drugs.

Under the health care law, Medicare benefits have been expanded for preventive care and drug coverage. Medicare is not part of the Health Insurance Marketplace, so—if you have Medicare—you will not need to take any action as a result of the new Marketplace. 

  • Medicare – Learn about the Medicare program; enroll online; and find a Medicare-enrolled doctor or health care facility.
  • Replace Your Medicare Card – If your Medicare card is lost, stolen, or damaged, you can ask for a new one online.

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COBRA: Keep Your Insurance If You Leave Your Job

The Consolidated Omnibus Budget Reconciliation Act (COBRA) can help you temporarily keep your health insurance even though you left your job. Eligibility for the program is based on the reason you left your job, and even if you get to keep your insurance, you may be required to pay the entire premium for coverage.

  • COBRA – Learn more about the costs and benefits of the COBRA program.
  • An Employee's Guide to Health Benefits Under COBRA – This booklet explains your rights under COBRA to a temporary extension of employer-provided group health coverage, called COBRA continuation coverage.

Starting in 2014, you may change from COBRA coverage to Marketplace health insurance coverage. Losing your COBRA coverage qualifies you to buy health insurance in the Marketplace, even if it's not during open enrollment. This is true whether your coverage runs out, or you choose to end it.

Health Insurance for Children: CHIP

The Children’s Health Insurance Program (CHIP) provides free or low-cost health coverage for low-income children. Each state decides on the benefits provided under CHIP, but all states cover routine check-ups, immunizations, hospital care, dental care, and lab and x-ray services.

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How to Appeal a Health Insurance Claim

If your health insurer has denied coverage for medical care you received, you have the right to appeal the claim, and ask that the company reverse that decision. You can be your own health care advocate. Follow these five steps:

  1. Review your policy and explanation of benefits.
  2. Contact your insurer and keep detailed records of your contacts (copies of letters, time and date of conversations).
  3. Request documentation from your doctor or employer to support your case.
  4. Write a formal complaint letter explaining what care was denied and why you are appealing through use of the company's internal review process.
  5. If the internal appeal is not granted through step four, file a claim with your state's insurance department.

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The 1040ez Instructions

1040ez instructions Publication 901 - Main Content Table of Contents Application of Treaties Tax Exemptions Provided by TreatiesPersonal Services Income Professors, Teachers, and Researchers Students and Apprentices Wages and Pensions Paid by a Foreign Government Explanation of TablesTable 1 Table 2 Table 3 Application of Treaties The United States has income tax treaties with a number of foreign countries. 1040ez instructions Under these treaties, residents (not necessarily citizens) of foreign countries are taxed at a reduced rate, or are exempt from U. 1040ez instructions S. 1040ez instructions income taxes on certain items of income they receive from sources within the United States. 1040ez instructions These reduced rates and exemptions vary among countries and specific items of income. 1040ez instructions If there is no treaty between your country and the United States, you must pay tax on the income in the same way and at the same rates shown in the instructions for Form 1040NR. 1040ez instructions Also see Publication 519. 1040ez instructions Many of the individual states of the United States tax the income of their residents. 1040ez instructions Therefore, you should consult the tax authorities of the state in which you live to find out if that state taxes the income of individuals and, if so, whether the tax applies to any of your income. 1040ez instructions Tax treaties reduce the U. 1040ez instructions S. 1040ez instructions taxes of residents of foreign countries. 1040ez instructions With certain exceptions, they do not reduce the U. 1040ez instructions S. 1040ez instructions taxes of U. 1040ez instructions S. 1040ez instructions citizens or residents. 1040ez instructions U. 1040ez instructions S. 1040ez instructions citizens and residents are subject to U. 1040ez instructions S. 1040ez instructions income tax on their worldwide income. 1040ez instructions Treaty provisions generally are reciprocal (apply to both treaty countries); therefore, a U. 1040ez instructions S. 1040ez instructions citizen or resident who receives income from a treaty country may refer to the tables in this publication to see if a tax treaty might affect the tax to be paid to that foreign country. 1040ez instructions Foreign taxing authorities sometimes require certification from the U. 1040ez instructions S. 1040ez instructions Government that an applicant filed an income tax return as a U. 1040ez instructions S. 1040ez instructions citizen or resident, as part of the proof of entitlement to the treaty benefits. 1040ez instructions See Form 8802, Application for United States Residency Certification, to request a certification. 1040ez instructions Disclosure of a treaty-based position that reduces your tax. 1040ez instructions   If you take the position that any U. 1040ez instructions S. 1040ez instructions tax is overruled or otherwise reduced by a U. 1040ez instructions S. 1040ez instructions treaty (a treaty-based position), you generally must disclose that position on Form 8833 and attach it to your return. 1040ez instructions If you are not required to file a return because of your treaty-based position, you must file a return anyway to report your position. 1040ez instructions The filing of Form 8833 does not apply to a reduced rate of withholding tax on noneffectively connected income, such as dividends, interest, rents or royalties, or to a reduced rate of tax on pay received for services performed as an employee, including pensions, annuities, and social security. 1040ez instructions For more information, see Publication 519 and the Form 8833 instructions. 1040ez instructions   If you fail to file Form 8833, you may have to pay a $1,000 penalty. 1040ez instructions Corporations are subject to a $10,000 penalty for each failure. 1040ez instructions Tax Exemptions Provided by Treaties In addition to the tables in the back of this publication, this publication contains discussions of the exemptions from tax and certain other effects of the tax treaties on the following types of income. 1040ez instructions Pay for certain personal services performed in the United States. 1040ez instructions Pay of a professor, teacher, or researcher who teaches or performs research in the United States for a limited time. 1040ez instructions Amounts received for maintenance and studies by a foreign student or apprentice who is here for study or experience. 1040ez instructions Wages, salaries, and pensions paid by a foreign government. 1040ez instructions Personal Services Income Pay for certain personal services performed in the United States is exempt from U. 1040ez instructions S. 1040ez instructions income tax if you are a resident of one of the countries discussed below, if you are in the United States for a limited number of days, and if you meet certain other conditions. 1040ez instructions For this purpose, the word “day” means a day during any part of which you are physically present in the United States. 1040ez instructions Terms defined. 1040ez instructions   Several terms appear in many of the discussions that follow. 1040ez instructions The exact meanings of the terms are determined by the particular tax treaty under discussion; thus, the meanings vary among treaties. 1040ez instructions The definitions that follow are, therefore, general definitions that may not give the exact meaning intended by a particular treaty. 1040ez instructions   The terms fixed base and permanent establishment generally mean a fixed place of business, such as a place of management, a branch, an office, a factory, a warehouse, or a mining site, through which an enterprise carries on its business. 1040ez instructions   The term borne by generally means having ultimate financial accounting responsibility for, or providing the monetary resources for, an expenditure or payment, even if another entity in another location actually made the expenditure or payment. 1040ez instructions Australia Income that residents of Australia receive for performing personal services as independent contractors or self-employed individuals (independent personal services) in the United States during the tax year is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents: Are in the United States for no more than 183 days during the tax year, and Do not have a fixed base regularly available to them in the United States for the purpose of performing the services. 1040ez instructions If they have a fixed base available in the United States, they are taxed on the income attributable to the fixed base. 1040ez instructions Pay that residents of Australia receive for labor or personal services performed in the United States as employees (dependent personal services), including services as a director of a company, is exempt from U. 1040ez instructions S. 1040ez instructions income tax if: The residents are in the United States for no more than 183 days during the tax year, The pay is paid by, or on behalf of, an employer or company that is not a resident of the United States, and The pay is not deductible in determining the taxable income of the trade or business of the employer (or company) in the United States. 1040ez instructions These exemptions do not apply to public entertainers (such as theater, motion picture, radio, or television entertainers, musicians, and athletes) from Australia who earn more than $10,000 in gross receipts, including reimbursed expenses, from their entertainment activities in the United States during the tax year. 1040ez instructions Austria Income that residents of Austria receive for personal services as independent contractors or self-employed individuals (independent personal services) in the United States is exempt from U. 1040ez instructions S. 1040ez instructions income tax if they do not have a fixed base regularly available to them in the United States for performing the services. 1040ez instructions If they have a fixed base available in the United States, they are taxed on the income attributable to the fixed base. 1040ez instructions Income that residents of Austria receive for services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents meet the following requirements. 1040ez instructions They are in the United States for no more than 183 days in any 12-month period beginning or ending in the tax year. 1040ez instructions Their income is paid by, or on behalf of, an employer who is not a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions Their income is not borne by a permanent establishment or a fixed base that the employer has in the United States. 1040ez instructions These exemptions do not apply to public entertainers (such as theater, motion picture, radio, or television entertainers, musicians, and athletes) from Austria who earn more than $20,000 in gross receipts, including reimbursed expenses, from their entertainment activities in the United States during the tax year. 1040ez instructions Income received by a resident of Austria for services performed as an employee and member of the regular complement of a ship or aircraft operated in international traffic is exempt from U. 1040ez instructions S. 1040ez instructions income tax. 1040ez instructions Bangladesh Income that residents of Bangladesh receive for performing personal services as independent contractors or self-employed individuals (independent personal services) in the United States during the tax year is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents: Are in the United States for no more than 183 days in any 12-month period beginning or ending in the tax year, or Do not have a fixed base regularly available to them in the United States for the purpose of performing the services. 1040ez instructions If they have a fixed base available in the United States, they are taxed on the income attributable to the fixed base. 1040ez instructions Income that residents of Bangladesh receive for services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents meet the following requirements. 1040ez instructions They are in the United States for no more than 183 days in any 12-month period beginning or ending in the tax year. 1040ez instructions Their income is paid by, or on behalf of, an employer who is not a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions Their income is not borne by a permanent establishment or a fixed base that the employer has in the United States. 1040ez instructions These exemptions do not apply to pubic entertainers (such as theater, motion picture, radio, or television entertainers, musicians, and athletes) from Bangladesh who earn more than $10,000 in gross receipts, including reimbursed expenses, from their entertainment activities in the United States during the tax year. 1040ez instructions Regardless of these limits, income of Bangladesh entertainers is exempt from U. 1040ez instructions S. 1040ez instructions income tax if their visit to the United States is wholly or mainly supported by public funds of Bangladesh, its political subdivisions, or local authorities. 1040ez instructions Income received from employment as a member of the regular complement of a ship or an aircraft operated by a Bangladesh enterprise in international traffic is exempt from U. 1040ez instructions S. 1040ez instructions tax. 1040ez instructions If the ship or aircraft is operated by a U. 1040ez instructions S. 1040ez instructions enterprise, the income is subject to U. 1040ez instructions S. 1040ez instructions tax. 1040ez instructions If the resident of Bangladesh is a shareholder in a U. 1040ez instructions S. 1040ez instructions corporation, these exemptions do not apply to directors' fees received as a member of the board of directors of the U. 1040ez instructions S. 1040ez instructions corporation. 1040ez instructions The amount received by the shareholder that is more than the amount paid to a director that is not a shareholder is subject to U. 1040ez instructions S. 1040ez instructions tax at the rate of 15%. 1040ez instructions Barbados Income that residents of Barbados receive for performing personal services as independent contractors or self-employed individuals (independent personal services) in the United States during the tax year is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents: Are in the United States for no more than 89 days during the tax year, Earn net income for independent services provided to U. 1040ez instructions S. 1040ez instructions residents that is not more than $5,000 (there is no dollar limit if the contractors are not U. 1040ez instructions S. 1040ez instructions residents), and Do not have a regular base available in the United States for performing the services. 1040ez instructions If they have a regular base available in the United States but otherwise meet the conditions for exemption, they are taxed only on the income attributable to the regular base. 1040ez instructions Income that residents of Barbados receive for personal services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions tax if the residents meet four requirements. 1040ez instructions They are in the United States for no more than 183 days during the calendar year. 1040ez instructions The income earned in the calendar year in the United States is not more than $5,000. 1040ez instructions Their income is paid by or for an employer who is not a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions The income is not borne by a permanent establishment or regular base of the employer in the United States. 1040ez instructions Income of a Barbadian resident from employment as a member of the regular complement of a ship or aircraft operated in international traffic is exempt from U. 1040ez instructions S. 1040ez instructions tax. 1040ez instructions These exemptions do not apply to Barbadian resident public entertainers (such as theater, motion picture, radio, or television artists, musicians, or athletes) who receive gross receipts of more than $250 per day or $4,000 in the tax year, not including reimbursed expenses, from their entertainment activities in the United States. 1040ez instructions However, the exemptions do apply regardless of these limits on gross receipts if the entertainer's visit to the United States is substantially supported by Barbadian public funds or if the entertainer's services are provided to a nonprofit organization. 1040ez instructions Belgium Income that residents of Belgium receive for personal services as independent contractors or self-employed individuals are subject to the provisions of Article 7 (Business Profits) of the treaty. 1040ez instructions Under that provision, business profits are exempt from U. 1040ez instructions S. 1040ez instructions income tax unless the individual has a permanent establishment in the United States. 1040ez instructions If they have a permanent establishment in the United States, they are taxed on the profit attributable to the permanent establishment. 1040ez instructions Income that residents of Belgium receive for services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents meet the following requirements. 1040ez instructions They are in the United States for no more than 183 days in any 12-month period beginning or ending in the tax year. 1040ez instructions Their income is paid by, or on behalf of, an employer who is not a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions Their income is not borne by a permanent establishment that the employer has in the United States. 1040ez instructions The exemption does not apply to directors' fees and similar payments received by a resident of Belgium for services performed in the United States as a member of the board of directors of a company that is a resident of the United States. 1040ez instructions Public entertainers (such as theater, motion picture, radio, or television artists, musicians, or athletes) from Belgium who earn more than $20,000 in gross receipts, including reimbursed expenses, from their entertainment activities in the United States during the tax year are subject to U. 1040ez instructions S. 1040ez instructions tax. 1040ez instructions Income received by a resident of Belgium for services performed as an employee and member of the regular complement of a ship or aircraft operated in international traffic is exempt from U. 1040ez instructions S. 1040ez instructions income tax. 1040ez instructions Bulgaria Income that residents of Bulgaria receive for personal services as independent contractors or self-employed individuals is subject to the provisions of Article 7 (Business Profits) of the treaty. 1040ez instructions Under that provision, business profits are exempt from U. 1040ez instructions S. 1040ez instructions income tax unless the individual has a permanent establishment in the United States. 1040ez instructions If they have a permanent establishment in the United States, they are taxed on the profit attributable to the permanent establishment. 1040ez instructions Under Article 5 (Permanent Establishment), you may be considered to provide services through a permanent establishment in the United States even if you do not have a fixed place of business. 1040ez instructions Income that residents of Bulgaria receive for services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents meet the following requirements. 1040ez instructions They are in the United States for no more than 183 days in any 12-month period beginning or ending in the tax year. 1040ez instructions Their income is paid by, or on behalf of, an employer who is not a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions Their income is not borne by a permanent establishment that the employer has in the United States. 1040ez instructions The exemption does not apply to directors' fees and similar payments received by a resident of Bulgaria as a member of the board of directors of a U. 1040ez instructions S. 1040ez instructions company. 1040ez instructions Public entertainers (such as theater, motion picture, radio, or television artists, musicians, or athletes) from Bulgaria who earn more than $15,000 in gross receipts, including reimbursed expenses, from their entertainment activities in the United States during the tax year are subject to U. 1040ez instructions S. 1040ez instructions tax. 1040ez instructions Income received by a resident of Bulgaria for services performed as an employee and member of the regular complement of a ship or aircraft operated in international traffic is exempt from U. 1040ez instructions S. 1040ez instructions income tax. 1040ez instructions Canada Income that residents of Canada receive for personal services as independent contractors or self-employed individuals is subject to the provisions of Article VII (Business Profits) of the treaty. 1040ez instructions Under that provision, business profits are exempt from U. 1040ez instructions S. 1040ez instructions income tax unless the individual has a permanent establishment in the United States. 1040ez instructions If they have a permanent establishment in the United States, they are taxed on the profit attributable to the permanent establishment. 1040ez instructions Under Article V (Permanent Establishment), you may be considered to provide services through a permanent establishment in the United States even if you do not have a fixed place of business. 1040ez instructions Income that residents of Canada receive for personal services performed as employees (dependent personal services) in the United States is exempt from U. 1040ez instructions S. 1040ez instructions tax if it is not more than $10,000 for the year. 1040ez instructions If the income is more than $10,000 for the year, it is exempt only if: The residents are present in the United States for no more than 183 days in any 12-month period beginning or ending in the tax year, and The income is not paid by, or on behalf of, a U. 1040ez instructions S. 1040ez instructions resident, and is not borne by a permanent establishment in the United States. 1040ez instructions Public entertainers (such as theater, motion picture, radio, or television artists, musicians, or athletes) from Canada who derive more than $15,000 in gross receipts, including reimbursed expenses, from their entertainment activities in the United States during the calendar year are subject to U. 1040ez instructions S. 1040ez instructions tax. 1040ez instructions However, this article does not apply to athletes participating in team sports in leagues with regularly scheduled games in both Canada and the United States. 1040ez instructions Pay received by a resident of Canada for employment regularly done in more than one country on a ship, aircraft, motor vehicle, or train operated by a Canadian resident is exempt from U. 1040ez instructions S. 1040ez instructions tax. 1040ez instructions China, People's Republic of Income that residents of the People's Republic of China receive for personal services as independent contractors or self-employed individuals (independent personal services) that they perform during the tax year in the United States is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents: Are present in the United States for no more than 183 days in the calendar year, and Do not have a fixed base regularly available in the United States for performing the services. 1040ez instructions If they have a fixed base available in the United States, they are taxable on the income attributable to the fixed base. 1040ez instructions Pay received by residents of the People's Republic of China for services performed as employees (dependent personal services) in the United States is exempt from U. 1040ez instructions S. 1040ez instructions tax if: The residents are present in the United States for no more than 183 days in the calendar year, The pay is paid by or for an employer who is not a U. 1040ez instructions S. 1040ez instructions resident, and The pay is not borne by a permanent establishment or fixed base that the employer has in the United States. 1040ez instructions These exemptions do not apply to directors' fees for service on the board of directors of a U. 1040ez instructions S. 1040ez instructions corporation. 1040ez instructions These exemptions generally do not apply to income received as a public entertainer (such as a theater, motion picture, radio, or television artist, musician, or athlete). 1040ez instructions However, income of athletes or public entertainers from China participating in a cultural exchange program agreed upon by the U. 1040ez instructions S. 1040ez instructions and Chinese governments is exempt from U. 1040ez instructions S. 1040ez instructions tax. 1040ez instructions Commonwealth of Independent States Income that residents of a C. 1040ez instructions I. 1040ez instructions S. 1040ez instructions member receive for performing personal services in the United States is exempt from U. 1040ez instructions S. 1040ez instructions income tax if those residents are in the United States for no more than 183 days during the tax year. 1040ez instructions Pay received by an employee who is a member of the regular complement of a ship or aircraft operated in international traffic by a C. 1040ez instructions I. 1040ez instructions S. 1040ez instructions member or a resident of a C. 1040ez instructions I. 1040ez instructions S. 1040ez instructions member is exempt from U. 1040ez instructions S. 1040ez instructions tax. 1040ez instructions Cyprus Income that residents of Cyprus receive for performing personal services as independent contractors or self-employed individuals (independent personal services) in the United States during the tax year is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents: Are present in the United States for less than 183 days in the tax year, and Do not have a fixed base regularly available to them in the United States for performing the services. 1040ez instructions If they have a fixed base available in the United States, they are taxable on the income attributable to the fixed base. 1040ez instructions Pay received by residents of Cyprus from services performed as employees (dependent personal services), including services as an officer of a corporation, is exempt from U. 1040ez instructions S. 1040ez instructions income tax if: The residents are in the United States for less than 183 days during the tax year, The pay is paid by or for an employer who is not a U. 1040ez instructions S. 1040ez instructions resident, and The pay is not borne by a permanent establishment, fixed base, or trade or business that the employer has in the United States. 1040ez instructions Pay received by a Cyprus resident for performing personal services as an employee and member of the regular complement of a ship or aircraft operated in international traffic by a resident of Cyprus is exempt from U. 1040ez instructions S. 1040ez instructions tax. 1040ez instructions These exemptions do not apply to Cyprus resident public entertainers (theater, motion picture, radio, or television artists, musicians, or athletes) who receive gross receipts of more than $500 per day or $5,000 for the tax year, not including reimbursed expenses, from their entertainment activities in the United States. 1040ez instructions Directors' fees received by residents of Cyprus for service on the board of directors of a U. 1040ez instructions S. 1040ez instructions corporation are exempt from U. 1040ez instructions S. 1040ez instructions income tax to the extent of a reasonable fixed amount payable to all directors for each day of attendance at directors' meetings held in the United States. 1040ez instructions Czech Republic Income that residents of the Czech Republic receive for performing personal services as independent contractors or self-employed individuals (independent personal services) in the United States is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents: Are present in the United States for no more than 183 days in any 12-month period, and Do not have a fixed base regularly available to them in the United States for performing the services. 1040ez instructions If they have a fixed base available, they are taxed only on income attributable to the fixed base. 1040ez instructions Income that residents of the Czech Republic receive for employment in the United States (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the following three requirements are met. 1040ez instructions The resident is present in the United States for no more than 183 days in any 12-month period. 1040ez instructions The income is paid by, or on behalf of, an employer who is not a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions The income is not borne by a permanent establishment or a fixed base that the employer has in the United States. 1040ez instructions These exemptions do not apply to income residents of the Czech Republic receive as public entertainers (such as theater, motion picture, radio, or television artists, or musicians) or sportsmen if their gross receipts, including reimbursed expenses, are more than $20,000 during the tax year. 1040ez instructions Regardless of these limits, income of Czech entertainers and sportsmen is exempt from U. 1040ez instructions S. 1040ez instructions income tax if their visit to the United States is substantially supported by public funds of the Czech Republic, its political subdivisions, or local authorities, or the visit is made pursuant to a specific arrangement between the United States and the Czech Republic. 1040ez instructions These exemptions do not apply to directors' fees and similar payments received by a resident of the Czech Republic as a member of the board of directors of a company that is a resident of the United States. 1040ez instructions Income from employment as a member of the regular complement of a ship or aircraft operated by a Czech enterprise in international traffic is exempt from U. 1040ez instructions S. 1040ez instructions income tax. 1040ez instructions If the ship or aircraft is operated by a U. 1040ez instructions S. 1040ez instructions enterprise, the income is subject to U. 1040ez instructions S. 1040ez instructions tax. 1040ez instructions Denmark Income that residents of Denmark receive for personal services as independent contractors or self-employed individuals (independent personal services) in the United States is exempt from U. 1040ez instructions S. 1040ez instructions income tax if they do not have a fixed base regularly available to them in the United States for performing the services. 1040ez instructions If they have a fixed base available in the United States, they are taxed on the income attributable to the fixed base. 1040ez instructions Income that residents of Denmark receive for services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents meet the following requirements. 1040ez instructions They are in the United States for no more than 183 days in any 12-month period beginning or ending in the tax year. 1040ez instructions Their income is paid by, or on behalf of, an employer who is not a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions Their income is not borne by a permanent establishment or a fixed base that the employer has in the United States. 1040ez instructions These exemptions do not apply to directors' fees and similar payments received by a resident of Denmark as a member of the board of directors of a company that is a resident of the United States. 1040ez instructions These exemptions do not apply to public entertainers (such as theater, motion picture, radio, or television artists, musicians, and athletes) from Denmark who earn more than $20,000 in gross receipts, including reimbursed expenses, from their entertainment activities in the United States during the tax year. 1040ez instructions Income received by a resident of Denmark for services performed as an employee and member of the regular complement of a ship or aircraft operated in international traffic is exempt from U. 1040ez instructions S. 1040ez instructions income tax. 1040ez instructions Egypt Income that residents of Egypt receive for performing personal services as independent contractors or as self-employed individuals (independent personal services) in the United States during the tax year is exempt from U. 1040ez instructions S. 1040ez instructions income tax if they are in the United States for no more than 89 days during the tax year. 1040ez instructions Income that residents of Egypt receive for labor or personal services performed in the United States as employees (dependent personal services), including income for services performed by an officer of a corporation or company, is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents meet four requirements. 1040ez instructions They are in the United States for no more than 89 days during the tax year. 1040ez instructions They are employees of a resident of, or a permanent establishment in, Egypt. 1040ez instructions Their income is not borne by a permanent establishment that the employer has in the United States. 1040ez instructions Their income is subject to Egyptian tax. 1040ez instructions This exemption does not apply to pay received by a resident of Egypt who is an employee and member of the regular complement of a ship or an aircraft operated in international traffic by a resident of the United States. 1040ez instructions These exemptions do not apply to Egyptian resident public entertainers (theater, motion picture, radio, or television artists, musicians, or athletes), who earn income for services as public entertainers if the gross amount of the income is more than $400 for each day they are in the United States performing the services. 1040ez instructions Estonia Income that residents of Estonia receive for performing personal services as independent contractors or self-employed individuals (independent personal services) in the United States is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents: Are in the United States for no more than 183 days in any 12-month period beginning or ending in the tax year, and Do not have a fixed base regularly available to them in the United States for performing the services. 1040ez instructions If they have a fixed base available, they are taxed on the income attributable to the fixed base. 1040ez instructions Income that residents of Estonia receive for services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the following requirements are met. 1040ez instructions The resident is in the United States for no more than 183 days in any 12-month period beginning or ending in the tax year. 1040ez instructions The income is paid by, or on behalf of, an employer who is not a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions The income is not borne by a permanent establishment or a fixed base that the employer has in the United States. 1040ez instructions These exemptions do not apply to directors' fees and similar payments received by a resident of Estonia as a member of the board of directors or similar body of a company that is a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions Pay received for employment as a member of the regular complement of a ship or an aircraft operated in international traffic by a United States enterprise is subject to U. 1040ez instructions S. 1040ez instructions tax. 1040ez instructions These exemptions do not apply to income residents of Estonia receive as public entertainers (such as theater, motion picture, radio, or television artists, or musicians) or sportsmen if their gross receipts, including reimbursed expenses, are more than $20,000 for their personal activities in the United States during the tax year. 1040ez instructions Regardless of these limits, income of Estonian entertainers or athletes is exempt from U. 1040ez instructions S. 1040ez instructions income tax if their visit to the United States is wholly or mainly supported by public funds of Estonia, its political subdivisions, or local authorities. 1040ez instructions Finland Income that residents of Finland receive for performing personal services as independent contractors or self-employed individuals (independent personal services) in the United States is exempt from U. 1040ez instructions S. 1040ez instructions income tax if they do not have a fixed base regularly available to them in the United States for performing the services. 1040ez instructions If they have a fixed base available in the United States, they are taxed on the income attributable to the fixed base. 1040ez instructions Income that residents of Finland receive for labor or personal services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents meet three requirements. 1040ez instructions They are in the United States for no more than 183 days during any 12-month period. 1040ez instructions Their income is paid by, or on behalf of, an employer who is not a resident of the United States. 1040ez instructions Their income is not borne by a permanent establishment, fixed base, or trade or business that the employer has in the United States. 1040ez instructions The exemption does not apply to pay received by a resident of Finland who is an employee and member of the regular complement of a ship or aircraft operated in international traffic by a resident of the United States. 1040ez instructions These exemptions do not apply to income residents of Finland receive as public entertainers or sportsmen if the gross income, including reimbursed expenses, is more than $20,000 for their personal activities in the United States during the calendar year. 1040ez instructions France Income that residents of France receive for performing personal services as independent contractors or self-employed individuals (independent personal services) in the United States is exempt from U. 1040ez instructions S. 1040ez instructions income tax if they do not have a fixed base regularly available to them in the United States for performing the services. 1040ez instructions If they have a fixed base available in the United States, they are taxed on the income attributable to the fixed base. 1040ez instructions Income that residents of France receive for labor or personal services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents meet three requirements. 1040ez instructions They are in the United States for no more than 183 days in any 12-month period. 1040ez instructions Their income is paid by, or on behalf of, an employer who is not a resident of the United States. 1040ez instructions Their income is not borne by a permanent establishment or a fixed base that the employer has in the United States. 1040ez instructions Income for services performed by a resident of France as an employee and member of the regular complement of a ship or an aircraft operated in international traffic is exempt from tax in the United States. 1040ez instructions These exemptions do not apply to public entertainers (such as theater, motion picture, radio, or television artists, or musicians), or sportsmen from France who earn more than $10,000 in gross receipts, including reimbursed expenses, from their entertainment activities in the United States during the tax year. 1040ez instructions Regardless of these limits, income of French entertainers or sportsmen is exempt from U. 1040ez instructions S. 1040ez instructions tax if their visit is principally supported by public funds of France. 1040ez instructions These exemptions do not apply to directors' fees and similar payments received by a resident of France as a member of the board of directors of a company that is a resident of the United States. 1040ez instructions Germany Income that residents of Germany receive for personal services as independent contractors or self-employed individuals are subject to the provisions of Article 7 (Business Profits) of the treaty. 1040ez instructions Under that provision, business profits are exempt from U. 1040ez instructions S. 1040ez instructions income tax unless the individual has a permanent establishment in the United States. 1040ez instructions If they have a permanent establishment in the United States, they are taxed on the profit attributable to the permanent establishment. 1040ez instructions Income that residents of Germany receive for labor or personal services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions tax if the residents meet three requirements. 1040ez instructions They are in the United States for no more than 183 days during the calendar year. 1040ez instructions The income is paid by, or on behalf of, an employer who is not a resident of the United States. 1040ez instructions The income is not borne by a permanent establishment that the employer has in the United States. 1040ez instructions Pay received by a resident of Germany for services performed as an employee and member of the regular complement of a ship or aircraft operated in international traffic is exempt from U. 1040ez instructions S. 1040ez instructions tax. 1040ez instructions The exemption does not apply to directors' fees and other similar payments received by a resident of Germany for services performed in the United States as a member of the board of directors of a company resident in the United States. 1040ez instructions Income residents of Germany receive as public entertainers (such as theater, motion picture, radio, or television artists, or musicians) or athletes is subject to U. 1040ez instructions S. 1040ez instructions tax if their gross receipts, including reimbursed expenses, from their entertainment activities in the United States are more than $20,000 during the calendar year. 1040ez instructions Income of German entertainers or athletes is exempt from U. 1040ez instructions S. 1040ez instructions tax if their visit to the United States is substantially supported by public funds of Germany, its political subdivisions, or local authorities. 1040ez instructions Greece Income that residents of Greece receive for labor or personal services (including practicing liberal and artistic professions) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if they are in the United States for no more than 183 days during the tax year and the pay is not more than $10,000. 1040ez instructions The pay, regardless of amount, is exempt from U. 1040ez instructions S. 1040ez instructions income tax if it is for labor or personal services performed as employees of, or under contract with, a resident of Greece or a Greek corporation or other entity of Greece, and if the residents are in the United States for no more than 183 days during the tax year. 1040ez instructions Hungary Income that residents of Hungary receive for performing personal services as independent contractors or self-employed individuals (independent personal services) in the United States during the tax year is exempt from U. 1040ez instructions S. 1040ez instructions tax if the residents: Are in the United States for no more than 183 days during the tax year, and Do not have a fixed base regularly available in the United States. 1040ez instructions If they have a fixed base available in the United States, they are taxed on the income attributable to the fixed base. 1040ez instructions Income that residents of Hungary receive for labor or personal services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents meet three requirements. 1040ez instructions They are in the United States for no more than 183 days during the tax year. 1040ez instructions Their income is paid by or on behalf of an employer who is not a resident of the United States. 1040ez instructions Their income is not borne by a permanent establishment or a fixed base that the employer has in the United States. 1040ez instructions Pay received by an employee who is a member of the regular complement of a ship or aircraft operated by a Hungarian enterprise in international traffic is exempt from U. 1040ez instructions S. 1040ez instructions tax. 1040ez instructions If the ship or aircraft is operated by a U. 1040ez instructions S. 1040ez instructions enterprise, the pay is subject to U. 1040ez instructions S. 1040ez instructions tax. 1040ez instructions Iceland Income that residents of Iceland receive for personal services as independent contractors or self-employed individuals is subject to the provisions of Article 7 (Business Profits) of the treaty. 1040ez instructions Under that provision, business profits are exempt from U. 1040ez instructions S. 1040ez instructions income tax unless the individual has a permanent establishment in the United States. 1040ez instructions If they have a permanent establishment in the United States, they are taxed on the profit attributable to the permanent establishment. 1040ez instructions Income that residents of Iceland receive for services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents meet the following requirements. 1040ez instructions They are in the United States for no more than 183 days in any 12-month period beginning or ending in the tax year. 1040ez instructions Their income is paid by, or on behalf of, an employer who is not a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions Their income is not borne by a permanent establishment that the employer has in the United States. 1040ez instructions The exemption does not apply to directors' fees and similar payments received by a resident of Iceland as a member of the board of directors of a U. 1040ez instructions S. 1040ez instructions company. 1040ez instructions Public entertainers (such as theater, motion picture, radio, or television artists, musicians, or athletes) from Iceland who earn more than $20,000 in gross receipts, including reimbursed expenses, from their entertainment activities in the United States during the tax year are subject to U. 1040ez instructions S. 1040ez instructions tax. 1040ez instructions Income received by a resident of Iceland for services performed as an employee and member of the regular complement of a ship or aircraft operated in international traffic is exempt from U. 1040ez instructions S. 1040ez instructions income tax. 1040ez instructions India Income that residents of India receive for performing personal services in the United States during the tax year as independent contractors or self-employed individuals (independent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents: Are present in the United States for no more than 89 days during the tax year, and Do not have a fixed base regularly available to them in the United States for performing the services. 1040ez instructions If they have a fixed base available, they are taxed only on income attributable to the fixed base. 1040ez instructions Income that residents of India receive for personal services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents meet three requirements. 1040ez instructions They are present in the United States for no more than 183 days during the tax year. 1040ez instructions The income is paid by, or on behalf of, an employer who is not a resident of the United States. 1040ez instructions The income is not borne by a permanent establishment, fixed base, or trade or business the employer has in the United States. 1040ez instructions The exemption does not apply to pay received by a resident of India for services performed as an employee aboard a ship or aircraft operated in international traffic by a U. 1040ez instructions S. 1040ez instructions enterprise. 1040ez instructions These exemptions do not apply to directors' fees and similar payments received by an Indian resident as a member of the board of directors of a company that is a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions These exemptions do not apply to income residents of India receive as public entertainers (such as theater, motion picture, radio, or television artists, or musicians) or athletes if their net income is more than $1,500 during the tax year for their entertainment activities in the United States. 1040ez instructions Regardless of this limit, the income of Indian entertainers and athletes is exempt from U. 1040ez instructions S. 1040ez instructions tax if their visit to the United States is wholly or substantially supported from the public funds of the Indian Government, its political subdivisions, or local authorities. 1040ez instructions Indonesia Income that residents of Indonesia receive for performing personal services as individual contractors or self-employed individuals (independent personal services) in the United States during the tax year is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents: Are present in the United States for no more than 119 days during any consecutive 12-month period, and Do not have a fixed base regularly available to them in the United States for performing the services. 1040ez instructions If they have a fixed base available, they are taxed only on the income attributable to the fixed base. 1040ez instructions Income that residents of Indonesia receive for personal services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents meet three requirements. 1040ez instructions They are present in the United States no more than 119 days during any consecutive 12-month period. 1040ez instructions The income is paid by, or on behalf of, an employer who is not a resident of the United States. 1040ez instructions The income is not borne or reimbursed by a permanent establishment the employer has in the United States. 1040ez instructions Pay received by an individual for services performed as an employee aboard a ship or aircraft operated by an Indonesian resident in international traffic is exempt from U. 1040ez instructions S. 1040ez instructions tax if the individual is a member of the regular complement of the ship or aircraft. 1040ez instructions These exemptions do not apply to income residents of Indonesia receive as public entertainers (such as theater, motion picture, radio, or television artists, or musicians) or athletes if their gross receipts, including reimbursed expenses, are more than $2,000 during any consecutive 12-month period. 1040ez instructions Regardless of these limits, income of Indonesian entertainers and athletes is exempt from U. 1040ez instructions S. 1040ez instructions tax if their visit to the United States is substantially supported or sponsored by the Indonesian Government and the Indonesian competent authority certifies that the entertainers or athletes qualify for this exemption. 1040ez instructions Ireland Income that residents of Ireland receive for personal services as independent contractors or self-employed individuals (independent personal services) in the United States is exempt from U. 1040ez instructions S. 1040ez instructions income tax if they do not have a fixed base regularly available to them in the United States for performing the services. 1040ez instructions If they have a fixed base available in the United States, they are taxed on the income attributable to the fixed base. 1040ez instructions Income that residents of Ireland receive for services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents meet the following requirements. 1040ez instructions They are in the United States for no more than 183 days in any 12-month period beginning or ending in the tax year. 1040ez instructions Their income is paid by, or on behalf of, an employer who is not a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions Their income is not borne by a permanent establishment or a fixed base that the employer has in the United States. 1040ez instructions These exemptions do not apply to directors' fees and similar payments received by a resident of Ireland as a member of the board of directors of a company that is a resident of the United States. 1040ez instructions However, amounts received for attending meetings in Ireland are not subject to U. 1040ez instructions S. 1040ez instructions income tax. 1040ez instructions Income received by a resident of Ireland for services performed as an employee and member of the regular complement of a ship or aircraft operated in international traffic is exempt from U. 1040ez instructions S. 1040ez instructions income tax. 1040ez instructions These exemptions do not apply to public entertainers (such as theater, motion picture, radio, or television entertainers, musicians, and athletes) from Ireland who earn more than $20,000 in gross receipts, including reimbursed expenses, from their entertainment activities in the United States during the tax year. 1040ez instructions Israel Income that residents of Israel receive for performing personal services as independent contractors or as self-employed individuals (independent personal services) in the United States during the tax year is exempt from U. 1040ez instructions S. 1040ez instructions income tax if they are in the United States for no more than 182 days during the tax year. 1040ez instructions Income that residents of Israel receive for labor or personal services performed in the United States as employees (dependent personal services), including income for services performed by an officer of a corporation or company, is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents meet four requirements. 1040ez instructions They are in the United States for no more than 182 days during the tax year. 1040ez instructions They are employees of a resident of, or a permanent establishment in, Israel. 1040ez instructions Their income is not borne by a permanent establishment that the employer has in the United States. 1040ez instructions Their income is subject to Israeli tax. 1040ez instructions The exemption does not apply to pay received by an employee for labor or personal services performed as a member of the regular complement of a ship or an aircraft operated in international traffic by a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions These exemptions do not apply to income that residents of Israel receive as public entertainers (such as theater, motion picture, radio, or television artists, musicians, or athletes), if the gross amount of the income is more than $400 for each day they are in the United States performing the services. 1040ez instructions Italy Income that residents of Italy receive for personal services as independent contractors or self-employed individuals (independent personal services) in the United States is exempt from U. 1040ez instructions S. 1040ez instructions income tax if they do not have a fixed base regularly available to them in the United States for performing the services. 1040ez instructions If they have a fixed base available in the United States, they are taxed on the income attributable to the fixed base. 1040ez instructions Income that residents of Italy receive for labor or personal services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the following requirements are met. 1040ez instructions The residents are in the United States for no more than 183 days during the tax year. 1040ez instructions The income is paid by, or on behalf of, an employer who is not a resident of the United States. 1040ez instructions The income is not borne by a permanent establishment or a fixed base that the employer has in the United States. 1040ez instructions These exemptions do not apply to directors' fees and similar payments received by a resident of Italy for services performed in the United States as a member of the board of directors of a company that is a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions Pay received for employment regularly exercised aboard a ship or aircraft operated by a U. 1040ez instructions S. 1040ez instructions enterprise is subject to U. 1040ez instructions S. 1040ez instructions tax. 1040ez instructions These exemptions do not apply to income residents of Italy receive as public entertainers (such as theater, motion picture, radio, or television artists, musicians, or athletes) if they are present in the United States for more than 90 days during the tax year or their gross receipts, including reimbursed expenses, are more than $20,000 during the tax year for their entertainment activities in the United States. 1040ez instructions Jamaica Income that residents of Jamaica receive for the performance of personal services as independent contractors or self-employed individuals (independent personal services) in the United States during the tax year is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents: Are in the United States for no more than 89 days during the tax year, Do not have a fixed base regularly available to them in the United States for performing their services, and Earn net income for those services that is not more than $5,000 during the tax year if the income is from a U. 1040ez instructions S. 1040ez instructions contractor. 1040ez instructions If they have a fixed base available in the United States, they are taxed only on the income that is attributable to the fixed base. 1040ez instructions There is no dollar limit for condition (3) if the contractor is from a country other than the United States. 1040ez instructions Income that residents of Jamaica receive for personal services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents meet four requirements. 1040ez instructions They are in the United States for no more than 183 days during the tax year. 1040ez instructions Their income is paid by or for an employer who is not a resident of the United States. 1040ez instructions Their income is not borne by a permanent establishment or a fixed base that the employer has in the United States. 1040ez instructions Their net income received for the services is not more than $5,000 during the tax year. 1040ez instructions Pay received from employment as a member of the regular complement of a ship or an aircraft operated in international traffic by a Jamaican enterprise is exempt from U. 1040ez instructions S. 1040ez instructions tax. 1040ez instructions If the ship or aircraft is operated by a U. 1040ez instructions S. 1040ez instructions enterprise, the pay is subject to U. 1040ez instructions S. 1040ez instructions tax. 1040ez instructions These exemptions do not apply to income that residents of Jamaica receive for performing services in the United States as entertainers, such as theater, motion picture, radio, or television artists, musicians, or athletes, if the gross receipts (excluding reimbursements for expenses) from the services are more than $400 a day or $5,000 for the tax year. 1040ez instructions Directors' fees received by residents of Jamaica for services performed in the United States as members of boards of directors of U. 1040ez instructions S. 1040ez instructions corporations are exempt from U. 1040ez instructions S. 1040ez instructions tax if the fees (excluding reimbursed expenses) are not more than $400 per day for each day the directors are present in the United States to perform the services. 1040ez instructions Japan Income that residents of Japan receive for personal services as independent contractors or self-employed individuals is subject to the provisions of Article 7 (business profits) of the treaty. 1040ez instructions Under that provision, business profits are exempt from U. 1040ez instructions S. 1040ez instructions income tax unless the individual has a permanent establishment in the United States. 1040ez instructions If they have a permanent establishment in the United States, they are taxed on the profits attributable to the permanent establishment. 1040ez instructions Income that residents of Japan receive for services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents meet the following requirements. 1040ez instructions They are in the United States for no more than 183 days in any 12-month period beginning or ending in the tax year. 1040ez instructions Their income is paid by, or on behalf of, an employer who is not a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions Their income is not borne by a permanent establishment that the employer has in the United States. 1040ez instructions The exemption does not apply to directors' fees and similar payments received by a resident of Japan for services performed as a member of the board of directors of a company that is a resident of the United States. 1040ez instructions The exemption does not apply to a resident of Japan who performs services as an employee aboard a ship or an aircraft operated in international traffic by a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions Public entertainers (such as theater, motion picture, radio, or television artists, musicians, or athletes) from Japan who earn more than $10,000 in gross receipts, including reimbursed expenses, from their entertainment activities in the United States during the tax year are subject to U. 1040ez instructions S. 1040ez instructions tax. 1040ez instructions Kazakhstan Income that residents of Kazakhstan receive for performing personal services as independent contractors or self-employed individuals (independent personal services) in the United States is exempt from U. 1040ez instructions S. 1040ez instructions income tax if: The residents are in the United States for no more than 183 days in any consecutive 12-month period, and The income is not attributable to a fixed base in the United States which is regularly available to the residents. 1040ez instructions If the residents have a fixed base available, they are taxed only on the income attributable to the fixed base. 1040ez instructions Income that residents of Kazakhstan receive for employment in the United States (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the following three requirements are met. 1040ez instructions The resident is in the United States for no more than 183 days in any 12-month period. 1040ez instructions The income is paid by, or on behalf of, an employer who is not a resident of the United States. 1040ez instructions The income is not borne by a permanent establishment or a fixed base that the employer has in the United States. 1040ez instructions Income derived by a resident of Kazakhstan from employment as a member of the regular complement of a ship or aircraft operated in international traffic is exempt from U. 1040ez instructions S. 1040ez instructions tax. 1040ez instructions These exemptions do not apply to directors' fees and similar payments received by a resident of Kazakhstan as a member of the board of directors or similar body of a company that is a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions Korea, South Income that residents of South Korea receive for performing personal services as independent contractors or self-employed individuals (independent personal services) in the United States during the tax year is exempt from U. 1040ez instructions S. 1040ez instructions tax if the residents: Are in the United States for no more than 182 days during the tax year, Earn income for those services that is not more than $3,000 during the tax year, and Do not maintain a fixed base in the United States for more than 182 days during the tax year. 1040ez instructions If they maintain a fixed base in the United States for more than 182 days, they are taxed on the income attributable to the fixed base. 1040ez instructions Income that residents of Korea receive for labor or personal services performed in the United States as employees (dependent personal services), including pay for services performed as an officer of a corporation, is exempt from U. 1040ez instructions S. 1040ez instructions tax if the residents meet four requirements. 1040ez instructions They are in the United States for no more than 182 days during the tax year. 1040ez instructions They are employees of a resident of Korea or of a permanent establishment maintained in Korea. 1040ez instructions Their compensation is not borne by a permanent establishment that the employer has in the United States. 1040ez instructions Their income for those services is not more than $3,000. 1040ez instructions Pay received by employees who are members of the regular complement of a ship or aircraft operated by a resident of Korea in international traffic is exempt. 1040ez instructions Latvia Income that residents of Latvia receive for performing personal services as independent contractors or self-employed individuals (independent personal services) in the United States is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents: Are in the United States for no more than 183 days in any 12-month period beginning or ending in the tax year, and Do not have a fixed base regularly available to them in the United States for performing the services. 1040ez instructions If they have a fixed base available, they are taxed only on the income attributable to the fixed base. 1040ez instructions Income that residents of Latvia receive for services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the following requirements are met. 1040ez instructions The resident is in the United States for no more than 183 days in any 12-month period beginning or ending in the tax year. 1040ez instructions The income is paid by, or on behalf of, an employer who is not a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions The income is not borne by a permanent establishment or a fixed base that the employer has in the United States. 1040ez instructions The exemption does not apply to pay received for employment as a member of the regular complement of a ship or an aircraft operated in international traffic by a U. 1040ez instructions S. 1040ez instructions enterprise. 1040ez instructions The exemptions do not apply to directors' fees and similar payments received by a resident of Latvia as a member of the board of directors or similar body of a company that is a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions The exemptions do not apply to income residents of Latvia receive as public entertainers (such as theater, motion picture, radio, or television artists, or musicians) or sportsmen if their gross receipts, including reimbursed expenses, are more than $20,000 for their personal activities in the United States during the tax year. 1040ez instructions Regardless of these limits, income of Latvian entertainers or athletes is exempt from U. 1040ez instructions S. 1040ez instructions income tax if their visit to the United States is wholly or mainly supported by public funds of Latvia, its political subdivisions, or local authorities. 1040ez instructions Lithuania Income that residents of Lithuania receive for performing personal services as independent contractors or self-employed individuals (independent personal services) in the United States is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents: Are in the United States for no more than 183 days in any 12-month period beginning or ending in the tax year, and Do not have a fixed base regularly available to them in the United States for performing the services. 1040ez instructions If they have a fixed base available, they are taxed only on the income attributable to the fixed base. 1040ez instructions Income that residents of Lithuania receive for services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the following requirements are met. 1040ez instructions The resident is in the United States for no more than 183 days in any 12-month period beginning or ending in the tax year. 1040ez instructions The income is paid by, or on behalf of, an employer who is not a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions The income is not borne by a permanent establishment or a fixed base that the employer has in the United States. 1040ez instructions The exemption does not apply to pay received for employment as a member of the regular complement of a ship or an aircraft operated in international traffic by a U. 1040ez instructions S. 1040ez instructions enterprise. 1040ez instructions The exemptions do not apply to directors' fees and similar payments received by a resident of Lithuania as a member of the board of directors or similar body of a company that is a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions The exemptions do not apply to income residents of Lithuania receive as public entertainers (such as theater, motion picture, radio, or television artists, or musicians) or sportsmen if their gross receipts, including reimbursed expenses, are more than $20,000 for their personal activities in the United States during the tax year. 1040ez instructions Regardless of these limits, income of Lithuanian entertainers or athletes is exempt from U. 1040ez instructions S. 1040ez instructions income tax if their visit to the United States is wholly or mainly supported by public funds of Lithuania, its political subdivisions, or local authorities. 1040ez instructions Luxembourg Income that residents of Luxembourg receive for personal services as independent contractors or self-employed individuals (independent personal services) in the United States is exempt from U. 1040ez instructions S. 1040ez instructions income tax if they do not have a fixed base regularly available to them in the United States for performing the services. 1040ez instructions If they have a fixed base available in the United States, they are taxed on the income attributable to the fixed base. 1040ez instructions Income that residents of Luxembourg receive for services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents meet the following requirements. 1040ez instructions They are in the United States for no more than 183 days in any 12-month period beginning or ending in the tax year. 1040ez instructions Their income is paid by, or on behalf of, an employer who is not a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions Their income is not borne by a permanent establishment or a fixed base that the employer has in the United States. 1040ez instructions The exemption does not apply to pay received for employment exercised continuously or predominantly aboard a ship or aircraft operated in international traffic by a U. 1040ez instructions S. 1040ez instructions enterprise. 1040ez instructions The exemptions do not apply to directors' fees and similar payments received by a resident of Luxembourg for services performed in the United States as a member of the board of directors of a company that is a resident of the United States. 1040ez instructions The exemptions do not apply to public entertainers (such as theater, motion picture, radio, or television artists, musicians, or athletes) from Luxembourg who earn more than $10,000 in gross receipts, including reimbursed expenses, from their entertainment activities in the United States during the tax year. 1040ez instructions Malta Income that residents of Malta receive for personal services as independent contractors or self-employed individuals is subject to the provisions of Article 7 (Business Profits) of the treaty. 1040ez instructions Under that provision, business profits are exempt from U. 1040ez instructions S. 1040ez instructions income tax unless the individual has a permanent establishment in the United States. 1040ez instructions If they have a permanent establishment in the United States, they are taxed on the profits attributable to the permanent establishment. 1040ez instructions Income that residents of Malta receive for services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents meet the following requirements. 1040ez instructions They are in the United States for no more than 183 days in any 12-month period beginning or ending in the tax year. 1040ez instructions Their income is paid by, or on behalf of, an employer who is not a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions Their income is not borne by a permanent establishment that the employer has in the United States. 1040ez instructions The exemption does not apply to directors' fees and similar payments received by a resident of Malta for services performed in the United States as a member of the board of directors of a company that is a resident of the United States. 1040ez instructions Public entertainers (such as theater, motion picture, radio, or television artists, musicians, or athletes) from Malta who earn more than $20,000 in gross receipts, including reimbursed expenses, from their entertainment activities in the United States during the tax year are subject to U. 1040ez instructions S. 1040ez instructions tax. 1040ez instructions Income received by a resident of Malta for employment aboard a ship or an aircraft operated in international traffic is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the individual is a member of the regular complement of the ship or aircraft. 1040ez instructions Mexico Income that residents of Mexico receive for performing personal services as independent contractors or self-employed individuals (independent personal services) in the United States is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents: Are in the United States for no more than 182 days in a 12-month period, and Do not have a fixed base that they regularly use for performing the services. 1040ez instructions If they have a fixed base available, they are taxed only on income attributable to the fixed base. 1040ez instructions Income that residents of Mexico receive for employment in the United States (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions tax if the following three requirements are met. 1040ez instructions The resident is present in the United States for no more than 183 days in a 12-month period. 1040ez instructions The income is paid by, or on behalf of, an employer who is not a resident of the United States. 1040ez instructions The income is not borne by a permanent establishment or fixed base that the employer has in the United States. 1040ez instructions These exemptions do not apply to directors' fees and similar payments received by a resident of Mexico for services performed outside Mexico as a director or overseer of a company that is a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions These exemptions do not apply to income residents of Mexico receive as public entertainers (such as theater, motion picture, radio, or television artists, or musicians) or athletes if the income, including reimbursed expenses, is more than $3,000 during the tax year for their entertainment activities in the United States. 1040ez instructions This includes income from activities performed in the United States relating to the entertainer or athlete's reputation, such as endorsements of commercial products. 1040ez instructions Regardless of this limit, the income of Mexican entertainers and athletes is exempt from U. 1040ez instructions S. 1040ez instructions tax if their visit to the United States is substantially supported by public funds of Mexico, its political subdivisions, or local authorities. 1040ez instructions Morocco Income that residents of Morocco receive for performing personal services as independent contractors or as self-employed persons (independent personal services) in the United States during the tax year is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents: Are in the United States for no more than 182 days during the tax year, Do not maintain a fixed base in the United States for more than 89 days during the tax year, and Earn total income for those services that is not more than $5,000. 1040ez instructions If they have a fixed base in the United States for more than 89 days, they are taxed only on the income attributable to the fixed base. 1040ez instructions Income that residents of Morocco receive for labor or personal services performed in the United States as employees (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the residents meet three requirements. 1040ez instructions They are in the United States for less than 183 days during the tax year. 1040ez instructions They are employees of a resident of Morocco or of a permanent establishment of a resident of a country other than Morocco if the permanent establishment is located in Morocco. 1040ez instructions Their income is not borne by a permanent establishment that the employer has in the United States. 1040ez instructions Compensation received for services performed by a member of the board of directors of a corporation does not qualify for this exemption. 1040ez instructions Income received by an individual for performing labor or personal services as an employee aboard a ship or an aircraft operated in international traffic by a Moroccan resident is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the individual is a member of the regular complement of the ship or aircraft. 1040ez instructions These exemptions do not apply to income received for services performed in the United States by professional entertainers, including theater, film, radio, and television performers, musicians, and athletes, unless the services are performed by, or for the account of, a Moroccan nonprofit organization. 1040ez instructions Netherlands Income that residents of the Netherlands receive for performing personal services as independent contractors or self-employed individuals (independent personal services) in the United States is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the income is not attributable to a fixed base in the United States that is regularly available for performing the services. 1040ez instructions Income that residents of the Netherlands receive for employment in the United States (dependent personal services) is exempt from U. 1040ez instructions S. 1040ez instructions income tax if the following three requirements are met. 1040ez instructions The resident is in the United States for no more than 183 days during the tax year. 1040ez instructions The income is paid by, or on behalf of, an employer who is not a U. 1040ez instructions S. 1040ez instructions resident. 1040ez instructions The income is not borne by a permanent establishment or fixed base the employer has in the United States. 1040ez instructions Income received by a Netherlands resident for employment as a member of the regular complement of a ship or