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2006 Tax Return Software Free

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2006 Tax Return Software Free

2006 tax return software free Publication 523 - Main Content Table of Contents Main HomeVacant land. 2006 tax return software free Factors used to determine main home. 2006 tax return software free Figuring Gain or LossSelling Price Amount Realized Adjusted Basis Amount of Gain or Loss Dispositions Other Than Sales Determining BasisCost As Basis Basis Other Than Cost Adjusted Basis Excluding the GainMaximum Exclusion Ownership and Use Tests Reduced Maximum Exclusion Nonqualified Use Business Use or Rental of HomeUnrecaptured section 1250 gain. 2006 tax return software free Property Used Partly for Business or Rental Reporting the SaleSeller-financed mortgage. 2006 tax return software free Individual taxpayer identification number (ITIN). 2006 tax return software free More information. 2006 tax return software free Comprehensive Examples Special SituationsException for sales to related persons. 2006 tax return software free Deducting Taxes in the Year of SaleForm 1099-S. 2006 tax return software free More information. 2006 tax return software free Recapturing (Paying Back) a Federal Mortgage Subsidy Recapture of First-Time Homebuyer CreditExample. 2006 tax return software free Worksheets How To Get Tax HelpLow Income Taxpayer Clinics Main Home This section explains the term “main home. 2006 tax return software free ” Usually, the home you live in most of the time is your main home and can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. 2006 tax return software free To exclude gain under the rules in this publication, you in most cases must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. 2006 tax return software free Land. 2006 tax return software free   If you sell the land on which your main home is located, but not the house itself, you cannot exclude any gain you have from the sale of the land. 2006 tax return software free Example. 2006 tax return software free You buy a piece of land and move your main home to it. 2006 tax return software free Then, you sell the land on which your main home was located. 2006 tax return software free This sale is not considered a sale of your main home, and you cannot exclude any gain on the sale of the land. 2006 tax return software free Vacant land. 2006 tax return software free   The sale of vacant land is not a sale of your main home unless: The vacant land is adjacent to land containing your home, You owned and used the vacant land as part of your main home, The separate sale of your home satisfies the requirements for exclusion and occurs within 2 years before or 2 years after the date of the sale of the vacant land, and The other requirements for excluding gain from the sale of a main home have been satisfied with respect to the vacant land. 2006 tax return software free If these requirements are met, the sale of the home and the sale of the vacant land are treated as one sale and only one maximum exclusion can be applied to any gain. 2006 tax return software free See Excluding the Gain , later. 2006 tax return software free The destruction of your home is treated as a sale of your home. 2006 tax return software free As a result, you may be able to meet these requirements if you sell vacant land used as a part of your main home within 2 years from the date of the destruction of your main home. 2006 tax return software free For information, see Publication 547. 2006 tax return software free More than one home. 2006 tax return software free   If you have more than one home, you can exclude gain only from the sale of your main home. 2006 tax return software free You must include in income the gain from the sale of any other home. 2006 tax return software free If you have two homes and live in each of them, your main home is ordinarily the one you live in most of the time during the year. 2006 tax return software free Example 1. 2006 tax return software free You own two homes, one in New York and one in Florida. 2006 tax return software free From 2009 through 2013, you live in the New York home for 7 months and in the Florida residence for 5 months of each year. 2006 tax return software free In the absence of facts and circumstances indicating otherwise, the New York home is your main home. 2006 tax return software free You would be eligible to exclude the gain from the sale of the New York home but not of the Florida home in 2013. 2006 tax return software free Example 2. 2006 tax return software free You own a house, but you live in another house that you rent. 2006 tax return software free The rented house is your main home. 2006 tax return software free Example 3. 2006 tax return software free You own two homes, one in Virginia and one in New Hampshire. 2006 tax return software free In 2009 and 2010, you lived in the Virginia home. 2006 tax return software free In 2011 and 2012, you lived in the New Hampshire home. 2006 tax return software free In 2013, you lived again in the Virginia home. 2006 tax return software free Your main home in 2009, 2010, and 2013 is the Virginia home. 2006 tax return software free Your main home in 2011 and 2012 is the New Hampshire home. 2006 tax return software free You would be eligible to exclude gain from the sale of either home (but not both) in 2013. 2006 tax return software free Factors used to determine main home. 2006 tax return software free   In addition to the amount of time you live in each home, other factors are relevant in determining which home is your main home. 2006 tax return software free Those factors include the following. 2006 tax return software free Your place of employment. 2006 tax return software free The location of your family members' main home. 2006 tax return software free Your mailing address for bills and correspondence. 2006 tax return software free The address listed on your: Federal and state tax returns, Driver's license, Car registration, and Voter registration card. 2006 tax return software free The location of the banks you use. 2006 tax return software free The location of recreational clubs and religious organizations of which you are a member. 2006 tax return software free Property used partly as your main home. 2006 tax return software free   If you use only part of the property as your main home, the rules discussed in this publication apply only to the gain or loss on the sale of that part of the property. 2006 tax return software free For details, see Business Use or Rental of Home , later. 2006 tax return software free Figuring Gain or Loss To figure the gain or loss on the sale of your main home, you must know the selling price, the amount realized, and the adjusted basis. 2006 tax return software free Subtract the adjusted basis from the amount realized to get your gain or loss. 2006 tax return software free     Selling price     − Selling expenses       Amount realized     − Adjusted basis       Gain or loss   Gain. 2006 tax return software free   Gain is the excess of the amount realized over the adjusted basis of the property. 2006 tax return software free Loss. 2006 tax return software free   Loss is the excess of the adjusted basis over the amount realized for the property. 2006 tax return software free Selling Price The selling price is the total amount you receive for your home. 2006 tax return software free It includes money and the fair market value of any other property or any other services you receive and all notes, mortgages or other debts assumed by the buyer as part of the sale. 2006 tax return software free Personal property. 2006 tax return software free   The selling price of your home does not include amounts you received for personal property sold with your home. 2006 tax return software free Personal property is property that is not a permanent part of the home. 2006 tax return software free Examples are furniture, draperies, rugs, a washer and dryer, and lawn equipment. 2006 tax return software free Separately stated amounts you received for these items should not be shown on Form 1099-S (discussed later). 2006 tax return software free Any gains from sales of personal property must be included in your income, but not as part of the sale of your home. 2006 tax return software free Payment by employer. 2006 tax return software free   You may have to sell your home because of a job transfer. 2006 tax return software free If your employer pays you for a loss on the sale or for your selling expenses, do not include the payment as part of the selling price. 2006 tax return software free Your employer will include it as wages in box 1 of your Form W-2 and you will include it in your income on Form 1040, line 7, or on Form 1040NR, line 8. 2006 tax return software free Option to buy. 2006 tax return software free   If you grant an option to buy your home and the option is exercised, add the amount you receive for the option to the selling price of your home. 2006 tax return software free If the option is not exercised, you must report the amount as ordinary income in the year the option expires. 2006 tax return software free Report this amount on Form 1040, line 21, or on Form 1040NR, line 21. 2006 tax return software free Form 1099-S. 2006 tax return software free   If you received Form 1099-S, box 2 (gross proceeds) should show the total amount you received for your home. 2006 tax return software free   However, box 2 will not include the fair market value of any services or property other than cash or notes you received or will receive. 2006 tax return software free Instead, box 4 will be checked to indicate your receipt or expected receipt of these items. 2006 tax return software free Amount Realized The amount realized is the selling price minus selling expenses. 2006 tax return software free Selling expenses. 2006 tax return software free   Selling expenses include: Commissions, Advertising fees, Legal fees, and Loan charges paid by the seller, such as loan placement fees or “points. 2006 tax return software free ” Adjusted Basis While you owned your home, you may have made adjustments (increases or decreases) to the basis. 2006 tax return software free This adjusted basis must be determined before you can figure gain or loss on the sale of your home. 2006 tax return software free For information on how to figure your home's adjusted basis, see Determining Basis , later. 2006 tax return software free Amount of Gain or Loss To figure the amount of gain or loss, compare the amount realized to the adjusted basis. 2006 tax return software free Gain on sale. 2006 tax return software free   If the amount realized is more than the adjusted basis, the difference is a gain and, except for any part you can exclude, generally is taxable. 2006 tax return software free Loss on sale. 2006 tax return software free   If the amount realized is less than the adjusted basis, the difference is a loss. 2006 tax return software free Generally, a loss on the sale of your main home cannot be deducted. 2006 tax return software free Jointly owned home. 2006 tax return software free   If you and your spouse sell your jointly owned home and file a joint return, you figure your gain or loss as one taxpayer. 2006 tax return software free Separate returns. 2006 tax return software free   If you file separate returns, each of you must figure your own gain or loss according to your ownership interest in the home. 2006 tax return software free Your ownership interest is generally determined by state law. 2006 tax return software free Joint owners not married. 2006 tax return software free   If you and a joint owner other than your spouse sell your jointly owned home, each of you must figure your own gain or loss according to your ownership interest in the home. 2006 tax return software free Each of you applies the rules discussed in this publication on an individual basis. 2006 tax return software free Dispositions Other Than Sales Some special rules apply to other dispositions of your main home. 2006 tax return software free Foreclosure or repossession. 2006 tax return software free   If your home was foreclosed on or repossessed, you have a disposition. 2006 tax return software free See Publication 4681 to determine if you have ordinary income, gain, or loss. 2006 tax return software free More information. 2006 tax return software free   If part of a home is used for business or rental purposes, see Foreclosures and Repossessions in chapter 1 of Publication 544 for more information. 2006 tax return software free Publication 544 has examples of how to figure gain or loss on a foreclosure or repossession. 2006 tax return software free Abandonment. 2006 tax return software free   If you abandon your home, see Publication 4681 to determine if you have ordinary income, gain, or loss. 2006 tax return software free Trading (exchanging) homes. 2006 tax return software free   If you trade your home for another home, treat the trade as a sale and a purchase. 2006 tax return software free Example. 2006 tax return software free You owned and lived in a home with an adjusted basis of $41,000. 2006 tax return software free A real estate dealer accepted your old home as a trade-in and allowed you $50,000 toward a new home priced at $80,000. 2006 tax return software free This is treated as a sale of your old home for $50,000 with a gain of $9,000 ($50,000 − $41,000). 2006 tax return software free If the dealer had allowed you $27,000 and assumed your unpaid mortgage of $23,000 on your old home, your sales price would still be $50,000 (the $27,000 trade-in allowed plus the $23,000 mortgage assumed). 2006 tax return software free Transfer to spouse. 2006 tax return software free   If you transfer your home to your spouse or you transfer it to your former spouse incident to your divorce, you in most cases have no gain or loss (unless the Exception, discussed next, applies). 2006 tax return software free This is true even if you receive cash or other consideration for the home. 2006 tax return software free As a result, the rules explained in this publication do not apply. 2006 tax return software free   If you owned your home jointly with your spouse and transfer your interest in the home to your spouse, or to your former spouse incident to your divorce, the same rule applies. 2006 tax return software free You have no gain or loss. 2006 tax return software free Exception. 2006 tax return software free   These transfer rules do not apply if your spouse or former spouse is a nonresident alien. 2006 tax return software free In that case, you generally will have a gain or loss. 2006 tax return software free More information. 2006 tax return software free    See Property Settlements in Publication 504, Divorced or Separated Individuals, for more information. 2006 tax return software free Involuntary conversion. 2006 tax return software free   You have a disposition when your home is destroyed or condemned and you receive other property or money in payment, such as insurance or a condemnation award. 2006 tax return software free This is treated as a sale and you may be able to exclude all or part of any gain from the destruction or condemnation of your home, as explained later under Special Situations (see Home destroyed or condemned ). 2006 tax return software free Determining Basis You need to know your basis in your home to figure any gain or loss when you sell it. 2006 tax return software free Your basis in your home is determined by how you got the home. 2006 tax return software free Generally, your basis is its cost if you bought it or built it. 2006 tax return software free If you got it in some other way (inheritance, gift, etc. 2006 tax return software free ), your basis is generally either its fair market value when you received it or the adjusted basis of the previous owner. 2006 tax return software free While you owned your home, you may have made adjustments (increases or decreases) to your home's basis. 2006 tax return software free The result of these adjustments is your home's adjusted basis, which is used to figure gain or loss on the sale of your home. 2006 tax return software free To figure your adjusted basis, you can use Worksheet 1, near the end of this publication. 2006 tax return software free Filled-in examples of that worksheet are included in the Comprehensive Examples , later. 2006 tax return software free Cost As Basis The cost of property is the amount you paid for it in cash, debt obligations, other property, or services. 2006 tax return software free Purchase. 2006 tax return software free   If you bought your home, your basis is its cost to you. 2006 tax return software free This includes the purchase price and certain settlement or closing costs. 2006 tax return software free In most cases, your purchase price includes your down payment and any debt, such as a first or second mortgage or notes you gave the seller in payment for the home. 2006 tax return software free If you build, or contract to build, a new home, your purchase price can include costs of construction, as discussed later. 2006 tax return software free Seller-paid points. 2006 tax return software free   If the person who sold you your home paid points on your loan, you may have to reduce your home's basis by the amount of the points, as shown in the following chart. 2006 tax return software free    IF you bought your home. 2006 tax return software free . 2006 tax return software free . 2006 tax return software free THEN reduce your home's basis by the seller-paid points. 2006 tax return software free . 2006 tax return software free . 2006 tax return software free after 1990 but before April 4, 1994 only if you deducted them as home mortgage interest in the year paid. 2006 tax return software free after April 3, 1994 even if you did not deduct them. 2006 tax return software free Settlement fees or closing costs. 2006 tax return software free   When you bought your home, you may have paid settlement fees or closing costs in addition to the contract price of the property. 2006 tax return software free You can include in your basis some of the settlement fees and closing costs you paid for buying the home, but not the fees and costs for getting a mortgage loan. 2006 tax return software free A fee paid for buying the home is any fee you would have had to pay even if you paid cash for the home (that is, without the need for financing). 2006 tax return software free   Settlement fees do not include amounts placed in escrow for the future payment of items such as taxes and insurance. 2006 tax return software free   Some of the settlement fees or closing costs that you can include in your basis are: Abstract fees (abstract of title fees), Charges for installing utility services, Legal fees (including fees for the title search and preparing the sales contract and deed), Recording fees, Survey fees, Transfer or stamp taxes, Owner's title insurance, and Any amounts the seller owes that you agree to pay, such as: Certain real estate taxes (discussed later), Back interest, Recording or mortgage fees, Charges for improvements or repairs, and Sales commissions. 2006 tax return software free   Some settlement fees and closing costs you cannot include in your basis are: Fire insurance premiums, Rent for occupancy of the house before closing, Charges for utilities or other services related to occupancy of the house before closing, Any fee or cost that you deducted as a moving expense (allowed for certain fees and costs before 1994), Charges connected with getting a mortgage loan, such as: Mortgage insurance premiums (including funding fees connected with loans guaranteed by the Department of Veterans Affairs), Loan assumption fees, Cost of a credit report, Fee for an appraisal required by a lender, and Fees for refinancing a mortgage. 2006 tax return software free Real estate taxes. 2006 tax return software free   Real estate taxes for the year you bought your home may affect your basis, as shown in the following chart. 2006 tax return software free    IF. 2006 tax return software free . 2006 tax return software free . 2006 tax return software free AND. 2006 tax return software free . 2006 tax return software free . 2006 tax return software free THEN the taxes. 2006 tax return software free . 2006 tax return software free . 2006 tax return software free you pay taxes that the seller owed on the home up to the date of sale the seller does not reimburse you are added to the basis of your home. 2006 tax return software free the seller reimburses you do not affect the basis of your home. 2006 tax return software free the seller pays taxes for you (taxes owed beginning on the date of sale) you do not reimburse the seller are subtracted from the basis of your home. 2006 tax return software free you reimburse the seller do not affect the basis of your home. 2006 tax return software free Construction. 2006 tax return software free   If you contracted to have your house built on land you own, your basis is: The cost of the land, plus The amount it cost you to complete the house, including: The cost of labor and materials, Any amounts paid to a contractor, Any architect's fees, Building permit charges, Utility meter and connection charges, and Legal fees directly connected with building the house. 2006 tax return software free   Your cost includes your down payment and any debt such as a first or second mortgage or notes you gave the seller or builder. 2006 tax return software free It also includes certain settlement or closing costs. 2006 tax return software free You may have to reduce your basis by points the seller paid for you. 2006 tax return software free For more information, see Seller-paid points and Settlement fees or closing costs , earlier. 2006 tax return software free Built by you. 2006 tax return software free   If you built all or part of your house yourself, its basis is the total amount it cost you to complete it. 2006 tax return software free Do not include in the cost of the house: The value of your own labor, or The value of any other labor you did not pay for. 2006 tax return software free Temporary housing. 2006 tax return software free   If a builder gave you temporary housing while your home was being finished, you must reduce your basis by the part of the contract price that was for the temporary housing. 2006 tax return software free To figure the amount of the reduction, multiply the contract price by a fraction. 2006 tax return software free The numerator is the value of the temporary housing, and the denominator is the sum of the value of the temporary housing plus the value of the new home. 2006 tax return software free Cooperative apartment. 2006 tax return software free   If you are a tenant-stockholder in a cooperative housing corporation, your basis in the cooperative apartment used as your home is usually the cost of your stock in the corporation. 2006 tax return software free This may include your share of a mortgage on the apartment building. 2006 tax return software free Condominium. 2006 tax return software free   To determine your basis in a condominium apartment used as your home, use the same rules as for any other home. 2006 tax return software free Basis Other Than Cost You must use a basis other than cost, such as adjusted basis or fair market value, if you received your home as a gift, inheritance, a trade, or from your spouse. 2006 tax return software free These situations are discussed in the following pages. 2006 tax return software free Also, the instructions for Worksheet 1 (near the end of the publication) address each of these issues. 2006 tax return software free Other special rules may apply in certain situations. 2006 tax return software free If you converted the property, or some part of it, to business or rental use, see Property Changed to Business or Rental Use, in Publication 551. 2006 tax return software free Home received as gift. 2006 tax return software free   Use the following chart to find the basis of a home you received as a gift. 2006 tax return software free IF the donor's adjusted basis at the time of the gift was. 2006 tax return software free . 2006 tax return software free . 2006 tax return software free THEN your basis is. 2006 tax return software free . 2006 tax return software free . 2006 tax return software free more than the fair market value of the home at that time the same as the donor's adjusted basis at the time of the gift. 2006 tax return software free   Exception: If using the donor's adjusted basis results in a loss when you sell the home, you must use the fair market value of the home at the time of the gift as your basis. 2006 tax return software free If using the fair market value results in a gain, you have neither gain nor loss. 2006 tax return software free equal to or less than the fair market value at that time, and you received the gift before 1977 the smaller of the: • donor's adjusted basis, plus  any federal gift tax paid on  the gift, or • the home's fair market value  at the time of the gift. 2006 tax return software free equal to or less than the fair market value at that time, and you received the gift after 1976 the same as the donor's adjusted basis, plus the part of any federal gift tax paid that is due to the net increase in value of the home (explained next). 2006 tax return software free Fair market value. 2006 tax return software free   The fair market value of property at the time of the gift is the value of the property as appraised for purposes of the federal gift tax. 2006 tax return software free If the gift was not subject to the federal gift tax, the fair market value is the value as appraised for the purposes of a state gift tax. 2006 tax return software free Part of federal gift tax due to net increase in value. 2006 tax return software free   Figure the part of the federal gift tax paid that is due to the net increase in value of the home by multiplying the total federal gift tax paid by a fraction. 2006 tax return software free The numerator of the fraction is the net increase in the value of the home, and the denominator is the value of the home for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. 2006 tax return software free The net increase in the value of the home is its fair market value minus the donor's adjusted basis immediately before the gift. 2006 tax return software free Home acquired from a decedent who died before or after 2010. 2006 tax return software free   If you inherited your home from a decedent who died before or after 2010, your basis is the fair market value of the property on the date of the decedent's death (or the later alternate valuation date chosen by the personal representative of the estate). 2006 tax return software free If an estate tax return was filed or required to be filed, the value of the property listed on the estate tax return is your basis. 2006 tax return software free If a federal estate tax return did not have to be filed, your basis in the home is the same as its appraised value at the date of death, for purposes of state inheritance or transmission taxes. 2006 tax return software free Surviving spouse. 2006 tax return software free   If you are a surviving spouse and you owned your home jointly, your basis in the home will change. 2006 tax return software free The new basis for the interest your spouse owned will be its fair market value on the date of death (or alternate valuation date). 2006 tax return software free The basis in your interest will remain the same. 2006 tax return software free Your new basis in the home is the total of these two amounts. 2006 tax return software free   If you and your spouse owned the home either as tenants by the entirety or as joint tenants with right of survivorship, you will each be considered to have owned one-half of the home. 2006 tax return software free Example. 2006 tax return software free Your jointly owned home (owned as joint tenants with right of survivorship) had an adjusted basis of $50,000 on the date of your spouse's death, and the fair market value on that date was $100,000. 2006 tax return software free Your new basis in the home is $75,000 ($25,000 for one-half of the adjusted basis plus $50,000 for one-half of the fair market value). 2006 tax return software free Community property. 2006 tax return software free   In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), each spouse is usually considered to own half of the community property. 2006 tax return software free When either spouse dies, the total fair market value of the community property becomes the basis of the entire property, including the part belonging to the surviving spouse. 2006 tax return software free For this to apply, at least half the value of the community property interest must be includible in the decedent's gross estate, whether or not the estate must file a return. 2006 tax return software free   For more information about community property, see Publication 555, Community Property. 2006 tax return software free    If you are selling a home in which you acquired an interest from a decedent who died in 2010, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your basis. 2006 tax return software free Home received as trade. 2006 tax return software free   If you acquired your home as a trade for other property, in most cases, the basis of your home is the fair market value (at the time of the trade) of the property you gave up. 2006 tax return software free If you traded one home for another, you have made a sale and purchase. 2006 tax return software free In that case, you may have a gain. 2006 tax return software free See Trading (exchanging) homes under Dispositions Other Than Sales, earlier, for an example of figuring the gain. 2006 tax return software free Home received from spouse. 2006 tax return software free   If you received your home from your spouse or from your former spouse incident to your divorce, your basis in the home depends on the date of the transfer. 2006 tax return software free Transfers after July 18, 1984. 2006 tax return software free   If you received the home after July 18, 1984, there was no gain or loss on the transfer. 2006 tax return software free In most cases, your basis in this home is the same as your spouse's (or former spouse's) adjusted basis just before you received it. 2006 tax return software free This rule applies even if you received the home in exchange for cash, the release of marital rights, the assumption of liabilities, or other considerations. 2006 tax return software free   If you owned a home jointly with your spouse and your spouse transferred his or her interest in the home to you, in most cases, your basis in the half interest received from your spouse is the same as your spouse's adjusted basis just before the transfer. 2006 tax return software free This also applies if your former spouse transferred his or her interest in the home to you incident to your divorce. 2006 tax return software free Your basis in the half interest you already owned does not change. 2006 tax return software free Your new basis in the home is the total of these two amounts. 2006 tax return software free Transfers before July 19, 1984. 2006 tax return software free   If you received your home before July 19, 1984, in exchange for your release of marital rights, in most cases, your basis in the home is generally its fair market value at the time you received it. 2006 tax return software free More information. 2006 tax return software free   For more information on property received from a spouse or former spouse, see Property Settlements in Publication 504. 2006 tax return software free Involuntary conversion. 2006 tax return software free   If your home is destroyed or condemned, you may receive insurance proceeds or a condemnation award. 2006 tax return software free If you acquired a replacement home with these proceeds, the basis is its cost decreased by any gain not recognized on the conversion under the rules explained in: Publication 547, in the case of a home that was destroyed, or Chapter 1 of Publication 544, in the case of a home that was condemned. 2006 tax return software free Example. 2006 tax return software free A fire destroyed your home that you owned and used for only 6 months. 2006 tax return software free The home had an adjusted basis of $80,000 and the insurance company paid you $130,000 for the loss. 2006 tax return software free Your gain is $50,000 ($130,000 − $80,000). 2006 tax return software free You bought a replacement home for $100,000. 2006 tax return software free The part of your gain that is taxable is $30,000 ($130,000 − $100,000), the unspent part of the payment from the insurance company. 2006 tax return software free The rest of the gain ($20,000) is not taxable, so that amount reduces your basis in the new home. 2006 tax return software free The basis of the new home is figured as follows. 2006 tax return software free Cost of replacement home $100,000 Minus: Gain not recognized 20,000 Basis of the replacement home $80,000 More information. 2006 tax return software free   For more information about basis, see Publication 551. 2006 tax return software free Adjusted Basis Adjusted basis is your cost or other basis increased or decreased by certain amounts. 2006 tax return software free To figure your adjusted basis, you can use Worksheet 1, found toward the end of this publication. 2006 tax return software free Filled-in examples of that worksheet are included in Comprehensive Examples , later. 2006 tax return software free Recordkeeping. 2006 tax return software free You should keep records to prove your home's adjusted basis. 2006 tax return software free Ordinarily, you must keep records for 3 years after the due date for filing your return for the tax year in which you sold your home. 2006 tax return software free But if you sold a home before May 7, 1997, and postponed tax on any gain, the basis of that home affects the basis of the new home you bought. 2006 tax return software free Keep records proving the basis of both homes as long as they are needed for tax purposes. 2006 tax return software free The records you should keep include: Proof of the home's purchase price and purchase expenses; Receipts and other records for all improvements, additions, and other items that affect the home's adjusted basis; Any worksheets or other computations you used to figure the adjusted basis of the home you sold, the gain or loss on the sale, the exclusion, and the taxable gain; Any Form 982 you filed to exclude any discharge of qualified principal residence indebtedness; Any Form 2119, Sale of Your Home, you filed to postpone gain from the sale of a previous home before May 7, 1997; and Any worksheets you used to prepare Form 2119, such as the Adjusted Basis of Home Sold Worksheet or the Capital Improvements Worksheet from the Form 2119 instructions, or other source of computations. 2006 tax return software free Increases to Basis These include the following. 2006 tax return software free Additions and other improvements that have a useful life of more than 1 year. 2006 tax return software free Special assessments for local improvements. 2006 tax return software free Amounts you spent after a casualty to restore damaged property. 2006 tax return software free Improvements. 2006 tax return software free   These add to the value of your home, prolong its useful life, or adapt it to new uses. 2006 tax return software free You add the cost of additions and other improvements to the basis of your property. 2006 tax return software free   The following chart lists some other examples of improvements. 2006 tax return software free Examples of Improvements That Increase Basis Additions Bedroom Bathroom Deck Garage Porch Patio Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Lawn & Grounds Landscaping Driveway Walkway Fence  Retaining wall Sprinkler system Swimming pool  Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system  Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances  Kitchen modernization  Flooring Wall-to-wall carpeting  Insulation Attic Walls Floors Pipes and duct work Improvements no longer part of home. 2006 tax return software free   Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. 2006 tax return software free Example. 2006 tax return software free You put wall-to-wall carpeting in your home 15 years ago. 2006 tax return software free Later, you replaced that carpeting with new wall-to-wall carpeting. 2006 tax return software free The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. 2006 tax return software free Repairs. 2006 tax return software free   These maintain your home in good condition but do not add to its value or prolong its life. 2006 tax return software free You do not add their cost to the basis of your property. 2006 tax return software free Examples. 2006 tax return software free Repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering, and replacing broken window panes are examples of repairs. 2006 tax return software free Exception. 2006 tax return software free   The entire job is considered an improvement if items that would otherwise be considered repairs are done as part of an extensive remodeling or restoration of your home. 2006 tax return software free For example, if you have a casualty and your home is damaged, increase your basis by the amount you spend on repairs that restore the property to its pre-casualty condition. 2006 tax return software free Decreases to Basis These include the following. 2006 tax return software free Discharge of qualified principal residence indebtedness that was excluded from income (but not below zero). 2006 tax return software free For details, see Publication 4681. 2006 tax return software free Some or all of the cancellation of debt income that was excluded due to your bankruptcy or insolvency. 2006 tax return software free For details, see Publication 4681. 2006 tax return software free Gain you postponed from the sale of a previous home before May 7, 1997. 2006 tax return software free Deductible casualty losses. 2006 tax return software free Insurance payments you received or expect to receive for casualty losses. 2006 tax return software free Payments you received for granting an easement or right-of-way. 2006 tax return software free Depreciation allowed or allowable if you used your home for business or rental purposes. 2006 tax return software free Energy-related credits allowed for expenditures made on the residence. 2006 tax return software free (Reduce the increase in basis otherwise allowable for expenditures on the residence by the amount of credit allowed for those expenditures. 2006 tax return software free ) Adoption credit you claimed for improvements added to the basis of your home. 2006 tax return software free Nontaxable payments from an adoption assistance program of your employer you used for improvements you added to the basis of your home. 2006 tax return software free Energy conservation subsidy excluded from your gross income because you received it (directly or indirectly) from a public utility after 1992 to buy or install any energy conservation measure. 2006 tax return software free An energy conservation measure is an installation or modification primarily designed either to reduce consumption of electricity or natural gas or to improve the management of energy demand for a home. 2006 tax return software free District of Columbia first-time homebuyer credit allowed on the purchase of a principal residence in the District of Columbia. 2006 tax return software free General sales taxes claimed as an itemized deduction on Schedule A (Form 1040) that were imposed on the purchase of personal property, such as a houseboat used as your home or a mobile home. 2006 tax return software free Discharges of qualified principal residence indebtedness. 2006 tax return software free   You may be able to exclude from gross income a discharge of qualified principal residence indebtedness. 2006 tax return software free This exclusion applies to discharges made after 2006 and before 2014. 2006 tax return software free If you choose to exclude this income, you must reduce (but not below zero) the basis of your principal residence by the amount excluded from gross income. 2006 tax return software free   File Form 982 with your tax return. 2006 tax return software free See the form's instructions for detailed information. 2006 tax return software free    A decrease in basis due to a discharge of qualified principal residence indebtedness that is excluded from income occurs only if you retain ownership of the principal residence after a discharge. 2006 tax return software free In most cases, this would occur in a refinancing or a restructuring of the mortgage. 2006 tax return software free Excluding the Gain You may qualify to exclude from your income all or part of any gain from the sale of your main home. 2006 tax return software free This means that, if you qualify, you will not have to pay tax on the gain up to the limit described under Maximum Exclusion , next. 2006 tax return software free To qualify, you must meet the ownership and use tests described later. 2006 tax return software free You can choose not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. 2006 tax return software free This choice can be made (or revoked) at any time before the expiration of a 3-year period beginning on the due date of your return (not including extensions) for the year of the sale. 2006 tax return software free You can use Worksheet 2 (near the end of this publication) to figure the amount of your exclusion and your taxable gain, if any. 2006 tax return software free If you have any taxable gain from the sale of your home, you may have to increase your withholding or make estimated tax payments. 2006 tax return software free See Publication 505, Tax Withholding and Estimated Tax. 2006 tax return software free Maximum Exclusion You can exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true. 2006 tax return software free You meet the ownership test. 2006 tax return software free You meet the use test. 2006 tax return software free During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. 2006 tax return software free For details on gain allocated to periods of nonqualified use, see Nonqualified Use , later. 2006 tax return software free If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions just listed. 2006 tax return software free You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons . 2006 tax return software free Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. 2006 tax return software free This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test). 2006 tax return software free Exception. 2006 tax return software free   If you owned and lived in the property as your main home for less than 2 years, you can still claim an exclusion in some cases. 2006 tax return software free However, the maximum amount you may be able to exclude will be reduced. 2006 tax return software free See Reduced Maximum Exclusion , later. 2006 tax return software free Example 1—home owned and occupied for at least 2 years. 2006 tax return software free Mya bought and moved into her main home in September 2011. 2006 tax return software free She sold the home at a gain in October 2013. 2006 tax return software free During the 5-year period ending on the date of sale in October 2013, she owned and lived in the home for more than 2 years. 2006 tax return software free She meets the ownership and use tests. 2006 tax return software free Example 2—ownership test met but use test not met. 2006 tax return software free Ayden bought a home, lived in it for 6 months, moved out, and never occupied the home again. 2006 tax return software free He later sold the home for a gain in June 2013. 2006 tax return software free He owned the home during the entire 5-year period ending on the date of sale. 2006 tax return software free He meets the ownership test but not the use test. 2006 tax return software free He cannot exclude any part of his gain on the sale unless he qualified for a reduced maximum exclusion (explained later). 2006 tax return software free Period of Ownership and Use The required 2 years of ownership and use during the 5-year period ending on the date of the sale do not have to be continuous nor do they both have to occur at the same time. 2006 tax return software free You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 × 2) during the 5-year period ending on the date of sale. 2006 tax return software free Example. 2006 tax return software free Naomi bought and moved into a house in July 2009. 2006 tax return software free She lived there for 13 months and then moved in with a friend. 2006 tax return software free She later moved back into her house and lived there for 12 months until she sold it in August 2013. 2006 tax return software free Naomi meets the ownership and use tests because, during the 5-year period ending on the date of sale, she owned the house for more than 2 years and lived in it for a total of 25 (13 + 12) months. 2006 tax return software free Temporary absence. 2006 tax return software free   Short temporary absences for vacations or other seasonal absences, even if you rent out the property during the absences, are counted as periods of use. 2006 tax return software free The following examples assume that the reduced maximum exclusion (discussed later) does not apply to the sales. 2006 tax return software free Example 1. 2006 tax return software free David Johnson, who is single, bought and moved into his home on February 1, 2011. 2006 tax return software free Each year during 2011 and 2012, David left his home for a 2-month summer vacation. 2006 tax return software free David sold the house on March 1, 2013. 2006 tax return software free Although the total time David lived in his home is less than 2 years (21 months), he meets the use requirement and may exclude gain. 2006 tax return software free The 2-month vacations are short temporary absences and are counted as periods of use in determining whether David used the home for the required 2 years. 2006 tax return software free Example 2. 2006 tax return software free Professor Paul Beard, who is single, bought and moved into a house in December 2010, went abroad for a 1-year sabbatical leave in January 2012, returned to the house in January 2013, and sold it at a gain in February 2013. 2006 tax return software free Because his leave was not a short temporary absence, he cannot include the period of leave to meet the 2-year use test. 2006 tax return software free He cannot exclude any part of his gain because he did not use the residence for the required 2 years. 2006 tax return software free Ownership and use tests met at different times. 2006 tax return software free   You can meet the ownership and use tests during different 2-year periods. 2006 tax return software free However, you must meet both tests during the 5-year period ending on the date of the sale. 2006 tax return software free Example. 2006 tax return software free Beginning in 2002, Helen Jones lived in a rented apartment. 2006 tax return software free The apartment building was later converted to condominiums, and she bought her same apartment on December 3, 2010. 2006 tax return software free In 2011, Helen became ill and on April 14 of that year she moved to her daughter's home. 2006 tax return software free On July 12, 2013, while still living in her daughter's home, she sold her condominium. 2006 tax return software free Helen can exclude gain on the sale of her condominium because she met the ownership and use tests during the 5-year period from July 13, 2008, to July 12, 2013, the date she sold the condominium. 2006 tax return software free She owned her condominium from December 3, 2010, to July 12, 2013 (more than 2 years). 2006 tax return software free She lived in the property from July 13, 2008 (the beginning of the 5-year period), to April 14, 2011 (more than 2 years). 2006 tax return software free The time Helen lived in her daughter's home during the 5-year period can be counted toward her period of ownership, and the time she lived in her rented apartment during the 5-year period can be counted toward her period of use. 2006 tax return software free Cooperative apartment. 2006 tax return software free   If you sold stock as a tenant-shareholder in a cooperative housing corporation, the ownership and use tests are met if, during the 5-year period ending on the date of sale, you: Owned the stock for at least 2 years, and Lived in the house or apartment that the stock entitled you to occupy as your main home for at least 2 years. 2006 tax return software free Exceptions to Ownership and Use Tests The following sections contain exceptions to the ownership and use tests for certain taxpayers. 2006 tax return software free Exception for individuals with a disability. 2006 tax return software free   There is an exception to the use test if: You become physically or mentally unable to care for yourself, and You owned and lived in your home as your main home for a total of at least 1 year during the 5-year period before the sale of your home. 2006 tax return software free Under this exception, you are considered to live in your home during any time within the 5-year period that you own the home and live in a facility (including a nursing home) licensed by a state or political subdivision to care for persons in your condition. 2006 tax return software free   If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion. 2006 tax return software free Previous home destroyed or condemned. 2006 tax return software free   For the ownership and use tests, you add the time you owned and lived in a previous home that was destroyed or condemned to the time you owned and lived in the replacement home on whose sale you wish to exclude gain. 2006 tax return software free This rule applies if any part of the basis of the home you sold depended on the basis of the destroyed or condemned home (see Involuntary Conversions in Publication 551). 2006 tax return software free Otherwise, you must have owned and lived in the same home for 2 of the 5 years before the sale to qualify for the exclusion. 2006 tax return software free Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. 2006 tax return software free   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on qualified official extended duty (defined later) as a member of the uniformed services or Foreign Service of the United States, or as an employee of the intelligence community. 2006 tax return software free You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve outside the United States either as an employee of the Peace Corps on qualified official extended duty (defined later) or as an enrolled volunteer or volunteer leader of the Peace Corps. 2006 tax return software free This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. 2006 tax return software free   If this helps you qualify to exclude gain, you can choose to have the 5-year test period suspended by filing a return for the year of sale that does not include the gain. 2006 tax return software free Example. 2006 tax return software free John bought and moved into a home in 2005. 2006 tax return software free He lived in it as his main home for 2½ years. 2006 tax return software free For the next 6 years, he did not live in it because he was on qualified official extended duty with the Army. 2006 tax return software free He then sold the home at a gain in 2013. 2006 tax return software free To meet the use test, John chooses to suspend the 5-year test period for the 6 years he was on qualified official extended duty. 2006 tax return software free This means he can disregard those 6 years. 2006 tax return software free Therefore, John's 5-year test period consists of the 5 years before he went on qualified official extended duty. 2006 tax return software free He meets the ownership and use tests because he owned and lived in the home for 2½ years during this test period. 2006 tax return software free Period of suspension. 2006 tax return software free   The period of suspension cannot last more than 10 years. 2006 tax return software free Together, the 10-year suspension period and the 5-year test period can be as long as, but no more than, 15 years. 2006 tax return software free You cannot suspend the 5-year period for more than one property at a time. 2006 tax return software free You can revoke your choice to suspend the 5-year period at any time. 2006 tax return software free Example. 2006 tax return software free Mary bought a home on April 1, 1997. 2006 tax return software free She used it as her main home until August 31, 2000. 2006 tax return software free On September 1, 2000, she went on qualified official extended duty with the Navy. 2006 tax return software free She did not live in the house again before selling it on July 31, 2013. 2006 tax return software free Mary chooses to use the entire 10-year suspension period. 2006 tax return software free Therefore, the suspension period would extend back from July 31, 2013, to August 1, 2003, and the 5-year test period would extend back to August 1, 1998. 2006 tax return software free During that period, Mary owned the house all 5 years and lived in it as her main home from August 1, 1998, until August 31, 2000, a period of more than 24 months. 2006 tax return software free She meets the ownership and use tests because she owned and lived in the home for at least 2 years during this test period. 2006 tax return software free Uniformed services. 2006 tax return software free   The uniformed services are: The Armed Forces (the Army, Navy, Air Force, Marine Corps, and Coast Guard), The commissioned corps of the National Oceanic and Atmospheric Administration, and The commissioned corps of the Public Health Service. 2006 tax return software free Foreign Service member. 2006 tax return software free   For purposes of the choice to suspend the 5-year test period for ownership and use, you are a member of the Foreign Service if you are any of the following. 2006 tax return software free A Chief of mission. 2006 tax return software free An Ambassador at large. 2006 tax return software free A member of the Senior Foreign Service. 2006 tax return software free A Foreign Service officer. 2006 tax return software free Part of the Foreign Service personnel. 2006 tax return software free Employee of the intelligence community. 2006 tax return software free   For purposes of the choice to suspend the 5-year test period for ownership and use, you are an employee of the intelligence community if you are an employee of any of the following. 2006 tax return software free The Office of the Director of National Intelligence. 2006 tax return software free The Central Intelligence Agency. 2006 tax return software free The National Security Agency. 2006 tax return software free The Defense Intelligence Agency. 2006 tax return software free The National Geospatial-Intelligence Agency. 2006 tax return software free The National Reconnaissance Office and any other office within the Department of Defense for the collection of specialized national intelligence through reconnaissance programs. 2006 tax return software free Any of the intelligence elements of the Army, the Navy, the Air Force, the Marine Corps, the Federal Bureau of Investigation, the Department of Treasury, the Department of Energy, and the Coast Guard. 2006 tax return software free The Bureau of Intelligence and Research of the Department of State. 2006 tax return software free Any of the elements of the Department of Homeland Security concerned with the analyses of foreign intelligence information. 2006 tax return software free Qualified official extended duty. 2006 tax return software free   You are on qualified official extended duty if you are on extended duty while: Serving at a duty station at least 50 miles from your main home, or Living in Government quarters under Government orders. 2006 tax return software free   You are on extended duty when you are called or ordered to active duty for a period of more than 90 days or for an indefinite period. 2006 tax return software free Married Persons If you and your spouse file a joint return for the year of sale and one spouse meets the ownership and use tests, you can exclude up to $250,000 of the gain. 2006 tax return software free (But see Special rules for joint returns, next. 2006 tax return software free ) Special rules for joint returns. 2006 tax return software free   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. 2006 tax return software free You are married and file a joint return for the year. 2006 tax return software free Either you or your spouse meets the ownership test. 2006 tax return software free Both you and your spouse meet the use test. 2006 tax return software free During the 2-year period ending on the date of the sale, neither you nor your spouse excluded gain from the sale of another home. 2006 tax return software free If either spouse does not satisfy all these requirements, the maximum exclusion that can be claimed by the couple is the total of the maximum exclusions that each spouse would qualify for if not married and the amounts were figured separately. 2006 tax return software free For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property. 2006 tax return software free Example 1—one spouse sells a home. 2006 tax return software free Emily sells her home in June 2013 for a gain of $300,000. 2006 tax return software free She marries Jamie later in the year. 2006 tax return software free She meets the ownership and use tests, but Jamie does not. 2006 tax return software free Emily can exclude up to $250,000 of gain on a separate or joint return for 2013. 2006 tax return software free The $500,000 maximum exclusion for certain joint returns does not apply because Jamie does not meet the use test. 2006 tax return software free Example 2—each spouse sells a home. 2006 tax return software free The facts are the same as in Example 1 except that Jamie also sells a home in 2013 for a gain of $200,000 before he marries Emily. 2006 tax return software free He meets the ownership and use tests on his home, but Emily does not. 2006 tax return software free Emily can exclude $250,000 of gain and Jamie can exclude $200,000 of gain on the respective sales of their individual homes. 2006 tax return software free However, Emily cannot use Jamie's unused exclusion to exclude more than $250,000 of gain. 2006 tax return software free Therefore, Emily and Jamie must recognize $50,000 of gain on the sale of Emily's home. 2006 tax return software free The $500,000 maximum exclusion for certain joint returns does not apply because Emily and Jamie do not both meet the use test for the same home. 2006 tax return software free Sale of main home by surviving spouse. 2006 tax return software free   If your spouse died and you did not remarry before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. 2006 tax return software free   If you meet all of the following requirements, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home. 2006 tax return software free The sale or exchange took place after 2008. 2006 tax return software free The sale or exchange took place no more than 2 years after the date of death of your spouse. 2006 tax return software free You have not remarried. 2006 tax return software free You and your spouse met the use test at the time of your spouse's death. 2006 tax return software free You or your spouse met the ownership test at the time of your spouse's death. 2006 tax return software free Neither you nor your spouse excluded gain from the sale of another home during the last 2 years before the date of death. 2006 tax return software free The ownership and use tests were described earlier. 2006 tax return software free Example. 2006 tax return software free Harry owned and used a house as his main home since 2009. 2006 tax return software free Harry and Wilma married on July 1, 2013, and from that date they used Harry's house as their main home. 2006 tax return software free Harry died on August 15, 2013, and Wilma inherited the property. 2006 tax return software free Wilma sold the property on September 1, 2013, at which time she had not remarried. 2006 tax return software free Although Wilma owned and used the house for less than 2 years, Wilma is considered to have satisfied the ownership and use tests because her period of ownership and use includes the period that Harry owned and used the property before death. 2006 tax return software free Home transferred from spouse. 2006 tax return software free   If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it. 2006 tax return software free Use of home after divorce. 2006 tax return software free   You are considered to have used property as your main home during any period when: You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home. 2006 tax return software free Reduced Maximum Exclusion If you fail to meet the requirements to qualify for the $250,000 or $500,000 exclusion, you may still qualify for a reduced exclusion. 2006 tax return software free This applies to those who: Fail to meet the ownership and use tests, or Have used the exclusion within 2 years of selling their current home. 2006 tax return software free In both cases, to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons. 2006 tax return software free A change in place of employment. 2006 tax return software free Health. 2006 tax return software free Unforeseen circumstances. 2006 tax return software free Qualified individual. 2006 tax return software free   For purposes of the reduced maximum exclusion, a qualified individual is any of the following. 2006 tax return software free You. 2006 tax return software free Your spouse. 2006 tax return software free A co-owner of the home. 2006 tax return software free A person whose main home is the same as yours. 2006 tax return software free Primary reason for sale. 2006 tax return software free   One of the three reasons above will be considered to be the primary reason you sold your home if either (1) or (2) is true. 2006 tax return software free You qualify under a “safe harbor. 2006 tax return software free ” This is a specific set of facts and circumstances that, if applicable, qualifies you to claim a reduced maximum exclusion. 2006 tax return software free Safe harbors corresponding to the reasons listed above are described later. 2006 tax return software free A safe harbor does not apply, but you can establish, based on facts and circumstances, that the primary reason for the sale is a change in place of employment, health, or unforeseen circumstances. 2006 tax return software free  Factors that may be relevant in determining your primary reason for sale include whether: Your sale and the circumstances causing it were close in time, The circumstances causing your sale occurred during the time you owned and used the property as your main home, The circumstances causing your sale were not reasonably foreseeable when you began using the property as your main home, Your financial ability to maintain the property became materially impaired, The suitability of the property as your main home materially changed, and During the time you owned the property, you used it as your home. 2006 tax return software free Change in Place of Employment You may qualify for a reduced exclusion if the primary reason for the sale of your main home is a change in the location of employment of a qualified individual. 2006 tax return software free Employment. 2006 tax return software free   For this purpose, employment includes the start of work with a new employer or continuation of work with the same employer. 2006 tax return software free It also includes the start or continuation of self-employment. 2006 tax return software free Distance safe harbor. 2006 tax return software free   A change in place of employment is considered to be the reason you sold your home if: The change occurred during the period you owned and used the property as your main home, and The new place of employment is at least 50 miles farther from the home you sold than was the former place of employment (or, if there was no former place of employment, the distance between your new place of employment and the home sold is at least 50 miles). 2006 tax return software free Example. 2006 tax return software free Justin was unemployed and living in a townhouse in Florida he had owned and used as his main home since 2012. 2006 tax return software free He got a job in North Carolina and sold his townhouse in 2013. 2006 tax return software free Because the distance between Justin's new place of employment and the home he sold is at least 50 miles, the sale satisfies the conditions of the distance safe harbor. 2006 tax return software free Justin's sale of his home is considered to be because of a change in place of employment, and he is entitled to claim a reduced maximum exclusion of gain from the sale. 2006 tax return software free Health The sale of your main home is because of health if your primary reason for the sale is: To obtain, provide, or facilitate the diagnosis, cure, mitigation, or treatment of disease, illness, or injury of a qualified individual, or To obtain or provide medical or personal care for a qualified individual suffering from a disease, illness, or injury. 2006 tax return software free The sale of your home is not because of health if the sale merely benefits a qualified individual's general health or well-being. 2006 tax return software free For purposes of this reason, a qualified individual includes, in addition to the individuals listed earlier under Qualified individual , any of the following family members of these individuals. 2006 tax return software free Parent, grandparent, stepmother, stepfather. 2006 tax return software free Child, grandchild, stepchild, adopted child, eligible foster child. 2006 tax return software free Brother, sister, stepbrother, stepsister, half-brother, half-sister. 2006 tax return software free Mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, or daughter-in-law. 2006 tax return software free Uncle, aunt, nephew, niece, or cousin. 2006 tax return software free Example. 2006 tax return software free In 2012, Chase and Lauren, spouses, bought a house that they used as their main home. 2006 tax return software free Lauren's father has a chronic disease and is unable to care for himself. 2006 tax return software free In 2013, Chase and Lauren sold their home in order to move into Lauren's father's house to provide care for him. 2006 tax return software free Because the primary reason for the sale of their home was to provide care for Lauren's father, Chase and Lauren are entitled to a reduced maximum exclusion. 2006 tax return software free Doctor's recommendation safe harbor. 2006 tax return software free   Health is considered to be the reason you sold your home if, for one or more of the reasons listed at the beginning of this discussion, a doctor recommends a change of residence. 2006 tax return software free Unforeseen Circumstances The sale of your main home is because of an unforeseen circumstance if your primary reason for the sale is the occurrence of an event that you could not reasonably have anticipated before buying and occupying that home. 2006 tax return software free You are not considered to have an unforeseen circumstance if the primary reason you sold your home was that you preferred to get a different home or because your finances improved. 2006 tax return software free Specific event safe harbors. 2006 tax return software free   Unforeseen circumstances are considered to be the reason for selling your home if any of the following events occurred while you owned and used the property as your main home. 2006 tax return software free An involuntary conversion of your home, such as when your home is destroyed or condemned. 2006 tax return software free Natural or man-made disasters or acts of war or terrorism resulting in a casualty to your home, whether or not your loss is deductible. 2006 tax return software free In the case of qualified individuals (listed earlier under Qualified individual ): Death, Unemployment (if the individual is eligible for unemployment compensation), A change in employment or self-employment status that results in the individual's inability to pay reasonable basic living expenses (listed under Reasonable basic living expenses , later) for his or her household, Divorce or legal separation under a decree of divorce or separate maintenance, or Multiple births resulting from the same pregnancy. 2006 tax return software free An event the IRS determined to be an unforeseen circumstance in published guidance of general applicability. 2006 tax return software free For example, the IRS determined the September 11, 2001, terrorist attacks to be an unforeseen circumstance. 2006 tax return software free Reasonable basic living expenses. 2006 tax return software free   Reasonable basic living expenses for your household include the following. 2006 tax return software free Amounts spent for food. 2006 tax return software free Amounts spent for clothing. 2006 tax return software free Housing and related expenses. 2006 tax return software free Medical expenses. 2006 tax return software free Transportation expenses. 2006 tax return software free Tax payments. 2006 tax return software free Court-ordered payments. 2006 tax return software free Expenses reasonably necessary to produce income. 2006 tax return software free   Any of these amounts spent to maintain an affluent or luxurious standard of living are not reasonable basic living expenses. 2006 tax return software free Nonqualified Use Gain from the sale or exchange of the main home is not excludable from income if it is allocable to periods of nonqualified use. 2006 tax return software free Nonqualified use means any period after 2008 where neither you nor your spouse (or your former spouse) used the property as a main home, with certain exceptions (see next). 2006 tax return software free Exceptions. 2006 tax return software free   A period of nonqualified use does not include: Any portion of the 5-year period ending on the date of the sale or exchange after the last date you (or your spouse) use the property as a main home; Any period (not to exceed an aggregate period of 10 years) during which you (or your spouse) are serving on qualified official extended duty: As a member of the uniformed services; As a member of the Foreign Service of the United States; or As an employee of the intelligence community; and Any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the IRS. 2006 tax return software free Calculation. 2006 tax return software free   To figure the portion of the gain allocated to the period of nonqualified use, multiply the gain (net of any depreciation allowed or allowable on the property for periods after May 6, 1997) by the following fraction:   Total nonqualified use during the period of ownership after 2008     Total period of ownership     This calculation can be found in Worksheet 2, line 10, later in this publication. 2006 tax return software free   For examples of this calculation, see Business Use or Rental of Home , next. 2006 tax return software free Business Use or Rental of Home You may be able to exclude gain from the sale of a home you have used for business or to produce rental income if you meet the ownership and use tests. 2006 tax return software free Example 1. 2006 tax return software free On May 23, 2007, Amy, who is unmarried for all years in this example, bought a house. 2006 tax return software free She moved in on that date and lived in it until May 31, 2009, when she moved out of the house and put it up for rent. 2006 tax return software free The house was rented from June 1, 2009, to March 31, 2011. 2006 tax return software free Amy claimed depreciation deductions in 2009 through 2011 totaling $10,000. 2006 tax return software free Amy moved back into the house on April 1, 2011, and lived there until she sold it on January 31, 2013, for a gain of $200,000. 2006 tax return software free During the 5-year period ending on the date of the sale (January 31, 2008–January 31, 2013), Amy owned and lived in the house for more than 2 years as shown in the following table. 2006 tax return software free Five-Year Period Used as Home Used as Rental 1/31/08 – 5/31/09 16 months   6/01/09 – 3/31/11   22 months 4/01/11 – 1/31/13 22 months     38 months 22 months       During the period Amy owned the house (2,080 days), her period of nonqualified use was 668 days. 2006 tax return software free Because the gain attributable to periods of nonqualified use is $60,990, Amy can exclude $129,010 of her gain, as shown on Worksheet 2. 2006 tax return software free Example 2. 2006 tax return software free William owned and used a house as his main home from 2007 through 2010. 2006 tax return software free On January 1, 2011, he moved to another state. 2006 tax return software free He rented his house from that date until April 30, 2013, when he sold it. 2006 tax return software free During the 5-year period ending on the date of sale (May 1, 2008-April 30, 2013), William owned and lived in the house for more than 2 years. 2006 tax return software free Because it was rental property at the time of the sale, he must report the sale on Form 4797. 2006 tax return software free Because the period of nonqualified use does not include any part of the 5-year period after the last date William lived in the house, he has no period of nonqualified use. 2006 tax return software free Because he met the ownership and use tests, he can exclude gain up to $250,000. 2006 tax return software free However, he cannot exclude the part of the gain equal to the depreciation he claimed or could have claimed for renting the house, as explained next. 2006 tax return software free Depreciation after May 6, 1997. 2006 tax return software free   If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. 2006 tax return software free If you can show by adequate records or other evidence that the depreciation allowed was less than the amount allowable, then you may limit the amount of gain recognized to the depreciation allowed. 2006 tax return software free Unrecaptured section 1250 gain. 2006 tax return software free   This is the part of any long-term capital gain from the sale of your home that is due to depreciation and cannot be excluded. 2006 tax return software free To figure the amount of unrecaptured section 1250 gain to be reported on Schedule D (Form 1040), you must also take into account certain gains or losses from the sale of property other than your home. 2006 tax return software free Use the Unrecaptured Section 1250 Gain Worksheet in the Schedule D instructions for this purpose. 2006 tax return software free Worksheet 2. 2006 tax return software free Taxable Gain on Sale of Home—Completed Example 1 for Amy Part 1. 2006 tax return software free Gain or (Loss) on Sale       1. 2006 tax return software free   Selling price of home 1. 2006 tax return software free     2. 2006 tax return software free   Selling expenses (including commissions, advertising and legal fees, and seller-paid loan charges) 2. 2006 tax return software free     3. 2006 tax return software free   Subtract line 2 from line 1. 2006 tax return software free This is the amount realized 3. 2006 tax return software free     4. 2006 tax return software free   Adjusted basis of home sold (from Worksheet 1, line 13) 4. 2006 tax return software free     5. 2006 tax return software free   Gain or (loss) on the sale. 2006 tax return software free Subtract line 4 from line 3. 2006 tax return software free If this is a loss, stop here 5. 2006 tax return software free 200,000   Part 2. 2006 tax return software free Exclusion and Taxable Gain       6. 2006 tax return software free   Enter any depreciation allowed or allowable on the property for periods after May 6, 1997. 2006 tax return software free If none, enter -0- 6. 2006 tax return software free 10,000   7. 2006 tax return software free   Subtract line 6 from line 5. 2006 tax return software free If the result is less than zero, enter -0- 7. 2006 tax return software free 190,000   8. 2006 tax return software free   Aggregate number of days of nonqualified use after 2008. 2006 tax return software free If none, enter -0-. 2006 tax return software free  If line 8 is equal to zero, skip to line 12 and enter the amount from line 7 on line 12 8. 2006 tax return software free 668   9. 2006 tax return software free   Number of days taxpayer owned the property 9. 2006 tax return software free 2,080   10. 2006 tax return software free   Divide the amount on line 8 by the amount on line 9. 2006 tax return software free Enter the result as a decimal (rounded to at least 3 places). 2006 tax return software free But do not enter an amount greater than 1. 2006 tax return software free 00 10. 2006 tax return software free 0. 2006 tax return software free 321   11. 2006 tax return software free   Gain allocated to nonqualified use. 2006 tax return software free (Line 7 multiplied by line 10) 11. 2006 tax return software free 60,990   12. 2006 tax return software free   Gain eligible for exclusion. 2006 tax return software free Subtract line 11 from line 7 12. 2006 tax return software free 129,010   13. 2006 tax return software free   If you qualify to exclude gain on the sale, enter your maximum exclusion (see Maximum Exclusion ). 2006 tax return software free  If you qualify for a reduced maximum exclusion, enter the amount from Worksheet 3, line 7. 2006 tax return software free If you do  not qualify to exclude gain, enter -0- 13. 2006 tax return software free 250,000   14. 2006 tax return software free   Exclusion. 2006 tax return software free Enter the smaller of line 12 or line 13 14. 2006 tax return software free 129,010   15. 2006 tax return software free   Taxable gain. 2006 tax return software free Subtract line 14 from line 5. 2006 tax return software free Report your taxable gain as described under Reporting the Sale . 2006 tax return software free If the amount on line 6 is more than zero, complete line 16 15. 2006 tax return software free 70,990   16. 2006 tax return software free   Enter the smaller of line 6 or line 15. 2006 tax return software free Enter this amount on line 12 of the Unrecaptured Section 1250 Gain  Worksheet in the instructions for Schedule D (Form 1040) 16. 2006 tax return software free 10,000 Property Used Partly for Business or Rental If you use property partly as a home and partly for business or to produce rental income, the treatment of any gain on the sale depends partly on whether the business or rental part of the property is part of your home or separate from it. 2006 tax return software free Part of Home Used for Business or Rental If the part of your property used for business or to produce rental income is within your home, such as a room used as a home office for a business, you do not need to allocate gain on the sale of the property between the business part of the property and the part used as a home. 2006 tax return software free In addition, you do not need to report the sale of the business or rental part on Form 4797. 2006 tax return software free This is true whether or not you were entitled to claim any depreciation. 2006 tax return software free However, you cannot exclude the part of any gain equal to any depreciation allowed or allowable after May 6, 1997. 2006 tax return software free See Depreciation after May 6, 1997, earlier. 2006 tax return software free Example 1. 2006 tax return software free Ray sold his main home in 2013 at a $30,000 gain. 2006 tax return software free He has no gains or losses from the sale of property other than the gain from the sale of his home. 2006 tax return software free He meets the ownership and use tests to exclude the gain from his income. 2006 tax return software free However, he used part of the home as a business office in 2012 and claimed $500 depreciation. 2006 tax return software free Because the business office was part of his home (not separate from it), he does not have to allocate the gain on the sale between the business part of the property and the part used as a home. 2006 tax return software free In addition, he does not have to report any part of the gain on Form 4797. 2006 tax return software free Because Ray was entitled to take a depreciation deduction, he must recognize $500 of the gain as unrecaptured section 1250 gain. 2006 tax return software free He reports his gain, exclusion, and the taxable gain of $500 on Form 8949 and Schedule D (Form 1040). 2006 tax return software free Example 2. 2006 tax return software free The facts are the same as in Example 1 except that Ray was not entitled to claim depreciation for the business use of his home. 2006 tax return software free Since Ray did not claim any depreciation, he can exclude the entire $30,000 gain. 2006 tax return software free Separate Part of Property Used for Business or Rental You may have used part of your property as your home and a separate part of it for business or to produce rental income. 2006 tax return software free Examples are: A working farm on which your house was located, A duplex in w
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Take the First Step to Solve Your Complaint

You can solve most consumer problems by talking to a salesperson or customer service representative. Do this as soon as possible because some retailers have time limits on returns and refunds. If this doesn't work, ask for a supervisor or manager. With each person, calmly and accurately explain the problem and what action you would like taken.

When this fails, try going higher up, to the national headquarters of the seller or the manufacturer of the item. Many companies have a special customer relations or consumer affairs division whose primary function is solving consumer problems. Many companies provide a toll-free number or address for this office on the product label, warranty or other papers given to you at the time of purchase. If this is not the case:

  • Visit the company's website. Look for a "Contact Us" link.
  • Dial the directory of toll-free numbers at 1-800-555-1212 to see if the company has a toll-free number listed.
  • Ask your local librarian to assist you. Most public libraries have reference books with contact information.

As you do your search, keep in mind the name of the manufacturer or parent company is often different from the brand name. The Thomas Register of American Manufacturers, a book available at many public libraries, lists the manufacturers of thousands of products.

A written letter is a good strategy because you will have a record of your communication with the company. Our sample letter can help you prepare a written complaint.

  • Be brief and to the point. Note all important facts about your purchase, including what you bought, serial or model numbers, the name and location of the seller, and when you made the purchase.
  • State exactly what you want done about the problem and how long you are willing to wait for a response. Be reasonable.
  • Don't write an angry, sarcastic or threatening letter. The person reading your letter probably was not responsible for your problem, but may be very helpful in resolving it.
  • Include copies of all documents regarding your problem. Keep the originals.
  • Provide your name, address and phone numbers. If an account is involved, be sure to include the account number.

Keep a record of your efforts to contact the seller; include the name of the person with whom you spoke and what was done, if anything.

File a Complaint Using Social Media

Social media offers an alternative to filing a formal consumer complaint. The customer relations staff at many major corporations monitor posts and complaints about their company’s service. Someone may respond to your problem quickly, to avoid negative perceptions of their performance by other potential customers. While there is no guarantee that you’ll get your problem resolved, it can be a worthwhile effort.

The 2006 Tax Return Software Free

2006 tax return software free Publication 559 - Main Content Table of Contents Personal RepresentativeDuties Fees Received by Personal Representatives Final Income Tax Return for Decedent—Form 1040Name, Address, and Signature When and Where To File Filing Requirements Income To Include Exemptions and Deductions Credits, Other Taxes, and Payments Tax Forgiveness for Armed Forces Members, Victims of Terrorism, and Astronauts Filing Reminders Other Tax InformationTax Benefits for Survivors Income in Respect of a Decedent Deductions in Respect of a Decedent Estate Tax Deduction Gifts, Insurance, and Inheritances Other Items of Income Income Tax Return of an Estate— Form 1041Filing Requirements Income To Include Exemption and Deductions Credits, Tax, and Payments Name, Address, and Signature When and Where To File Distributions to BeneficiariesIncome That Must Be Distributed Currently Other Amounts Distributed Discharge of a Legal Obligation Character of Distributions How and When To Report Bequest Termination of Estate Estate and Gift TaxesApplicable Credit Amount Gift Tax Estate Tax Generation-Skipping Transfer Tax Comprehensive ExampleFinal Return for Decedent—Form 1040 Income Tax Return of an Estate—Form 1041 How To Get Tax HelpLow Income Taxpayer Clinics Personal Representative A personal representative of an estate is an executor, administrator, or anyone who is in charge of the decedent's property. 2006 tax return software free Generally, an executor (or executrix) is named in a decedent's will to administer the estate and distribute properties as the decedent has directed. 2006 tax return software free An administrator (or administratrix) is usually appointed by the court if no will exists, if no executor was named in the will, or if the named executor cannot or will not serve. 2006 tax return software free In general, an executor and an administrator perform the same duties and have the same responsibilities. 2006 tax return software free For estate tax purposes, if there is no executor or administrator appointed, qualified, and acting within the United States, the term “executor” includes anyone in actual or constructive possession of any property of the decedent. 2006 tax return software free It includes, among others, the decedent's agents and representatives; safe-deposit companies, warehouse companies, and other custodians of property in this country; brokers holding securities of the decedent as collateral; and the debtors of the decedent who are in this country. 2006 tax return software free Duties The primary duties of a personal representative are to collect all the decedent's assets, pay his or her creditors, and distribute the remaining assets to the heirs or other beneficiaries. 2006 tax return software free The personal representative also must perform the following duties. 2006 tax return software free Apply for an employer identification number (EIN) for the estate. 2006 tax return software free File all tax returns, including income, estate and gift tax returns, when due. 2006 tax return software free Pay the tax determined up to the date of discharge from duties. 2006 tax return software free Other duties of the personal representative in federal tax matters are discussed in other sections of this publication. 2006 tax return software free If any beneficiary is a nonresident alien, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for information on the personal representative's duties as a withholding agent. 2006 tax return software free Penalty. 2006 tax return software free   There is a penalty for failure to file a tax return when due unless the failure is due to reasonable cause. 2006 tax return software free Reliance on an agent (attorney, accountant, etc. 2006 tax return software free ) is not reasonable cause for late filing. 2006 tax return software free It is the personal representative's duty to file the returns for the decedent and the estate when due. 2006 tax return software free Identification number. 2006 tax return software free   The first action you should take if you are the personal representative for the decedent is to apply for an EIN for the estate. 2006 tax return software free You should apply for this number as soon as possible because you need to enter it on returns, statements, and other documents you file concerning the estate. 2006 tax return software free You also must give the number to payers of interest and dividends and other payers who must file a return concerning the estate. 2006 tax return software free   You can get an EIN by applying online at www. 2006 tax return software free irs. 2006 tax return software free gov (click on "Apply for an EIN Online" under the Tools heading). 2006 tax return software free Generally, if you apply online, you will receive your EIN immediately upon completing the application. 2006 tax return software free You can also apply using Form SS-4, Application for Employer Identification Number. 2006 tax return software free Generally, if you apply by mail, it takes about 4 weeks to get your EIN. 2006 tax return software free See the form instructions for other ways to apply. 2006 tax return software free   Payers of interest and dividends report amounts on Forms 1099 using the identification number of the person to whom the account is payable. 2006 tax return software free After a decedent's death, Forms 1099 must reflect the identification number of the estate or beneficiary to whom the amounts are payable. 2006 tax return software free As the personal representative handling the estate, you must furnish this identification number to the payer. 2006 tax return software free For example, if interest is payable to the estate, the estate's EIN must be provided to the payer and used to report the interest on Form 1099-INT, Interest Income. 2006 tax return software free If the interest is payable to a surviving joint owner, the survivor's identification number, such as an SSN or ITIN, must be provided to the payer and used to report the interest. 2006 tax return software free   If the estate or a survivor may receive interest or dividends after you inform the payer of the decedent's death, the payer should give you (or the survivor) a Form W-9, Request for Taxpayer Identification Number and Certification (or a similar substitute form). 2006 tax return software free Complete this form to inform the payer of the estate's (or if completed by the survivor, the survivor's) identification number and return it to the payer. 2006 tax return software free    Do not use the deceased individual's identifying number to file an individual income tax return after the decedent's final tax return. 2006 tax return software free Also do not use it to make estimated tax payments for a tax year after the year of death. 2006 tax return software free Penalty. 2006 tax return software free   If you do not include the EIN or the taxpayer identification number of another person where it is required on a return, statement, or other document, you are liable for a penalty for each failure, unless you can show reasonable cause. 2006 tax return software free You also are liable for a penalty if you do not give the taxpayer identification number of another person when required on a return, statement, or other document. 2006 tax return software free Notice of fiduciary relationship. 2006 tax return software free   The term fiduciary means any person acting for another person. 2006 tax return software free It applies to persons who have positions of trust on behalf of others. 2006 tax return software free A personal representative for a decedent's estate is a fiduciary. 2006 tax return software free Form 56. 2006 tax return software free   If you are appointed to act in a fiduciary capacity for another, you must file a written notice with the IRS stating this. 2006 tax return software free Form 56, Notice Concerning Fiduciary Relationship, is used for this purpose. 2006 tax return software free See the Instructions for Form 56 for filing requirements and other information. 2006 tax return software free   File Form 56 as soon as all the necessary information (including the EIN) is available. 2006 tax return software free It notifies the IRS that you, as the fiduciary, are assuming the powers, rights, duties, and privileges of the decedent. 2006 tax return software free The notice remains in effect until you notify the IRS (by filing another Form 56) that your fiduciary relationship with the estate has terminated. 2006 tax return software free Termination of fiduciary relationship. 2006 tax return software free   Form 56 should also be filed to notify the IRS if your fiduciary relationship is terminated or when a successor fiduciary is appointed if the estate has not been terminated. 2006 tax return software free See Form 56 and its instructions for more information. 2006 tax return software free   At the time of termination of the fiduciary relationship, you may want to file Form 4810, Request for Prompt Assessment Under Internal Revenue Code Section 6501(d), and Form 5495, Request for Discharge From Personal Liability Under Internal Revenue Code Section 2204 or 6905, to wind up your duties as fiduciary. 2006 tax return software free See below for a discussion of these forms. 2006 tax return software free Request for prompt assessment (charge) of tax. 2006 tax return software free   The IRS ordinarily has 3 years from the date an income tax return is filed, or its due date, whichever is later, to charge any additional tax due. 2006 tax return software free However, as a personal representative, you may request a prompt assessment of tax after the return has been filed. 2006 tax return software free This reduces the time for making the assessment to 18 months from the date the written request for prompt assessment was received. 2006 tax return software free This request can be made for any tax return (except the estate tax return) of the decedent or the decedent's estate. 2006 tax return software free This may permit a quicker settlement of the tax liability of the estate and an earlier final distribution of the assets to the beneficiaries. 2006 tax return software free Form 4810. 2006 tax return software free   Form 4810 can be used for making this request. 2006 tax return software free It must be filed separately from any other document. 2006 tax return software free   As the personal representative for the decedent's estate, you are responsible for any additional taxes that may be due. 2006 tax return software free You can request prompt assessment of any of the decedent's taxes (other than federal estate taxes) for any years for which the statutory period for assessment is open. 2006 tax return software free This applies even though the returns were filed before the decedent's death. 2006 tax return software free Failure to report income. 2006 tax return software free   If you or the decedent failed to report substantial amounts of gross income (more than 25% of the gross income reported on the return) or filed a false or fraudulent return, your request for prompt assessment will not shorten the period during which the IRS may assess the additional tax. 2006 tax return software free However, such a request may relieve you of personal liability for the tax if you did not have knowledge of the unpaid tax. 2006 tax return software free Request for discharge from personal liability for tax. 2006 tax return software free   An executor can make a request for discharge from personal liability for a decedent's income, gift, and estate taxes. 2006 tax return software free The request must be made after the returns for those taxes are filed. 2006 tax return software free To make the request, file Form 5495. 2006 tax return software free For this purpose, an executor is an executor or administrator that is appointed, qualified, and acting within the United States. 2006 tax return software free   Within 9 months after receipt of the request, the IRS will notify the executor of the amount of taxes due. 2006 tax return software free If this amount is paid, the executor will be discharged from personal liability for any future deficiencies. 2006 tax return software free If the IRS has not notified the executor, he or she will be discharged from personal liability at the end of the 9-month period. 2006 tax return software free    Even if the executor is discharged from personal liability, the IRS will still be able to assess tax deficiencies against the executor to the extent he or she still has any of the decedent's property. 2006 tax return software free Insolvent estate. 2006 tax return software free   Generally, if a decedent's estate is insufficient to pay all the decedent's debts, the debts due to the United States must be paid first. 2006 tax return software free Both the decedent's federal income tax liabilities at the time of death and the estate's income tax liability are debts due to the United States. 2006 tax return software free The personal representative of an insolvent estate is personally responsible for any tax liability of the decedent or of the estate if he or she had notice of such tax obligations or failed to exercise due care in determining if such obligations existed before distribution of the estate's assets and before being discharged from duties. 2006 tax return software free The extent of such personal responsibility is the amount of any other payments made before paying the debts due to the United States, except where such other debt paid has priority over the debts due to the United States. 2006 tax return software free Income tax liabilities need not be formally assessed for the personal representative to be liable if he or she was aware or should have been aware of their existence. 2006 tax return software free Fees Received by Personal Representatives All personal representatives must include fees paid to them from an estate in their gross income. 2006 tax return software free If you are not in the trade or business of being an executor (for instance, you are the executor of a friend's or relative's estate), report these fees on your Form 1040, line 21. 2006 tax return software free If you are in the trade or business of being an executor, report fees received from the estate as self-employment income on Schedule C or Schedule C-EZ of your Form 1040. 2006 tax return software free If the estate operates a trade or business and you, as executor, actively participate in the trade or business while fulfilling your duties, any fees you receive related to the operation of the trade or business must be reported as self-employment income on Schedule C (or Schedule C-EZ) of your Form 1040. 2006 tax return software free Final Income Tax Return for Decedent—Form 1040 The personal representative (defined earlier) must file the final income tax return (Form 1040) of the decedent for the year of death and any returns not filed for preceding years. 2006 tax return software free A surviving spouse, under certain circumstances, may have to file the returns for the decedent. 2006 tax return software free See Joint Return, later. 2006 tax return software free Return for preceding year. 2006 tax return software free   If an individual died after the close of the tax year, but before the return for that year was filed, the return for the year just closed will not be the final return. 2006 tax return software free The return for that year will be a regular return and the personal representative must file it. 2006 tax return software free Example. 2006 tax return software free Samantha Smith died on March 21, 2013, before filing her 2012 tax return. 2006 tax return software free Her personal representative must file her 2012 return by April 15, 2013. 2006 tax return software free Her final tax return covering the period from January 1, 2013, to March 20, 2013, is due April 15, 2014. 2006 tax return software free Name, Address, and Signature Write the word “DECEASED,” the decedent's name, and the date of death across the top of the tax return. 2006 tax return software free If filing a joint return, write the name and address of the decedent and the surviving spouse in the name and address fields. 2006 tax return software free If a joint return is not being filed, write the decedent's name in the name field and the personal representative's name and address in the address field. 2006 tax return software free Third party designee. 2006 tax return software free   You can check the “Yes” box in the Third Party Designee area on page 2 of the return to authorize the IRS to discuss the return with a friend, family member, or any other person you choose. 2006 tax return software free This allows the IRS to call the person you identified as the designee to answer any questions that may arise during the processing of the return. 2006 tax return software free It also allows the designee to perform certain actions. 2006 tax return software free See the Instructions for Form 1040 for details. 2006 tax return software free Signature. 2006 tax return software free   If a personal representative has been appointed, that person must sign the return. 2006 tax return software free If it is a joint return, the surviving spouse must also sign it. 2006 tax return software free If no personal representative has been appointed, the surviving spouse (on a joint return) signs the return and writes in the signature area “Filing as surviving spouse. 2006 tax return software free ” If no personal representative has been appointed and if there is no surviving spouse, the person in charge of the decedent's property must file and sign the return as “personal representative. 2006 tax return software free ” Paid preparer. 2006 tax return software free   If you pay someone to prepare, assist in preparing, or review the tax return, that person must sign the return and fill in the other blanks in the Paid Preparer Use Only area of the return. 2006 tax return software free See the Form 1040 instructions for details. 2006 tax return software free When and Where To File The final income tax return is due at the same time the decedent's return would have been due had death not occurred. 2006 tax return software free A final return for a decedent who was a calendar year taxpayer is generally due on April 15 following the year of death, regardless of when during that year death occurred. 2006 tax return software free However, when the due date falls on a Saturday, Sunday, or legal holiday, the return is filed timely if filed by the next business day. 2006 tax return software free The tax return must be prepared for the year of death regardless of when during the year death occurred. 2006 tax return software free Generally, you must file the final income tax return of the decedent with the Internal Revenue Service Center for the place where you live. 2006 tax return software free A tax return for a decedent can be electronically filed. 2006 tax return software free A personal representative may also obtain an income tax filing extension on behalf of a decedent. 2006 tax return software free Filing Requirements The gross income, age, and filing status of a decedent generally determine whether a return must be filed. 2006 tax return software free Gross income is all income received by an individual from any source in the form of money, goods, property, and services that is not tax-exempt. 2006 tax return software free It includes gross receipts from self-employment, but if the business involves manufacturing, merchandising, or mining, subtract any cost of goods sold. 2006 tax return software free In general, filing status depends on whether the decedent was considered single or married at the time of death. 2006 tax return software free See the income tax return instructions or Publication 501, Exemptions, Standard Deduction, and Filing Information. 2006 tax return software free Refund A return must be filed to obtain a refund if tax was withheld from salaries, wages, pensions, or annuities, or if estimated tax was paid, even if a return is not otherwise required to be filed. 2006 tax return software free Also, the decedent may be entitled to other credits that result in a refund. 2006 tax return software free These advance payments of tax and credits are discussed later under Credits, Other Taxes, and Payments. 2006 tax return software free Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer. 2006 tax return software free   Form 1310 does not have to be filed if you are claiming a refund and you are: A surviving spouse filing an original or amended joint return with the decedent, or A court-appointed or certified personal representative filing the decedent’s original return and a copy of the court certificate showing your appointment is attached to the return. 2006 tax return software free   If the personal representative is filing a claim for refund on Form 1040X, Amended U. 2006 tax return software free S. 2006 tax return software free Individual Income Tax Return, or Form 843, Claim for Refund and Request for Abatement, and the court certificate has already been filed with the IRS, attach Form 1310 and write “Certificate Previously Filed” at the bottom of the form. 2006 tax return software free Example. 2006 tax return software free Edward Green died before filing his tax return. 2006 tax return software free You were appointed the personal representative for Edward's estate, and you file his Form 1040 showing a refund due. 2006 tax return software free You do not need Form 1310 to claim the refund if you attach a copy of the court certificate showing you were appointed the personal representative. 2006 tax return software free    If you are a surviving spouse and you receive a tax refund check in both your name and your deceased spouse's name, you can have the check reissued in your name alone. 2006 tax return software free Return the joint-name check marked “VOID” to your local IRS office or the service center where you mailed your return, along with a written request for reissuance of the refund check. 2006 tax return software free A new check will be issued in your name and mailed to you. 2006 tax return software free Death certificate. 2006 tax return software free   When filing the decedent's final income tax return, do not attach the death certificate or other proof of death to the final return. 2006 tax return software free Instead, keep it for your records and provide it if requested. 2006 tax return software free Nonresident Alien If the decedent was a nonresident alien who would have had to file Form 1040NR, U. 2006 tax return software free S. 2006 tax return software free Nonresident Alien Income Tax Return, you must file that form for the decedent's final tax year. 2006 tax return software free See the Instructions for Form 1040NR for the filing requirements, due date, and where to file. 2006 tax return software free Joint Return Generally, the personal representative and the surviving spouse can file a joint return for the decedent and the surviving spouse. 2006 tax return software free However, the surviving spouse alone can file the joint return if no personal representative has been appointed before the due date for filing the final joint return for the year of death. 2006 tax return software free This also applies to the return for the preceding year if the decedent died after the close of the preceding tax year and before filing the return for that year. 2006 tax return software free The income of the decedent that was includible on his or her return for the year up to the date of death (see Income To Include, later) and the income of the surviving spouse for the entire year must be included in the final joint return. 2006 tax return software free A final joint return with the decedent cannot be filed if the surviving spouse remarried before the end of the year of the decedent's death. 2006 tax return software free The filing status of the decedent in this instance is married filing a separate return. 2006 tax return software free For information about tax benefits to which a surviving spouse may be entitled, see Tax Benefits for Survivors, later, under Other Tax Information. 2006 tax return software free Personal representative may revoke joint return election. 2006 tax return software free   A court-appointed personal representative may revoke an election to file a joint return previously made by the surviving spouse alone. 2006 tax return software free This is done by filing a separate return for the decedent within one year from the due date of the return (including any extensions). 2006 tax return software free The joint return made by the surviving spouse will then be regarded as the separate return of that spouse by excluding the decedent's items and refiguring the tax liability. 2006 tax return software free Relief from joint liability. 2006 tax return software free   In some cases, one spouse may be relieved of joint liability for tax, interest, and penalties on a joint return for items of the other spouse that were incorrectly reported on the joint return. 2006 tax return software free If the decedent qualified for this relief while alive, the personal representative can pursue an existing request, or file a request, for relief from joint liability. 2006 tax return software free For information on requesting this relief, see Publication 971, Innocent Spouse Relief. 2006 tax return software free Income To Include The decedent's income includible on the final return is generally determined as if the person were still alive except that the taxable period is usually shorter because it ends on the date of death. 2006 tax return software free The method of accounting regularly used by the decedent before death also determines the income includible on the final return. 2006 tax return software free This section explains how some types of income are reported on the final return. 2006 tax return software free For more information about accounting methods, see Publication 538, Accounting Periods and Methods. 2006 tax return software free Cash Method If the decedent accounted for income under the cash method, only those items actually or constructively received before death are included on the final return. 2006 tax return software free Constructive receipt of income. 2006 tax return software free   Interest from coupons on the decedent's bonds is constructively received by the decedent if the coupons matured in the decedent's final tax year, but had not been cashed. 2006 tax return software free Include the interest income on the final return. 2006 tax return software free   Generally, a dividend is considered constructively received if it was available for use by the decedent without restriction. 2006 tax return software free If the corporation customarily mailed its dividend checks, the dividend was includible when received. 2006 tax return software free If the individual died between the time the dividend was declared and the time it was received in the mail, the decedent did not constructively receive it before death. 2006 tax return software free Do not include the dividend in the final return. 2006 tax return software free Accrual Method Generally, under an accrual method of accounting, income is reported when earned. 2006 tax return software free If the decedent used an accrual method, only the income items normally accrued before death are included on the final return. 2006 tax return software free Interest and Dividend Income (Forms 1099) Form(s) 1099 reporting interest and dividends earned by the decedent before death should be received and the amounts included on the decedent's final return. 2006 tax return software free A separate Form 1099 should show the interest and dividends earned after the date of the decedent's death and paid to the estate or other recipient that must include those amounts on its return. 2006 tax return software free You can request corrected Forms 1099 if these forms do not properly reflect the right recipient or amounts. 2006 tax return software free For example, a Form 1099-INT, reporting interest payable to the decedent, may include income that should be reported on the final income tax return of the decedent, as well as income that the estate or other recipient should report, either as income earned after death or as income in respect of the decedent (discussed later). 2006 tax return software free For income earned after death, you should ask the payer for a Form 1099 that properly identifies the recipient (by name and identification number) and the proper amount. 2006 tax return software free If that is not possible, or if the form includes an amount that represents income in respect of the decedent, report the interest as shown next under How to report. 2006 tax return software free See U. 2006 tax return software free S. 2006 tax return software free savings bonds acquired from decedent under Income in Respect of a Decedent, later, for information on savings bond interest that may have to be reported on the final return. 2006 tax return software free How to report. 2006 tax return software free   If you are preparing the decedent's final return and you have received a Form 1099-INT for the decedent that includes amounts belonging to the decedent and to another recipient (the decedent's estate or another beneficiary), report the total interest shown on Form 1099-INT on Schedule B (Form 1040A or 1040), Interest and Ordinary Dividends. 2006 tax return software free Next, enter a subtotal of the interest shown on Forms 1099, and the interest reportable from other sources for which you did not receive Forms 1099. 2006 tax return software free Then, show any interest (including any interest you receive as a nominee) belonging to another recipient separately and subtract it from the subtotal. 2006 tax return software free Identify the amount of this adjustment as “Nominee Distribution” or other appropriate designation. 2006 tax return software free   Report dividend income for which you received a Form 1099-DIV, Dividends and Distributions, on the appropriate schedule using the same procedure. 2006 tax return software free    Note. 2006 tax return software free If the decedent received amounts as a nominee, you must give the actual owner a Form 1099, unless the owner is the decedent's spouse. 2006 tax return software free See General Instructions for Certain Information Returns (Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G) for more information on filing Forms 1099. 2006 tax return software free Partnership Income The death of a partner closes the partnership's tax year for that partner. 2006 tax return software free Generally, it does not close the partnership's tax year for the remaining partners. 2006 tax return software free The decedent's distributive share of partnership items must be figured as if the partnership's tax year ended on the date the partner died. 2006 tax return software free To avoid an interim closing of the partnership books, the partners can agree to estimate the decedent's distributive share by prorating the amounts the partner would have included for the entire partnership tax year. 2006 tax return software free On the decedent's final return, include the decedent's distributive share of partnership items for the following periods. 2006 tax return software free The partnership's tax year that ended within or with the decedent's final tax year (the year ending on the date of death). 2006 tax return software free The period, if any, from the end of the partnership's tax year in (1) to the decedent's date of death. 2006 tax return software free Example. 2006 tax return software free Mary Smith was a partner in XYZ partnership and reported her income on a tax year ending December 31. 2006 tax return software free The partnership uses a tax year ending June 30. 2006 tax return software free Mary died August 31, 2013, and her estate established its tax year through August 31. 2006 tax return software free The distributive share of partnership items based on the decedent's partnership interest is reported as follows. 2006 tax return software free Final Return for the Decedent—January 1 through August 31, 2013, includes XYZ partnership items from (a) the partnership tax year ending June 30, 2013, and (b) the partnership tax year beginning July 1, 2013, and ending August 31, 2013 (the date of death). 2006 tax return software free Income Tax Return of the Estate—September 1, 2013, through August 31, 2014, includes XYZ partnership items for the period September 1, 2013, through June 30, 2014. 2006 tax return software free S Corporation Income If the decedent was a shareholder in an S corporation, include on the final return the decedent's share of the S corporation's items of income, loss, deduction, and credit for the following periods. 2006 tax return software free The corporation's tax year that ended within or with the decedent's final tax year (the year ending on the date of death). 2006 tax return software free The period, if any, from the end of the corporation's tax year in (1) to the decedent's date of death. 2006 tax return software free Self-Employment Income Include self-employment income actually or constructively received or accrued, depending on the decedent's accounting method. 2006 tax return software free For self-employment tax purposes only, the decedent's self-employment income will include the decedent's distributive share of a partnership's income or loss through the end of the month in which death occurred. 2006 tax return software free For this purpose, the partnership's income or loss is considered to be earned ratably over the partnership's tax year. 2006 tax return software free Community Income If the decedent was married and domiciled in a community property state, half of the income received and half of the expenses paid during the decedent's tax year by either the decedent or spouse may be considered to be the income and expenses of the other. 2006 tax return software free For more information, see Publication 555, Community Property. 2006 tax return software free HSA, Archer MSA, or Medicare Advantage MSA The treatment of an HSA (health savings account), an Archer MSA (medical savings account), or a Medicare Advantage MSA at the death of the account holder, depends on who acquires the interest in the account. 2006 tax return software free If the decedent's estate acquires the interest, the fair market value (FMV) of the assets in the account on the date of death is included in income on the decedent's final return. 2006 tax return software free The estate tax deduction, discussed later, does not apply to this amount. 2006 tax return software free If a beneficiary acquires the interest, see the discussion under Income in Respect of a Decedent, later. 2006 tax return software free For other information on HSAs, Archer MSAs, or Medicare Advantage MSAs, see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. 2006 tax return software free Coverdell Education Savings Account (ESA) Generally, the balance in a Coverdell ESA must be distributed within 30 days after the individual for whom the account was established reaches age 30, or dies, whichever is earlier. 2006 tax return software free The treatment of the Coverdell ESA at the death of an individual under age 30 depends on who acquires the interest in the account. 2006 tax return software free If the decedent's estate acquires the interest, the earnings on the account must be included on the final income tax return of the decedent. 2006 tax return software free The estate tax deduction, discussed later, does not apply to this amount. 2006 tax return software free If a beneficiary acquires the interest, see the discussion under Income in Respect of a Decedent, later. 2006 tax return software free The age 30 limitation does not apply if the individual for whom the account was established or the beneficiary that acquires the account is an individual with special needs. 2006 tax return software free This includes an individual who, because of a physical, mental, or emotional condition (including a learning disability), requires additional time to complete his or her education. 2006 tax return software free For more information on Coverdell ESAs, see Publication 970, Tax Benefits for Education. 2006 tax return software free Accelerated Death Benefits Accelerated death benefits are amounts received under a life insurance contract before the death of the insured individual. 2006 tax return software free These benefits also include amounts received on the sale or assignment of the contract to a viatical settlement provider. 2006 tax return software free Generally, if the decedent received accelerated death benefits on the life of a terminally or chronically ill individual, whether on his or her own life or on the life of another person, those benefits are not included in the decedent's income. 2006 tax return software free For more information, see the discussion under Gifts, Insurance, and Inheritances under Other Tax Information, later. 2006 tax return software free Exemptions and Deductions Generally, the rules for exemptions and deductions allowed to an individual also apply to the decedent's final income tax return. 2006 tax return software free Show on the final return deductible items the decedent paid (or accrued, if the decedent reported deductions on an accrual method) before death. 2006 tax return software free This section contains a detailed discussion of medical expenses because the tax treatment of the decedent's medical expenses can be different. 2006 tax return software free See Medical Expenses, later. 2006 tax return software free Exemptions You can claim the decedent's personal exemption on the final income tax return. 2006 tax return software free If the decedent was another person's dependent (for example, a parent's), you cannot claim the personal exemption on the decedent's final return. 2006 tax return software free Standard Deduction If you do not itemize deductions on the final return, the full amount of the appropriate standard deduction is allowed regardless of the date of death. 2006 tax return software free For information on the appropriate standard deduction, see the Form 1040 income tax return instructions or Publication 501. 2006 tax return software free Medical Expenses Medical expenses paid before death by the decedent are deductible, subject to limits, on the final income tax return if deductions are itemized. 2006 tax return software free This includes expenses for the decedent, as well as for the decedent's spouse and dependents. 2006 tax return software free Beginning in 2013, medical expenses exceeding 10% of adjusted gross income (AGI) may be deducted, unless the decedent or their spouse is age 65 or older. 2006 tax return software free In that case medical expenses exceeding 7. 2006 tax return software free 5% of AGI may be deducted. 2006 tax return software free Qualified medical expenses are not deductible if paid with a tax-free distribution from an HSA or an Archer MSA. 2006 tax return software free Election for decedent's expenses. 2006 tax return software free   Medical expenses not paid before death are liabilities of the estate and are shown on the federal estate tax return (Form 706). 2006 tax return software free However, if medical expenses for the decedent are paid out of the estate during the 1-year period beginning with the day after death, you can elect to treat all or part of the expenses as paid by the decedent at the time they were incurred. 2006 tax return software free   If you make the election, you can claim all or part of the expenses on the decedent's income tax return (if deductions are itemized) rather than on the federal estate tax return (Form 706). 2006 tax return software free You can deduct expenses incurred in the year of death on the final income tax return. 2006 tax return software free You should file an amended return (Form 1040X) for medical expenses incurred in an earlier year, unless the statutory period for filing a claim for that year has expired. 2006 tax return software free   The amount you can deduct on the income tax return is the amount above 10% of adjusted gross income (or 7. 2006 tax return software free 5% of adjusted gross income if the decedent or the decedent's spouse was born before January 2, 1949). 2006 tax return software free Amounts not deductible because of this percentage cannot be claimed on the federal estate tax return. 2006 tax return software free Making the election. 2006 tax return software free   You make the election by attaching a statement, in duplicate, to the decedent's income tax return or amended return. 2006 tax return software free The statement must state that you have not claimed the amount as an estate tax deduction, and that the estate waives the right to claim the amount as a deduction. 2006 tax return software free This election applies only to expenses incurred for the decedent, not to expenses incurred to provide medical care for dependents. 2006 tax return software free Example. 2006 tax return software free Richard Brown used the cash method of accounting and filed his income tax return on a calendar year basis. 2006 tax return software free Richard died on June 1, 2013, at the age of 78, after incurring $800 in medical expenses. 2006 tax return software free Of that amount, $500 was incurred in 2012 and $300 was incurred in 2013. 2006 tax return software free Richard itemized his deductions when he filed his 2012 income tax return. 2006 tax return software free The personal representative of the estate paid the entire $800 liability in August 2013. 2006 tax return software free The personal representative may file an amended return (Form 1040X) for 2012 claiming the $500 medical expense as a deduction, subject to the 7. 2006 tax return software free 5% limit. 2006 tax return software free The $300 of expenses incurred in 2013 can be deducted on the final income tax return if deductions are itemized, subject to the 7. 2006 tax return software free 5% limit. 2006 tax return software free The personal representative must file a statement in duplicate with each return stating that these amounts have not been claimed on the federal estate tax return (Form 706), and waiving the right to claim such a deduction on Form 706 in the future. 2006 tax return software free Medical expenses not paid by estate. 2006 tax return software free   If you paid medical expenses for your deceased spouse or dependent, claim the expenses on your tax return for the year in which you paid them, whether they are paid before or after the decedent's death. 2006 tax return software free If the decedent was a child of divorced or separated parents, the medical expenses can usually be claimed by both the custodial and noncustodial parent to the extent paid by that parent during the year. 2006 tax return software free Insurance reimbursements. 2006 tax return software free   Insurance reimbursements of previously deducted medical expenses due a decedent at the time of death and later received by the decedent's estate are includible in the income tax return of the estate (Form 1041) for the year the reimbursements are received. 2006 tax return software free The reimbursements are also includible in the decedent's gross estate. 2006 tax return software free No deduction for funeral expenses can be taken on the final Form 1040 of a decedent. 2006 tax return software free These expenses may be deductible for estate tax purposes on Form 706. 2006 tax return software free Deduction for Losses A decedent's net operating loss deduction from a prior year and any capital losses (including capital loss carryovers) can be deducted only on the decedent's final income tax return. 2006 tax return software free A net operating loss on the decedent's final income tax return can be carried back to prior years. 2006 tax return software free (See Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. 2006 tax return software free ) You cannot deduct any unused net operating loss or capital loss on the estate's income tax return. 2006 tax return software free At-risk loss limits. 2006 tax return software free   Special at-risk rules apply to most activities that are engaged in as a trade or business or for the production of income. 2006 tax return software free   These rules limit the deductible loss to the amount which the individual was considered at-risk in the activity. 2006 tax return software free An individual generally will be considered at-risk to the extent of the money and the adjusted basis of property that he or she contributed to the activity and certain amounts the individual borrowed for use in the activity. 2006 tax return software free An individual will be considered at-risk for amounts borrowed only if he or she was personally liable for the repayment or if the amounts borrowed were secured by property other than that used in the activity. 2006 tax return software free The individual is not considered at-risk for borrowed amounts if the lender has an interest in the activity or if the lender is related to a person who has an interest in the activity. 2006 tax return software free For more information, see Publication 925, Passive Activity and At-Risk Rules. 2006 tax return software free Passive activity rules. 2006 tax return software free   A passive activity is any trade or business activity in which the taxpayer does not materially participate. 2006 tax return software free To determine material participation, see Publication 925. 2006 tax return software free Rental activities are passive activities regardless of the taxpayer's participation, unless the taxpayer meets certain eligibility requirements. 2006 tax return software free   Individuals, estates, and trusts can offset passive activity losses only against passive activity income. 2006 tax return software free Passive activity losses or credits not allowed in one tax year can be carried forward to the next year. 2006 tax return software free   If a passive activity interest is transferred because a taxpayer dies, the accumulated unused passive activity losses are allowed as a deduction against the decedent's income in the year of death. 2006 tax return software free Losses are allowed only to the extent they are greater than the excess of the transferee's (recipient of the interest transferred) basis in the property over the decedent's adjusted basis in the property immediately before death. 2006 tax return software free The part of the accumulated losses equal to the excess is not allowed as a deduction for any tax year. 2006 tax return software free   Use Form 8582, Passive Activity Loss Limitations, to summarize losses and income from passive activities and to figure the amounts allowed. 2006 tax return software free For more information, see Publication 925. 2006 tax return software free Credits, Other Taxes, and Payments Discussed below are some of the tax credits, types of taxes that may be owed, income tax withheld, and estimated tax payments reported on the final return of a decedent. 2006 tax return software free Credits On the final income tax return, you can claim any tax credits that applied to the decedent before death. 2006 tax return software free Some of these credits are discussed next. 2006 tax return software free Earned income credit. 2006 tax return software free   If the decedent was an eligible individual, you can claim the earned income credit on the decedent's final return even though the return covers less than 12 months. 2006 tax return software free If the allowable credit is more than the tax liability for the year, the excess is refunded. 2006 tax return software free   For more information, see Publication 596, Earned Income Credit (EIC). 2006 tax return software free Credit for the elderly or the disabled. 2006 tax return software free   This credit is allowable on a decedent's final income tax return if the decedent met both of the following requirements in the year of death. 2006 tax return software free The decedent: Was a “qualified individual,” and Had income (adjusted gross income (AGI) and nontaxable social security and pensions) less than certain limits. 2006 tax return software free   For details on qualifying for or figuring the credit, see Publication 524, Credit for the Elderly or the Disabled. 2006 tax return software free Child tax credit. 2006 tax return software free   If the decedent had a qualifying child, you may be able to claim the child tax credit on the decedent's final return even though the return covers less than 12 months. 2006 tax return software free You may be able to claim the additional child tax credit and get a refund if the credit is more than the decedent's liability. 2006 tax return software free For more information, see the Instructions for Form 1040. 2006 tax return software free Adoption credit. 2006 tax return software free   Depending upon when the adoption was finalized, this credit may be taken on a decedent's final income tax return if the decedent: Adopted an eligible child and paid qualified adoption expenses, or Has a carryforward of an adoption credit from a prior year. 2006 tax return software free   Also, if the decedent is survived by a spouse who meets the filing status of qualifying widow(er), unused adoption credit may be carried forward and used following the death of the decedent. 2006 tax return software free See Form 8839, Qualified Adoption Expenses, and its instructions for more details. 2006 tax return software free General business tax credit. 2006 tax return software free   The general business credit available to a taxpayer is limited. 2006 tax return software free Any credit arising in a tax year beginning before 1998 that has not been used up can be carried forward for up to 15 years. 2006 tax return software free Any unused credit arising in a tax year beginning after 1997 has a 1-year carryback and a 20-year carryforward period. 2006 tax return software free   After the carryforward period, a deduction may be allowed for any unused business credit. 2006 tax return software free If the taxpayer dies before the end of the carryforward period, the deduction generally is allowed in the year of death. 2006 tax return software free   For more information on the general business credit, see Publication 334, Tax Guide for Small Business. 2006 tax return software free Other Taxes Taxes other than income tax that may be owed on the final return of a decedent include self-employment tax and alternative minimum tax, which are reported on Form 1040. 2006 tax return software free Self-employment tax. 2006 tax return software free   Self-employment tax may be owed on the final return if either of the following applied to the decedent in the year of death: Net earnings from self-employment (excluding income described in (2)) were $400 or more; or Wages from services performed as a church employee were $108. 2006 tax return software free 28 or more. 2006 tax return software free Alternative minimum tax (AMT). 2006 tax return software free   The tax laws give special treatment to certain types of income and allow special deductions and credits for certain types of expenses. 2006 tax return software free The alternative minimum tax (AMT) was enacted so taxpayers who benefit from these laws still pay at least a minimum amount of tax. 2006 tax return software free In general, the AMT is the excess of the tentative minimum tax over the regular tax shown on the return. 2006 tax return software free Form 6251. 2006 tax return software free    Use Form 6251, Alternative Minimum Tax—Individuals, to determine if this tax applies to the decedent. 2006 tax return software free See the form instructions for information on when you must attach Form 6251 to Form 1040. 2006 tax return software free Form 8801. 2006 tax return software free   If the decedent paid AMT in a previous year or had a credit carryforward, the decedent may be eligible for a minimum tax credit. 2006 tax return software free See Form 8801, Credit for Prior Year Minimum Tax—Individuals, Estates, and Trusts. 2006 tax return software free Payments of Tax The income tax withheld from the decedent's salary, wages, pensions, or annuities, and the amount paid as estimated tax are credits (advance payments of tax) that must be claimed on the final return. 2006 tax return software free Tax Forgiveness for Armed Forces Members, Victims of Terrorism, and Astronauts Income tax liability may be forgiven for a decedent who dies due to service in a combat zone, due to military or terrorist actions, as a result of a terrorist attack, or while serving in the line of duty as an astronaut. 2006 tax return software free Combat Zone If a member of the Armed Forces of the United States dies while in active service in a combat zone or from wounds, disease, or injury incurred in a combat zone, the decedent's income tax liability is abated (forgiven) for the entire year in which death occurred and for any prior tax year ending on or after the first day the person served in a combat zone in active service. 2006 tax return software free For this purpose, a qualified hazardous duty area is treated as a combat zone. 2006 tax return software free If the tax (including interest, additions to the tax, and additional amounts) for these years has been assessed, the assessment will be forgiven. 2006 tax return software free If the tax has been collected (regardless of the date of collection), that tax will be credited or refunded. 2006 tax return software free Any of the decedent's income tax for tax years before those mentioned above that remains unpaid as of the actual (or presumptive) date of death will not be assessed. 2006 tax return software free If any unpaid tax (including interest, additions to the tax, and additional amounts) has been assessed, this assessment will be forgiven. 2006 tax return software free Also, if any tax was collected after the date of death, that amount will be credited or refunded. 2006 tax return software free The date of death of a member of the Armed Forces reported as missing in action or as a prisoner of war is the date his or her name is removed from missing status for military pay purposes. 2006 tax return software free This is true even if death actually occurred earlier. 2006 tax return software free For other tax information for members of the Armed Forces, see Publication 3, Armed Forces' Tax Guide. 2006 tax return software free Military or Terrorist Actions The decedent's income tax liability is forgiven if, at death, he or she was a military or civilian employee of the United States who died because of wounds or injury incurred: While a U. 2006 tax return software free S. 2006 tax return software free employee, and In a military or terrorist action. 2006 tax return software free The forgiveness applies to the tax year in which death occurred and for any earlier tax year, beginning with the year before the year in which the wounds or injury occurred. 2006 tax return software free Example. 2006 tax return software free The income tax liability of a civilian employee of the United States who died in 2013 because of wounds incurred while a U. 2006 tax return software free S. 2006 tax return software free employee in a terrorist attack that occurred in 2008 will be forgiven for 2013 and for all prior tax years in the period 2007 through 2012. 2006 tax return software free Refunds are allowed for the tax years for which the period for filing a claim for refund has not ended, as discussed later. 2006 tax return software free Military or terrorist action defined. 2006 tax return software free   A military or terrorist action means the following. 2006 tax return software free Any terrorist activity that most of the evidence indicates was directed against the United States or any of its allies. 2006 tax return software free Any military action involving the U. 2006 tax return software free S. 2006 tax return software free Armed Forces and resulting from violence or aggression against the United States or any of its allies, or the threat of such violence or aggression. 2006 tax return software free   Terrorist activity includes criminal offenses intended to coerce, intimidate, or retaliate against the government or civilian population. 2006 tax return software free Military action does not include training exercises. 2006 tax return software free Any multinational force in which the United States is participating is treated as an ally of the United States. 2006 tax return software free Determining if a terrorist activity or military action has occurred. 2006 tax return software free   You may rely on published guidance from the IRS to determine if a particular event is considered a terrorist activity or military action. 2006 tax return software free Specified Terrorist Victim The Victims of Terrorism Tax Relief Act of 2001 (the Act) provides tax relief for those injured or killed as a result of terrorist attacks, certain survivors of those killed as a result of terrorist attacks, and others who were affected by terrorist attacks. 2006 tax return software free Under the Act, the federal income tax liability of those killed in the following attacks (specified terrorist victim) is forgiven for certain tax years. 2006 tax return software free The April 19, 1995, terrorist attack on the Alfred P. 2006 tax return software free Murrah Federal Building (Oklahoma City). 2006 tax return software free The September 11, 2001, terrorist attacks. 2006 tax return software free The terrorist attacks involving anthrax occurring after September 10, 2001, and before January 1, 2002. 2006 tax return software free The Act also exempts from federal income tax the following types of income. 2006 tax return software free Qualified disaster relief payments made after September 10, 2001, to cover personal, family, living, or funeral expenses incurred because of a terrorist attack. 2006 tax return software free Certain disability payments received in tax years ending after September 10, 2001, for injuries sustained in a terrorist attack. 2006 tax return software free Certain death benefits paid by an employer to the survivor of an employee because the employee died as a result of a terrorist attack. 2006 tax return software free Payments from the September 11th Victim Compensation Fund 2001. 2006 tax return software free The Act also reduces the estate tax of individuals who die as a result of a terrorist attack. 2006 tax return software free See Publication 3920, Tax Relief for Victims of Terrorist Attacks, for more information. 2006 tax return software free Astronauts Legislation extended the tax relief available under the Victims of Terrorism Tax Relief Act of 2001 (the Act) to astronauts who died in the line of duty after December 31, 2002. 2006 tax return software free The decedent's income tax liability is forgiven for the tax year in which death occurs, and for the tax year prior to death. 2006 tax return software free For information on death benefit payments and the reduction of federal estate taxes, see Publication 3920. 2006 tax return software free However, the discussions in that publication under Death Benefits and Estate Tax Reduction should be modified for astronauts (for example, by using the date of death of the astronaut instead of September 11, 2001). 2006 tax return software free For more information on the Act, see Publication 3920. 2006 tax return software free Claim for Credit or Refund If any of these tax-forgiveness situations applies to a prior year tax, any tax paid for which the period for filing a claim has not ended will be credited or refunded. 2006 tax return software free If any tax is still due, it will be canceled. 2006 tax return software free The normal period for filing a claim for credit or refund is 3 years after the return was filed or 2 years after the tax was paid, whichever is later. 2006 tax return software free If death occurred in a combat zone or from wounds, disease, or injury incurred in a combat zone, the period for filing the claim is extended by: The amount of time served in the combat zone (including any period in which the individual was in missing status), plus The period of continuous qualified hospitalization for injury from service in the combat zone, if any, plus The next 180 days. 2006 tax return software free Qualified hospitalization means any hospitalization outside the United States and any hospitalization in the United States of not more than 5 years. 2006 tax return software free This extended period for filing the claim also applies to a member of the Armed Forces who was deployed outside the United States in a designated contingency operation. 2006 tax return software free Filing a claim. 2006 tax return software free   Use the following procedures to file a claim. 2006 tax return software free If a U. 2006 tax return software free S. 2006 tax return software free individual income tax return (Form 1040, 1040A, or 1040EZ) has not been filed, you should make a claim for refund of any withheld income tax or estimated tax payments by filing Form 1040. 2006 tax return software free Form W-2, Wage and Tax Statement, must accompany all returns. 2006 tax return software free If a U. 2006 tax return software free S. 2006 tax return software free individual income tax return has been filed, you should make a claim for refund by filing Form 1040X. 2006 tax return software free You must file a separate Form 1040X for each year in question. 2006 tax return software free   You must file these returns and claims at the following address for regular mail (U. 2006 tax return software free S. 2006 tax return software free Postal Service). 2006 tax return software free    Internal Revenue Service 333 W. 2006 tax return software free Pershing, P5–6503 Kansas City, MO 64108   Identify all returns and claims for refund by writing “Iraq—KIA,” “Enduring Freedom—KIA,” “Kosovo Operation—KIA,” “Desert Storm—KIA,” or “Former Yugoslavia—KIA” in bold letters on the top of page 1 of the return or claim. 2006 tax return software free On the applicable return, write the same phrase on the line for total tax. 2006 tax return software free If the individual was killed in a terrorist or military action, put “KITA” on the front of the return and on the line for total tax. 2006 tax return software free   Include an attachment showing the computation of the decedent's tax liability and a computation of the amount to be forgiven. 2006 tax return software free On joint returns, make an allocation of the tax as described below under Joint returns. 2006 tax return software free If you cannot make a proper allocation, attach a statement of all income and deductions allocable to each spouse and the IRS will make the proper allocation. 2006 tax return software free   You must attach Form 1310 to all returns and claims for refund. 2006 tax return software free However, for exceptions to filing Form 1310, see Form 1310. 2006 tax return software free Statement of Person Claiming Refund Due a Deceased Taxpayer, under Refund, earlier. 2006 tax return software free   You must also attach proof of death that includes a statement that the individual was a U. 2006 tax return software free S. 2006 tax return software free employee on the date of injury and on the date of death and died as the result of a military or terrorist action. 2006 tax return software free For military and civilian employees of the Department of Defense, attach DD Form 1300, Report of Casualty. 2006 tax return software free For other U. 2006 tax return software free S. 2006 tax return software free civilian employees killed in the United States, attach a death certificate and a certification (letter) from the federal employer. 2006 tax return software free For other U. 2006 tax return software free S. 2006 tax return software free civilian employees killed overseas, attach a certification from the Department of State. 2006 tax return software free   If you do not have enough tax information to file a timely claim for refund, you can suspend the period for filing a claim by filing Form 1040X. 2006 tax return software free Attach Form 1310, any required documentation currently available, and a statement that you will file an amended claim as soon as you have the required tax information. 2006 tax return software free Joint returns. 2006 tax return software free   If a joint return was filed, only the decedent's part of the income tax liability is eligible for forgiveness. 2006 tax return software free Determine the decedent's tax liability as follows. 2006 tax return software free Figure the income tax for which the decedent would have been liable if a separate return had been filed. 2006 tax return software free Figure the income tax for which the spouse would have been liable if a separate return had been filed. 2006 tax return software free Multiply the joint tax liability by a fraction. 2006 tax return software free The numerator of the fraction is the amount in (1), above. 2006 tax return software free The denominator of the fraction is the total of (1) and (2). 2006 tax return software free   The resulting amount from (3) above is the decedent's tax liability eligible for forgiveness. 2006 tax return software free Filing Reminders To minimize the time needed to process the decedent's final return and issue any refund, be sure to follow these procedures. 2006 tax return software free Write “DECEASED,” the decedent's name, and the date of death across the top of the tax return. 2006 tax return software free If a personal representative has been appointed, the personal representative must sign the return. 2006 tax return software free If it is a joint return, the surviving spouse must also sign it. 2006 tax return software free If you are the decedent's spouse filing a joint return with the decedent and no personal representative has been appointed, write “Filing as surviving spouse” in the area where you sign the return. 2006 tax return software free If no personal representative has been appointed and if there is no surviving spouse, the person in charge of the decedent's property must file and sign the return as “personal representative. 2006 tax return software free ” To claim a refund for the decedent, do the following. 2006 tax return software free If you are the decedent's spouse filing a joint return with the decedent, file only the tax return to claim the refund. 2006 tax return software free If you are the personal representative and the return is not a joint return filed with the decedent's surviving spouse, file the return and attach a copy of the certificate that shows your appointment by the court. 2006 tax return software free (A power of attorney or a copy of the decedent's will is not acceptable evidence of your appointment as the personal representative. 2006 tax return software free ) If you are filing an amended return, attach Form 1310 and a copy of the certificate of appointment (or, if you have already sent the certificate of appointment to IRS, write “Certificate Previously Filed” at the bottom of Form 1310). 2006 tax return software free If you are not filing a joint return as the surviving spouse and a personal representative has not been appointed, file the return and attach Form 1310. 2006 tax return software free Other Tax Information Discussed below is information about the effect of an individual's death on the income tax liability of the survivors (including widows and widowers), the beneficiaries, and the estate. 2006 tax return software free Tax Benefits for Survivors Survivors can qualify for certain benefits when filing their own income tax returns. 2006 tax return software free Joint return by surviving spouse. 2006 tax return software free   A surviving spouse can file a joint return for the year of death and may qualify for special tax rates for the following 2 years, as explained under Qualifying widows and widowers, later. 2006 tax return software free Decedent as your dependent. 2006 tax return software free   If the decedent qualified as your dependent for a part of the year before death, you can claim the exemption for the dependent on your tax return, regardless of when death occurred during the year. 2006 tax return software free   If the decedent was your qualifying child, you may be able to claim the child tax credit or the earned income credit. 2006 tax return software free To determine if you qualify for the child tax credit, see the instructions for Form 1040, line 51; Form 1040A, line 33; or Form 1040NR, line 48. 2006 tax return software free To determine if you qualify for the earned income credit, see the instructions for Form 1040, lines 64a and 64b or Form 1040A, lines 38a and 38b. 2006 tax return software free Qualifying widows and widowers. 2006 tax return software free   If your spouse died within the 2 tax years preceding the year for which your return is being filed, you may be eligible to claim the filing status of qualifying widow(er) with dependent child and qualify to use the married-filing-jointly tax rates. 2006 tax return software free Requirements. 2006 tax return software free   Generally, you qualify for this special benefit if you meet all of the following requirements. 2006 tax return software free You were entitled to file a joint return with your spouse for the year of death—whether or not you actually filed jointly. 2006 tax return software free You did not remarry before the end of the current tax year. 2006 tax return software free You have a child, stepchild, or foster child who qualifies as your dependent for the tax year. 2006 tax return software free You provide more than half the cost of maintaining your home, which is the principal residence of that child for the entire year except for temporary absences. 2006 tax return software free Example. 2006 tax return software free William Burns' wife died in 2010. 2006 tax return software free William has not remarried and continued throughout 2011 and 2012 to maintain a home for himself and his dependent child. 2006 tax return software free For 2010, he was entitled to file a joint return for himself and his deceased wife. 2006 tax return software free For 2011 and 2012, he qualifies to file as a qualifying widower with dependent child. 2006 tax return software free For later years, he may qualify to file as a head of household. 2006 tax return software free Figuring your tax. 2006 tax return software free   Check the box on line 5 (Form 1040 or 1040A) under Filing Status on your tax return. 2006 tax return software free Use the Tax Rate Schedule or the column in the Tax Table for Married filing jointly, which gives you the split-income benefits. 2006 tax return software free   The last year you can file jointly with, or claim an exemption for, your deceased spouse is the year of death. 2006 tax return software free Joint return filing rules. 2006 tax return software free   If you are the surviving spouse and a personal representative is handling the estate for the decedent, you should coordinate filing your return for the year of death with this personal representative. 2006 tax return software free See Joint Return under Final Income Tax Return for Decedent—Form 1040, earlier. 2006 tax return software free Income in Respect of a Decedent All income the decedent would have received had death not occurred that was not properly includible on the final return, discussed earlier, is income in respect of a decedent. 2006 tax return software free If the decedent is a specified terrorist victim (see Specified Terrorist Victim, earlier), income received after the date of death and before the end of the decedent's tax year (determined without regard to death) is excluded from the recipient's gross income. 2006 tax return software free This exclusion does not apply to certain income. 2006 tax return software free For more information, see Publication 3920. 2006 tax return software free How To Report Income in respect of a decedent must be included in the income of one of the following. 2006 tax return software free The decedent's estate, if the estate receives it. 2006 tax return software free The beneficiary, if the right to income is passed directly to the beneficiary and the beneficiary receives it. 2006 tax return software free Any person to whom the estate properly distributes the right to receive it. 2006 tax return software free If you have to include income in respect of a decedent in your gross income and an estate tax return (Form 706) was filed for the decedent, you may be able to claim a deduction for the estate tax paid on that income. 2006 tax return software free See Estate Tax Deduction, later. 2006 tax return software free Example 1. 2006 tax return software free Frank Johnson owned and operated an apple orchard. 2006 tax return software free He used the cash method of accounting. 2006 tax return software free He sold and delivered 1,000 bushels of apples to a canning factory for $2,000, but did not receive payment before his death. 2006 tax return software free The proceeds from the sale are income in respect of a decedent. 2006 tax return software free When the estate was settled, payment had not been made and the estate transferred the right to the payment to his widow. 2006 tax return software free When Frank's widow collects the $2,000, she must include that amount in her return. 2006 tax return software free It is not reported on the final return of the decedent or on the return of the estate. 2006 tax return software free Example 2. 2006 tax return software free Assume the same facts as in Example 1, except that Frank used the accrual method of accounting. 2006 tax return software free The amount accrued from the sale of the apples would be included on his final return. 2006 tax return software free Neither the estate nor the widow would realize income in respect of a decedent when the money is later paid. 2006 tax return software free Example 3. 2006 tax return software free On February 1, George High, a cash method taxpayer, sold his tractor for $3,000, payable March 1 of the same year. 2006 tax return software free His adjusted basis in the tractor was $2,000. 2006 tax return software free George died on February 15, before receiving payment. 2006 tax return software free The gain to be reported as income in respect of a decedent is the $1,000 difference between the decedent's basis in the property and the sale proceeds. 2006 tax return software free In other words, the income in respect of a decedent is the gain the decedent would have realized had he lived. 2006 tax return software free Example 4. 2006 tax return software free Cathy O'Neil was entitled to a large salary payment at the date of her death. 2006 tax return software free The amount was to be paid in five annual installments. 2006 tax return software free The estate, after collecting two installments, distributed the right to the remaining installments to you, the beneficiary. 2006 tax return software free The payments are income in respect of a decedent. 2006 tax return software free None of the payments were includible on Cathy's final return. 2006 tax return software free The estate must include in its income the two installments it received, and you must include in your income each of the three installments as you receive them. 2006 tax return software free Example 5. 2006 tax return software free You inherited the right to receive renewal commissions on life insurance sold by your father before his death. 2006 tax return software free You inherited the right from your mother, who acquired it by bequest from your father. 2006 tax return software free Your mother died before she received all the commissions she had the right to receive, so you received the rest. 2006 tax return software free The commissions are income in respect of a decedent. 2006 tax return software free None of these commissions were includible in your father's final return. 2006 tax return software free The commissions received by your mother were included in her income. 2006 tax return software free The commissions you received are not includible in your mother's income, even on her final return. 2006 tax return software free You must include them in your income. 2006 tax return software free Character of income. 2006 tax return software free   The character of the income you receive in respect of a decedent remains the same as it would have been to the decedent if he or she were alive. 2006 tax return software free If the income would have been a capital gain to the decedent, it will be a capital gain to you. 2006 tax return software free Transfer of right to income. 2006 tax return software free   If you transfer your right to income in respect of a decedent, you must include in your income the greater of: The amount you receive for the right, or The fair market value of the right you transfer. 2006 tax return software free   If you make a gift of such a right, you must include in your income the fair market value of the right at the time of the gift. 2006 tax return software free   If the right to income from an installment obligation is transferred, the amount you must include in income is reduced by the basis of the obligation. 2006 tax return software free See Installment obligations, later. 2006 tax return software free Transfer defined. 2006 tax return software free   A transfer for this purpose includes a sale, exchange, or other disposition, the satisfaction of an installment obligation at other than face value, or the cancellation of an installment obligation. 2006 tax return software free Installment obligations. 2006 tax return software free   If the decedent sold property using the installment method and you are collecting payments on an installment obligation acquired from the decedent, use the same gross profit percentage the decedent used to figure the part of each payment that represents profit. 2006 tax return software free Include in your income the same profit the decedent would have included had death not occurred. 2006 tax return software free For more information, see Publication 537, Installment Sales. 2006 tax return software free   If you dispose of an installment obligation acquired from a decedent (other than by transfer to the obligor), the rules explained in Publication 537 for figuring gain or loss on the disposition apply to you. 2006 tax return software free Transfer to obligor. 2006 tax return software free   A transfer of a right to income, discussed earlier, has occurred if the decedent (seller) sold property using the installment method and the installment obligation was transferred to the obligor (buyer or person legally obligated to pay the installments). 2006 tax return software free A transfer also occurs if the obligation was canceled either at death or by the estate or person receiving the obligation from the decedent. 2006 tax return software free An obligation that becomes unenforceable is treated as having been canceled. 2006 tax return software free   If such a transfer occurs, the amount included in the income of the transferor (the estate or beneficiary) is the greater of the amount received or the fair market value of the installment obligation at the time of transfer, reduced by the basis of the obligation. 2006 tax return software free The basis of the obligation is the decedent's basis, adjusted for all installment payments received after the decedent's death and before the transfer. 2006 tax return software free   If the decedent and obligor were related persons, the fair market value of the obligation cannot be less than its face value. 2006 tax return software free Specific Types of Income in Respect of a Decedent This section explains and provides examples of some specific types of income in respect of a decedent. 2006 tax return software free Wages. 2006 tax return software free   The entire amount of wages or other employee compensation earned by the decedent but unpaid at the time of death is income in respect of a decedent. 2006 tax return software free The income is not reduced by any amounts withheld by the employer. 2006 tax return software free If the income is $600 or more, the employer should report it in box 3 of Form 1099-MISC, Miscellaneous Income, and give the recipient a copy of the form or a similar statement. 2006 tax return software free   Wages paid as income in respect of a decedent are not subject to federal income tax withholding. 2006 tax return software free However, if paid during the calendar year of death, they are subject to withholding for social security and Medicare taxes. 2006 tax return software free These taxes should be included on the decedent's Form W-2 along with the taxes withheld before death. 2006 tax return software free These wages are not included in box 1 of Form W-2. 2006 tax return software free   Wages paid as income in respect of a decedent after the year of death generally are not subject to withholding for any federal taxe