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2011 Tax Form 1040

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2011 Tax Form 1040

2011 tax form 1040 3. 2011 tax form 1040   Farm Income Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Schedule F (Form 1040) Sales of Farm ProductsSchedule F. 2011 tax form 1040 Form 4797. 2011 tax form 1040 Sales Caused by Weather-Related Conditions Rents (Including Crop Shares)Crop Shares Agricultural Program PaymentsCommodity Credit Corporation (CCC) Loans Conservation Reserve Program (CRP) Crop Insurance and Crop Disaster Payments Feed Assistance and Payments Cost-Sharing Exclusion (Improvements) Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 2008 Tobacco Quota Buyout Program Payments Other Payments Payment to More Than One Person Income From CooperativesPatronage Dividends Per-Unit Retain Certificates Cancellation of DebtGeneral Rule Exceptions Exclusions Income From Other SourcesSod. 2011 tax form 1040 Granting the right to remove deposits. 2011 tax form 1040 Income Averaging for FarmersElected Farm Income (EFI) How To Figure the Tax Effect on Other Tax Determinations Tax for Certain Children Who Have Unearned Income Alternative Minimum Tax (AMT) Schedule J Introduction You may receive income from many sources. 2011 tax form 1040 You must report the income from all the different sources on your tax return, unless it is excluded by law. 2011 tax form 1040 Where you report the income on your tax return depends on its source. 2011 tax form 1040 This chapter discusses farm income you report on Schedule F (Form 1040), Profit or Loss From Farming. 2011 tax form 1040 For information on where to report other income, see the Instructions for Form 1040, U. 2011 tax form 1040 S. 2011 tax form 1040 Individual Income Tax Return. 2011 tax form 1040 Accounting method. 2011 tax form 1040   The rules discussed in this chapter assume you use the cash method of accounting. 2011 tax form 1040 Under the cash method, you generally include an item of income in gross income in the year you receive it. 2011 tax form 1040 See Cash Method in chapter 2. 2011 tax form 1040   If you use an accrual method of accounting, different rules may apply to your situation. 2011 tax form 1040 See Accrual Method in chapter 2. 2011 tax form 1040 Topics - This chapter discusses: Schedule F Sales of farm products Rents (including crop shares) Agricultural program payments Income from cooperatives Cancellation of debt Income from other sources Income averaging for farmers Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 550 Investment Income and Expenses 908 Bankruptcy Tax Guide 925 Passive Activity and At-Risk Rules 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) 982 Reduction of Tax Attributes Due to Discharge of Indebtedness Sch E (Form 1040) Supplemental Income and Loss Sch J (Form 1040) Income Averaging for Farmers and Fishermen 1099-G Certain Government Payments 1099-PATR Taxable Distributions Received From Cooperatives 4797 Sales of Business Property 4835 Farm Rental Income and Expenses See chapter 16 for information about getting publications and forms. 2011 tax form 1040 Schedule F (Form 1040) Individuals, trusts, and partnerships report farm income on Schedule F (Form 1040), Profit or Loss From Farming. 2011 tax form 1040 Use this schedule to figure the net profit or loss from regular farming operations. 2011 tax form 1040 Income from farming reported on Schedule F includes amounts you receive from cultivating, operating, or managing a farm for gain or profit, either as owner or tenant. 2011 tax form 1040 This includes income from operating a stock, dairy, poultry, fish, fruit, or truck farm and income from operating a plantation, ranch, range, or orchard. 2011 tax form 1040 It also includes income from the sale of crop shares if you materially participate in producing the crop. 2011 tax form 1040 See Rents (Including Crop Shares) , later. 2011 tax form 1040 Income received from operating a nursery, which specializes in growing ornamental plants, is considered to be income from farming. 2011 tax form 1040 Income reported on Schedule F does not include gains or losses from sales or other dispositions of the following farm assets. 2011 tax form 1040 Land. 2011 tax form 1040 Depreciable farm equipment. 2011 tax form 1040 Buildings and structures. 2011 tax form 1040 Livestock held for draft, breeding, sport, or dairy purposes. 2011 tax form 1040 Gains and losses from most dispositions of farm assets are discussed in chapters 8 and 9. 2011 tax form 1040 Gains and losses from casualties, thefts, and condemnations are discussed in chapter 11. 2011 tax form 1040 Sales of Farm Products Where to report. 2011 tax form 1040    Table 3-1 shows where to report the sale of farm products on your tax return. 2011 tax form 1040 Schedule F. 2011 tax form 1040   Amounts received from the sales of products you raised on your farm for sale (or bought for resale), such as livestock, produce, or grains, are reported on Schedule F. 2011 tax form 1040 This includes money and the fair market value of any property or services you receive. 2011 tax form 1040 When you sell farm products bought for resale, your profit or loss is the difference between your selling price (money plus the fair market value of any property) and your basis in the item (usually the cost). 2011 tax form 1040 See chapter 6 for information on the basis of assets. 2011 tax form 1040 You generally report these amounts on Schedule F for the year you receive payment. 2011 tax form 1040 Example. 2011 tax form 1040 In 2012, you bought 20 feeder calves for $11,000 for resale. 2011 tax form 1040 You sold them in 2013 for $21,000. 2011 tax form 1040 You report the $21,000 sales price on Schedule F, line 1b, subtract your $11,000 basis on line 1d, and report the resulting $10,000 profit on line 1e. 2011 tax form 1040 Form 4797. 2011 tax form 1040   Sales of livestock held for draft, breeding, sport, or dairy purposes may result in ordinary or capital gains or losses, depending on the circumstances. 2011 tax form 1040 In either case, you should always report these sales on Form 4797 instead of Schedule F. 2011 tax form 1040 See Livestock under Ordinary or Capital Gain or Loss in chapter 8. 2011 tax form 1040 Animals you do not hold primarily for sale are considered business assets of your farm. 2011 tax form 1040 Table 3-1. 2011 tax form 1040 Where To Report Sales of Farm Products Item Sold Schedule F Form 4797 Farm products raised for sale X   Farm products bought for resale X   Farm assets not held primarily for sale, such as livestock held for draft, breeding, sport, or dairy purposes (bought or raised)   X Sale by agent. 2011 tax form 1040   If your agent sells your farm products, you have constructive receipt of the income when your agent receives payment and you must include the net proceeds from the sale in gross income for the year the agent receives payment. 2011 tax form 1040 This applies even if your agent pays you in a later year. 2011 tax form 1040 For a discussion on constructive receipt of income, see Cash Method under Accounting Methods in chapter 2. 2011 tax form 1040 Sales Caused by Weather-Related Conditions If you sell or exchange more livestock, including poultry, than you normally would in a year because of a drought, flood, or other weather-related condition, you may be able to postpone reporting the gain from the additional animals until the next year. 2011 tax form 1040 You must meet all the following conditions to qualify. 2011 tax form 1040 Your principal trade or business is farming. 2011 tax form 1040 You use the cash method of accounting. 2011 tax form 1040 You can show that, under your usual business practices, you would not have sold or exchanged the additional animals this year except for the weather-related condition. 2011 tax form 1040 The weather-related condition caused an area to be designated as eligible for assistance by the federal government. 2011 tax form 1040 Sales or exchanges made before an area became eligible for federal assistance qualify if the weather-related condition that caused the sale or exchange also caused the area to be designated as eligible for federal assistance. 2011 tax form 1040 The designation can be made by the President, the Department of Agriculture (or any of its agencies), or by other federal departments or agencies. 2011 tax form 1040 A weather-related sale or exchange of livestock (other than poultry) held for draft, breeding, or dairy purposes may be an involuntary conversion. 2011 tax form 1040 See Other Involuntary Conversions in chapter 11. 2011 tax form 1040 Usual business practice. 2011 tax form 1040   You must determine the number of animals you would have sold had you followed your usual business practice in the absence of the weather-related condition. 2011 tax form 1040 Do this by considering all the facts and circumstances, but do not take into account your sales in any earlier year for which you postponed the gain. 2011 tax form 1040 If you have not yet established a usual business practice, rely on the usual business practices of similarly situated farmers in your general region. 2011 tax form 1040 Connection with affected area. 2011 tax form 1040   The livestock does not have to be raised or sold in an area affected by a weather-related condition for the postponement to apply. 2011 tax form 1040 However, the sale must occur solely because of a weather-related condition that affected the water, grazing, or other requirements of the livestock. 2011 tax form 1040 This requirement generally will not be met if the costs of feed, water, or other requirements of the livestock affected by the weather-related condition are not substantial in relation to the total costs of holding the livestock. 2011 tax form 1040 Classes of livestock. 2011 tax form 1040   You must figure the amount to be postponed separately for each generic class of animals—for example, hogs, sheep, and cattle. 2011 tax form 1040 Do not separate animals into classes based on age, sex, or breed. 2011 tax form 1040 Amount to be postponed. 2011 tax form 1040   Follow these steps to figure the amount of gain to be postponed for each class of animals. 2011 tax form 1040 Divide the total income realized from the sale of all livestock in the class during the tax year by the total number of such livestock sold. 2011 tax form 1040 For this purpose, do not treat any postponed gain from the previous year as income received from the sale of livestock. 2011 tax form 1040 Multiply the result in (1) by the excess number of such livestock sold solely because of weather-related conditions. 2011 tax form 1040 Example. 2011 tax form 1040 You are a calendar year taxpayer and you normally sell 100 head of beef cattle a year. 2011 tax form 1040 As a result of drought, you sold 135 head during 2012. 2011 tax form 1040 You realized $70,200 from the sale. 2011 tax form 1040 On August 9, 2012, as a result of drought, the affected area was declared a disaster area eligible for federal assistance. 2011 tax form 1040 The income you can postpone until 2013 is $18,200 [($70,200 ÷ 135) × 35]. 2011 tax form 1040 How to postpone gain. 2011 tax form 1040   To postpone gain, attach a statement to your tax return for the year of the sale. 2011 tax form 1040 The statement must include your name and address and give the following information for each class of livestock for which you are postponing gain. 2011 tax form 1040 A statement that you are postponing gain under Internal Revenue Code (IRC) section 451(e). 2011 tax form 1040 Evidence of the weather-related conditions that forced the early sale or exchange of the livestock and the date, if known, on which an area was designated as eligible for assistance by the federal government because of weather-related conditions. 2011 tax form 1040 A statement explaining the relationship of the area affected by the weather-related condition to your early sale or exchange of the livestock. 2011 tax form 1040 The number of animals sold in each of the 3 preceding years. 2011 tax form 1040 The number of animals you would have sold in the tax year had you followed your normal business practice in the absence of weather-related conditions. 2011 tax form 1040 The total number of animals sold and the number sold because of weather-related conditions during the tax year. 2011 tax form 1040 A computation, as described above, of the income to be postponed for each class of livestock. 2011 tax form 1040   Generally, you must file the statement and the return by the due date of the return, including extensions. 2011 tax form 1040 However, for sales or exchanges treated as an involuntary conversion from weather-related sales of livestock in an area eligible for federal assistance (discussed in chapter 11), you can file this statement at any time during the replacement period. 2011 tax form 1040 For other sales or exchanges, if you timely filed your return for the year without postponing gain, you can still postpone gain by filing an amended return within 6 months of the due date of the return (excluding extensions). 2011 tax form 1040 Attach the statement to the amended return and write “Filed pursuant to section 301. 2011 tax form 1040 9100-2” at the top of the amended return. 2011 tax form 1040 File the amended return at the same address you filed the original return. 2011 tax form 1040 Once you have filed the statement, you can cancel your postponement of gain only with the approval of the IRS. 2011 tax form 1040 Rents (Including Crop Shares) The rent you receive for the use of your farmland is generally rental income, not farm income. 2011 tax form 1040 However, if you materially participate in farming operations on the land, the rent is farm income. 2011 tax form 1040 See Landlord Participation in Farming in chapter 12. 2011 tax form 1040 Pasture income and rental. 2011 tax form 1040   If you pasture someone else's livestock and take care of them for a fee, the income is from your farming business. 2011 tax form 1040 You must enter it as Other income on Schedule F. 2011 tax form 1040 If you simply rent your pasture for a flat cash amount without providing services, report the income as rent on Part I of Schedule E (Form 1040), Supplemental Income and Loss. 2011 tax form 1040 Crop Shares You must include rent you receive in the form of crop shares in income in the year you convert the shares to money or the equivalent of money. 2011 tax form 1040 It does not matter whether you use the cash method of accounting or an accrual method of accounting. 2011 tax form 1040 If you materially participate in operating a farm from which you receive rent in the form of crop shares or livestock, the rental income is included in self-employment income. 2011 tax form 1040 See Landlord Participation in Farming in chapter 12. 2011 tax form 1040 Report the rental income on Schedule F. 2011 tax form 1040 If you do not materially participate in operating the farm, report this income on Form 4835 and carry the net income or loss to Schedule E (Form 1040). 2011 tax form 1040 The income is not included in self-employment income. 2011 tax form 1040 Crop shares you use to feed livestock. 2011 tax form 1040   Crop shares you receive as a landlord and feed to your livestock are considered converted to money when fed to the livestock. 2011 tax form 1040 You must include the fair market value of the crop shares in income at that time. 2011 tax form 1040 You are entitled to a business expense deduction for the livestock feed in the same amount and at the same time you include the fair market value of the crop share as rental income. 2011 tax form 1040 Although these two transactions cancel each other for figuring adjusted gross income on Form 1040, they may be necessary to figure your self-employment tax. 2011 tax form 1040 See  chapter 12. 2011 tax form 1040 Crop shares you give to others (gift). 2011 tax form 1040   Crop shares you receive as a landlord and give to others are considered converted to money when you make the gift. 2011 tax form 1040 You must report the fair market value of the crop share as income, even though someone else receives payment for the crop share. 2011 tax form 1040 Example. 2011 tax form 1040 A tenant farmed part of your land under a crop-share arrangement. 2011 tax form 1040 The tenant harvested and delivered the crop in your name to an elevator company. 2011 tax form 1040 Before selling any of the crop, you instructed the elevator company to cancel your warehouse receipt and make out new warehouse receipts in equal amounts of the crop in the names of your children. 2011 tax form 1040 They sell their crop shares in the following year and the elevator company makes payments directly to your children. 2011 tax form 1040 In this situation, you are considered to have received rental income and then made a gift of that income. 2011 tax form 1040 You must include the fair market value of the crop shares in your income for the tax year you gave the crop shares to your children. 2011 tax form 1040 Crop share loss. 2011 tax form 1040   If you are involved in a rental or crop-share lease arrangement, any loss from these activities may be subject to the limits under the passive loss rules. 2011 tax form 1040 See Publication 925 for information on these rules. 2011 tax form 1040 Agricultural Program Payments You must include in income most government payments, such as those for approved conservation practices, direct payments, and counter-cyclical payments, whether you receive them in cash, materials, services, or commodity certificates. 2011 tax form 1040 However, you can exclude from income some payments you receive under certain cost-sharing conservation programs. 2011 tax form 1040 See Cost-Sharing Exclusion (Improvements) , later. 2011 tax form 1040 Report the agricultural program payment on the appropriate line of Schedule F, Part I. 2011 tax form 1040 Report the full amount even if you return a government check for cancellation, refund any of the payment you receive, or the government collects all or part of the payment from you by reducing the amount of some other payment or Commodity Credit Corporation (CCC) loan. 2011 tax form 1040 However, you can deduct the amount you refund or return or that reduces some other payment or loan to you. 2011 tax form 1040 Claim the deduction on Schedule F for the year of repayment or reduction. 2011 tax form 1040 Commodity Credit Corporation (CCC) Loans Generally, you do not report loans you receive as income. 2011 tax form 1040 However, if you pledge part or all of your production to secure a CCC loan, you can treat the loan as if it were a sale of the crop and report the loan proceeds as income in the year you receive them. 2011 tax form 1040 You do not need approval from the IRS to adopt this method of reporting CCC loans. 2011 tax form 1040 Once you report a CCC loan as income for the year received, you generally must report all CCC loans in that year and later years in the same way. 2011 tax form 1040 However, you can obtain for your tax year an automatic consent to change your method of accounting for loans received from the CCC, from including the loan amount in gross income for the tax year in which the loan is received to treating the loan amount as a loan. 2011 tax form 1040 For more information, see Part I of the Instructions for Form 3115 and Revenue Procedure 2008-52. 2011 tax form 1040 Revenue Procedure 2008-52, 2008-36 I. 2011 tax form 1040 R. 2011 tax form 1040 B. 2011 tax form 1040 587, is available at  www. 2011 tax form 1040 irs. 2011 tax form 1040 gov/irb/2008-36_IRB/ar09. 2011 tax form 1040 html. 2011 tax form 1040 You can request income tax withholding from CCC loan payments you receive. 2011 tax form 1040 Use Form W-4V, Voluntary Withholding Request. 2011 tax form 1040 See chapter 16 for information about ordering the form. 2011 tax form 1040 To elect to report a CCC loan as income, include the loan proceeds as income on Schedule F, line 7a, for the year you receive it. 2011 tax form 1040 Attach a statement to your return showing the details of the loan. 2011 tax form 1040 You must file the statement and the return by the due date of the return, including extensions. 2011 tax form 1040 If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2011 tax form 1040 Attach the statement to the amended return and write “Filed pursuant to section 301. 2011 tax form 1040 9100-2” at the top of the return. 2011 tax form 1040 File the amended return at the same address you filed the original return. 2011 tax form 1040 When you make this election, the amount you report as income becomes your basis in the commodity. 2011 tax form 1040 See chapter 6 for information on the basis of assets. 2011 tax form 1040 If you later repay the loan, redeem the pledged commodity, and sell it, you report as income at the time of sale the sale proceeds minus your basis in the commodity. 2011 tax form 1040 If the sale proceeds are less than your basis in the commodity, you can report the difference as a loss on Schedule F. 2011 tax form 1040 If you forfeit the pledged crops to the CCC in full payment of the loan, the forfeiture is treated for tax purposes as a sale of the crops. 2011 tax form 1040 If you did not report the loan proceeds as income for the year you received them, you must include them in your income for the year of the forfeiture. 2011 tax form 1040 Form 1099-A. 2011 tax form 1040   If you forfeit pledged crops to the CCC in full payment of a loan, you may receive a Form 1099-A, Acquisition or Abandonment of Secured Property. 2011 tax form 1040 “CCC” should be shown in box 6. 2011 tax form 1040 The amount of any CCC loan outstanding when you forfeited your commodity should also be indicated on the form. 2011 tax form 1040 Market Gain Under the CCC nonrecourse marketing assistance loan program, your repayment amount for a loan secured by your pledge of an eligible commodity is generally based on the lower of the loan rate or the prevailing world market price for the commodity on the date of repayment. 2011 tax form 1040 If you repay the loan when the world price is lower, the difference between that repayment amount and the original loan amount is market gain. 2011 tax form 1040 Whether you use cash or CCC certificates to repay the loan, you will receive a Form 1099-G showing the market gain you realized. 2011 tax form 1040 Market gain should be reported as follows. 2011 tax form 1040 If you elected to include the CCC loan in income in the year you received it, do not include the market gain in income. 2011 tax form 1040 However, adjust the basis of the commodity for the amount of the market gain. 2011 tax form 1040 If you did not include the CCC loan in income in the year received, include the market gain in your income. 2011 tax form 1040 The following examples show how to report market gain. 2011 tax form 1040 Example 1. 2011 tax form 1040 Mike Green is a cotton farmer. 2011 tax form 1040 He uses the cash method of accounting and files his tax return on a calendar year basis. 2011 tax form 1040 He has deducted all expenses incurred in producing the cotton and has a zero basis in the commodity. 2011 tax form 1040 In 2012, Mike pledged 1,000 pounds of cotton as collateral for a CCC loan of $2,000 (a loan rate of $2. 2011 tax form 1040 00 per pound). 2011 tax form 1040 In 2013, he repaid the loan and redeemed the cotton for $1,500 when the world price was $1. 2011 tax form 1040 50 per pound (lower than the loan amount). 2011 tax form 1040 Later in 2013, he sold the cotton for $2,500. 2011 tax form 1040 The market gain on the redemption was $. 2011 tax form 1040 50 ($2. 2011 tax form 1040 00 – $1. 2011 tax form 1040 50) per pound. 2011 tax form 1040 Mike realized total market gain of $500 ($. 2011 tax form 1040 50 x 1,000 pounds). 2011 tax form 1040 How he reports this market gain and figures his gain or loss from the sale of the cotton depends on whether he included CCC loans in income in 2012. 2011 tax form 1040 Included CCC loan. 2011 tax form 1040   Mike reported the $2,000 CCC loan as income for 2012 on Schedule F, line 1b, so he is treated as if he sold the cotton for $2,000 when he pledged it and repurchased the cotton for $1,500 when he redeemed it. 2011 tax form 1040 The $500 market gain is not recognized on the redemption. 2011 tax form 1040 He reports it for 2013 as an agricultural program payment on Schedule F, line 4a, but does not include it as a taxable amount on line 4b. 2011 tax form 1040   Mike's basis in the cotton after he redeemed it was $1,500, which is the redemption (repurchase) price paid for the cotton. 2011 tax form 1040 His gain from the sale is $1,000 ($2,500 – $1,500). 2011 tax form 1040 He reports the $1,000 gain as income for 2013 on Schedule F, line 1b. 2011 tax form 1040 Excluded CCC loan. 2011 tax form 1040   Mike has income of $500 from market gain in 2013. 2011 tax form 1040 He reports it on Schedule F, lines 4a and 4b. 2011 tax form 1040 His basis in the cotton is zero, so his gain from its sale is $2,500. 2011 tax form 1040 He reports the $2,500 gain as income for 2013 on Schedule F, line 1b. 2011 tax form 1040 Example 2. 2011 tax form 1040 The facts are the same as in Example 1 except that, instead of selling the cotton for $2,500 after redeeming it, Mike entered into an option-to-purchase contract with a cotton buyer before redeeming the cotton. 2011 tax form 1040 Under that contract, Mike authorized the cotton buyer to pay the CCC loan on Mike's behalf. 2011 tax form 1040 In 2013, the cotton buyer repaid the loan for $1,500 and immediately exercised his option, buying the cotton for $1,500. 2011 tax form 1040 How Mike reports the $500 market gain on the redemption of the cotton and figures his gain or loss from its sale depends on whether he included CCC loans in income in 2012. 2011 tax form 1040 Included CCC loan. 2011 tax form 1040   As in Example 1, Mike is treated as though he sold the cotton for $2,000 when he pledged it and repurchased the cotton for $1,500 when the cotton buyer redeemed it for him. 2011 tax form 1040 The $500 market gain is not recognized on the redemption. 2011 tax form 1040 Mike reports it for 2013 as an agricultural program payment on Schedule F, line 4a, but does not include it as a taxable amount on line 4b. 2011 tax form 1040   Also, as in Example 1, Mike's basis in the cotton when the cotton buyer redeemed it for him was $1,500. 2011 tax form 1040 Mike has no gain or loss on its sale to the cotton buyer for that amount. 2011 tax form 1040 Excluded CCC loan. 2011 tax form 1040   As in Example 1, Mike has income of $500 from market gain in 2013. 2011 tax form 1040 He reports it on Schedule F, lines 4a and 4b. 2011 tax form 1040 His basis in the cotton is zero, so his gain from its sale is $1,500. 2011 tax form 1040 He reports the $1,500 gain as income for 2013 on Schedule F, line 1b. 2011 tax form 1040 Conservation Reserve Program (CRP) Under the Conservation Reserve Program (CRP), if you own or operate highly erodible or other specified cropland, you may enter into a long-term contract with the USDA, agreeing to convert to a less intensive use of that cropland. 2011 tax form 1040 You must include the annual rental payments and any one-time incentive payment you receive under the program on Schedule F, lines 4a and 4b. 2011 tax form 1040 Cost-share payments you receive may qualify for the cost-sharing exclusion. 2011 tax form 1040 See Cost-Sharing Exclusion (Improvements) , later. 2011 tax form 1040 CRP payments are reported to you on Form 1099-G. 2011 tax form 1040 Individuals who are receiving Social Security retirement or disability benefits may exclude CRP payments when calculating self-employment tax. 2011 tax form 1040 See the instructions for Schedule SE (Form 1040). 2011 tax form 1040 Crop Insurance and Crop Disaster Payments You must include in income any crop insurance proceeds you receive as the result of physical crop damage or reduction of crop revenue, or both. 2011 tax form 1040 You generally include them in the year you receive them. 2011 tax form 1040 Treat as crop insurance proceeds the crop disaster payments you receive from the federal government as the result of destruction or damage to crops, or the inability to plant crops, because of drought, flood, or any other natural disaster. 2011 tax form 1040 You can request income tax withholding from crop disaster payments you receive from the federal government. 2011 tax form 1040 Use Form W-4V, Voluntary Withholding Request. 2011 tax form 1040 See chapter 16 for information about ordering the form. 2011 tax form 1040 Election to postpone reporting until the following year. 2011 tax form 1040   You can postpone reporting some or all crop insurance proceeds as income until the year following the year the physical damage occurred if you meet all the following conditions. 2011 tax form 1040 You use the cash method of accounting. 2011 tax form 1040 You receive the crop insurance proceeds in the same tax year the crops are damaged. 2011 tax form 1040 You can show that under your normal business practice you would have included income from the damaged crops in any tax year following the year the damage occurred. 2011 tax form 1040   Deferral is not permitted for proceeds received from revenue insurance policies. 2011 tax form 1040   To postpone reporting some or all crop insurance proceeds received in 2013, report the amount you received on Schedule F, line 6a, but do not include it as a taxable amount on line 6b. 2011 tax form 1040 Check the box on line 8c and attach a statement to your tax return. 2011 tax form 1040 The statement must include your name and address and contain the following information. 2011 tax form 1040 A statement that you are making an election under IRC section 451(d) and Regulations section 1. 2011 tax form 1040 451-6. 2011 tax form 1040 The specific crop or crops physically destroyed or damaged. 2011 tax form 1040 A statement that under your normal business practice you would have included income from some or all of the destroyed or damaged crops in gross income for a tax year following the year the crops were destroyed or damaged. 2011 tax form 1040 The cause of the physical destruction or damage and the date or dates it occurred. 2011 tax form 1040 The total payments you received from insurance carriers, itemized for each specific crop, and the date you received each payment. 2011 tax form 1040 The name of each insurance carrier from whom you received payments. 2011 tax form 1040   One election covers all crops representing a single trade or business. 2011 tax form 1040 If you have more than one farming business, make a separate election for each one. 2011 tax form 1040 For example, if you operate two separate farms on which you grow different crops and you keep separate books for each farm, you should make two separate elections to postpone reporting insurance proceeds you receive for crops grown on each of your farms. 2011 tax form 1040   An election is binding for the year unless the IRS approves your request to change it. 2011 tax form 1040 To request IRS approval to change your election, write to the IRS at the following address giving your name, address, identification number, the year you made the election, and your reasons for wanting to change it. 2011 tax form 1040 Ogden Submission Processing Center P. 2011 tax form 1040 O. 2011 tax form 1040 Box 9941 Ogden, UT 84409 Feed Assistance and Payments The Disaster Assistance Act of 1988 authorizes programs to provide feed assistance, reimbursement payments, and other benefits to qualifying livestock producers if the Secretary of Agriculture determines that, because of a natural disaster, a livestock emergency exists. 2011 tax form 1040 These programs include partial reimbursement for the cost of purchased feed and for certain transportation expenses. 2011 tax form 1040 They also include the donation or sale at a below-market price of feed owned by the Commodity Credit Corporation. 2011 tax form 1040 Include in income: The market value of donated feed, The difference between the market value and the price you paid for feed you buy at below-market prices, and Any cost reimbursement you receive. 2011 tax form 1040 You must include these benefits in income in the year you receive them. 2011 tax form 1040 You cannot postpone reporting them under the rules explained earlier for weather-related sales of livestock or crop insurance proceeds. 2011 tax form 1040 Report the benefits on Schedule F, Part I, as agricultural program payments. 2011 tax form 1040 You can usually take a current deduction for the same amount as a feed expense. 2011 tax form 1040 Cost-Sharing Exclusion (Improvements) You can exclude from your income part or all of a payment you receive under certain federal or state cost-sharing conservation, reclamation, and restoration programs. 2011 tax form 1040 A payment is any economic benefit you get as a result of an improvement. 2011 tax form 1040 However, this exclusion applies only to that part of a payment that meets all three of the following tests. 2011 tax form 1040 It was for a capital expense. 2011 tax form 1040 You cannot exclude any part of a payment for an expense you can deduct in the year you pay or incur it. 2011 tax form 1040 You must include the payment for a deductible expense in income, and you can take any offsetting deduction. 2011 tax form 1040 See chapter 5 for information on deducting soil and water conservation expenses. 2011 tax form 1040 It does not substantially increase your annual income from the property for which it is made. 2011 tax form 1040 An increase in annual income is substantial if it is more than the greater of the following amounts. 2011 tax form 1040 10% of the average annual income derived from the affected property before receiving the improvement. 2011 tax form 1040 $2. 2011 tax form 1040 50 times the number of affected acres. 2011 tax form 1040 The Secretary of Agriculture certified that the payment was primarily made for conserving soil and water resources, protecting or restoring the environment, improving forests, or providing a habitat for wildlife. 2011 tax form 1040 Qualifying programs. 2011 tax form 1040   If the three tests listed above are met, you can exclude part or all of the payments from the following programs. 2011 tax form 1040 The rural clean water program authorized by the Federal Water Pollution Control Act. 2011 tax form 1040 The rural abandoned mine program authorized by the Surface Mining Control and Reclamation Act of 1977. 2011 tax form 1040 The water bank program authorized by the Water Bank Act. 2011 tax form 1040 The emergency conservation measures program authorized by title IV of the Agricultural Credit Act of 1978. 2011 tax form 1040 The agricultural conservation program authorized by the Soil Conservation and Domestic Allotment Act. 2011 tax form 1040 The great plains conservation program authorized by the Soil Conservation and Domestic Policy Act. 2011 tax form 1040 The resource conservation and development program authorized by the Bankhead-Jones Farm Tenant Act and by the Soil Conservation and Domestic Allotment Act. 2011 tax form 1040 Certain small watershed programs, listed later. 2011 tax form 1040 Any program of a state, possession of the United States, a political subdivision of any of these, or of the District of Columbia under which payments are made to individuals primarily for conserving soil, protecting or restoring the environment, improving forests, or providing a habitat for wildlife. 2011 tax form 1040 Several state programs have been approved. 2011 tax form 1040 For information about the status of those programs, contact the state offices of the Farm Service Agency (FSA) and the Natural Resources and Conservation Service (NRCS). 2011 tax form 1040 Small watershed programs. 2011 tax form 1040   If the three tests listed earlier are met, you can exclude part or all of the payments you receive under the following programs for improvements made in connection with a watershed. 2011 tax form 1040 The programs under the Watershed Protection and Flood Prevention Act. 2011 tax form 1040 The flood prevention projects under the Flood Control Act of 1944. 2011 tax form 1040 The Emergency Watershed Protection Program under the Flood Control Act of 1950. 2011 tax form 1040 Certain programs under the Colorado River Basin Salinity Control Act. 2011 tax form 1040 The Wetlands Reserve Program authorized by the Food Security Act of 1985, the Federal Agriculture Improvement and Reform Act of 1996 and the Farm Security and Rural Investment Act of 2002. 2011 tax form 1040 The Environmental Quality Incentives Program (EQIP) authorized by the Federal Agriculture Improvement and Reform Act of 1996. 2011 tax form 1040 The Wildlife Habitat Incentives Program (WHIP) authorized by the Federal Agriculture Improvement and Reform Act of 1996. 2011 tax form 1040 The Soil and Water Conservation Assistance Program authorized by the Agricultural Risk Protection Act of 2000. 2011 tax form 1040 The Agricultural Management Assistance Program authorized by the Agricultural Risk Protection Act of 2000. 2011 tax form 1040 The Conservation Reserve Program authorized by the Food Security Act of 1985 and the Federal Agriculture Improvement and Reform Act of 1996. 2011 tax form 1040 The Forest Land Enhancement Program authorized under the Farm Security and Rural Investment Act of 2002. 2011 tax form 1040 The Conservation Security Program authorized by the Food Security Act of 1985. 2011 tax form 1040 The Forest Health Protection Program (FHPP) authorized by the Cooperative Forestry Assistance Act of 1978. 2011 tax form 1040 Income realized. 2011 tax form 1040   The gross income you realize upon getting an improvement under these cost-sharing programs is the value of the improvement reduced by the sum of the excludable portion and your share of the cost of the improvement (if any). 2011 tax form 1040 Value of the improvement. 2011 tax form 1040   You determine the value of the improvement by multiplying its fair market value (defined in chapter 6) by a fraction. 2011 tax form 1040 The numerator of the fraction is the total cost of the improvement (all amounts paid either by you or by the government for the improvement) reduced by the sum of the following items. 2011 tax form 1040 Any government payments under a program not listed earlier. 2011 tax form 1040 Any part of a government payment under a program listed earlier that the Secretary of Agriculture has not certified as primarily for conservation. 2011 tax form 1040 Any government payment to you for rent or for your services. 2011 tax form 1040 The denominator of the fraction is the total cost of the improvement. 2011 tax form 1040 Excludable portion. 2011 tax form 1040   The excludable portion is the present fair market value of the right to receive annual income from the affected acreage of the greater of the following amounts. 2011 tax form 1040 10% of the prior average annual income from the affected acreage. 2011 tax form 1040 The prior average annual income is the average of the gross receipts from the affected acreage for the last 3 tax years before the tax year in which you started to install the improvement. 2011 tax form 1040 $2. 2011 tax form 1040 50 times the number of affected acres. 2011 tax form 1040 The calculation of present fair market value of the right to receive annual income is too complex to discuss in this publication. 2011 tax form 1040 You may need to consult your tax advisor for assistance. 2011 tax form 1040 Example. 2011 tax form 1040 One hundred acres of your land was reclaimed under a rural abandoned mine program contract with the Natural Resources Conservation Service of the USDA. 2011 tax form 1040 The total cost of the improvement was $500,000. 2011 tax form 1040 The USDA paid $490,000. 2011 tax form 1040 You paid $10,000. 2011 tax form 1040 The value of the cost-sharing improvement is $15,000. 2011 tax form 1040 The present fair market value of the right to receive the annual income described in (1) above is $1,380, and the present fair market value of the right to receive the annual income described in (2) is $1,550. 2011 tax form 1040 The excludable portion is the greater amount, $1,550. 2011 tax form 1040 You figure the amount to include in gross income as follows: Value of cost-sharing improvement $15,000 Minus: Your share $10,000     Excludable portion 1,550 11,550 Amount included in income $ 3,450 Effects of the exclusion. 2011 tax form 1040   When you figure the basis of property you acquire or improve using cost-sharing payments excluded from income, subtract the excluded payments from your capital costs. 2011 tax form 1040 Any payment excluded from income is not part of your basis. 2011 tax form 1040 In the example above, the increase in basis is $500,000 – $490,000 + $3,450 = $13,450. 2011 tax form 1040   In addition, you cannot take depreciation, amortization, or depletion deductions for the part of the cost of the property for which you receive cost-sharing payments you exclude from income. 2011 tax form 1040 How to report the exclusion. 2011 tax form 1040   Attach a statement to your tax return (or amended return) for the tax year you receive the last government payment for the improvement. 2011 tax form 1040 The statement must include the following information. 2011 tax form 1040 The dollar amount of the cost funded by the government payment. 2011 tax form 1040 The value of the improvement. 2011 tax form 1040 The amount you are excluding. 2011 tax form 1040   Report the total cost-sharing payments you receive on Schedule F, line 4a, and the taxable amount on line 4b. 2011 tax form 1040 Recapture. 2011 tax form 1040   If you dispose of the property within 20 years after you received the excluded payments, you must treat as ordinary income part or all of the cost-sharing payments you excluded. 2011 tax form 1040 In the above example, if the 100 acres were sold within 20 years of the exclusion for a gain of $2,000, $1,550 of that amount would be included in ordinary income. 2011 tax form 1040 You must report the recapture on Form 4797. 2011 tax form 1040 See Section 1255 property under Other Gains in chapter 9. 2011 tax form 1040 Electing not to exclude payments. 2011 tax form 1040   You can elect not to exclude all or part of any payments you receive under these programs. 2011 tax form 1040 If you make this election for all of these payments, none of the above restrictions and rules apply. 2011 tax form 1040 You must make this election by the due date, including extensions, for filing your return. 2011 tax form 1040 In the example above, an election not to exclude payments results in $5,000 included in income and a $15,000 increase in basis. 2011 tax form 1040 If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2011 tax form 1040 Write “Filed pursuant to section 301. 2011 tax form 1040 9100-2” at the top of the amended return and file it at the same address you filed the original return. 2011 tax form 1040 Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 2008 The Farm Security and Rural Investment Act of 2002 created two new types of payments—direct and counter-cyclical payments. 2011 tax form 1040 You must include these payments on Schedule F, lines 4a and 4b. 2011 tax form 1040 The Food, Conservation, and Energy Act of 2008 provides for direct and counter-cyclical payments (DCP) as well as Average Crop Revenue Election (ACRE) payments. 2011 tax form 1040 You must include these payments on Schedule F, lines 6a and 6b. 2011 tax form 1040 The American Taxpayer Relief Act of 2012, enacted on January 2, 2013, amends the Food, Conservation, and Energy Act of 2008 and provided a one-year extension for these payments. 2011 tax form 1040 Tobacco Quota Buyout Program Payments The Fair and Equitable Tobacco Reform Act of 2004, title VI of the American Jobs Creation Act of 2004, terminated the tobacco marketing quota program and the tobacco price support program. 2011 tax form 1040 As a result, the USDA offered to enter into contracts with eligible tobacco quota holders and growers to provide compensation for the lost value of the quotas and related price support. 2011 tax form 1040 If you are an eligible tobacco quota holder, your contract entitles you to receive total payments of $7 per pound of quota in 10 equal annual payments in fiscal years 2005 through 2014. 2011 tax form 1040 If you are an eligible tobacco grower, your contract entitles you to receive total payments of up to $3 per pound of quota in 10 equal annual payments in fiscal years 2005 through 2014. 2011 tax form 1040 Tobacco Quota Holders Contract payments you receive are considered proceeds from a sale of your tobacco quota as of the date on which you and the USDA enter into the contract. 2011 tax form 1040 Your taxable gain or loss is the total amount received for your quota reduced by any amount treated as interest (discussed below), over your adjusted basis. 2011 tax form 1040 The gain or loss is capital or ordinary depending on how you used the quota. 2011 tax form 1040 See Capital or ordinary gain or loss , later. 2011 tax form 1040 Report the entire gain on your income tax return for the tax year that includes the date you entered into the contract if you elect not to use the installment method. 2011 tax form 1040 Adjusted basis. 2011 tax form 1040   The adjusted basis of your quota is determined differently depending on how you obtained the quota. 2011 tax form 1040 The basis of a quota derived from an original grant by the federal government is zero. 2011 tax form 1040 The basis of a purchased quota is the purchase price. 2011 tax form 1040 The basis of a quota received as a gift is generally the same as the donor's basis. 2011 tax form 1040 However, under certain circumstances, the basis is increased by the amount of gift taxes paid. 2011 tax form 1040 If the basis is greater than the fair market value of the quota at the time of the gift, the basis for determining loss is the fair market value. 2011 tax form 1040 The basis of an inherited quota is generally the fair market value of the quota at the time of the decedent's death. 2011 tax form 1040 Reduction of basis. 2011 tax form 1040   You are required to reduce the basis of your tobacco quota by the following amounts. 2011 tax form 1040 Deductions you took for amortization, depletion, or depreciation. 2011 tax form 1040 Amounts you previously deducted as a loss because of a reduction in the number of pounds of tobacco allowable under the quota. 2011 tax form 1040 The entire cost of a purchased quota you deducted in an earlier year (which reduces your basis to zero). 2011 tax form 1040 Amount treated as interest. 2011 tax form 1040   You must reduce your tobacco quota buyout program payment by the amount treated as interest. 2011 tax form 1040 The interest is reportable as ordinary income. 2011 tax form 1040 If payments total $3,000 or less, your total quota buyout program payment does not include any amount treated as interest and you are not required to reduce the total payment you receive. 2011 tax form 1040   In all other cases, a portion of each payment may be treated as interest for federal tax purposes. 2011 tax form 1040 You may be required to reduce your total quota buyout program payment before you calculate your gain or loss. 2011 tax form 1040 For more information, see Notice 2005-57, 2005-32 I. 2011 tax form 1040 R. 2011 tax form 1040 B. 2011 tax form 1040 267, available at www. 2011 tax form 1040 irs. 2011 tax form 1040 gov/irb/2005-32_IRB/ar13. 2011 tax form 1040 html. 2011 tax form 1040 Installment method. 2011 tax form 1040   You may use the installment method to report a gain if you receive at least one payment after the close of your tax year. 2011 tax form 1040 Under the installment method, a portion of the gain is taken into account in each year in which a payment is received. 2011 tax form 1040 See chapter 10 for more information. 2011 tax form 1040 Capital or ordinary gain or loss. 2011 tax form 1040   Whether your gain or loss is ordinary or capital depends on how you used the quota. 2011 tax form 1040 Quota used in the trade or business of farming. 2011 tax form 1040   If you used the quota in the trade or business of farming and you held it for more than one year, you report the transaction as a section 1231 transaction on Form 4797. 2011 tax form 1040 See Section 1231 transactions in the Instructions for Form 4797 for detailed information on reporting section 1231 transactions. 2011 tax form 1040 Quota held for investment. 2011 tax form 1040   If you held the quota for investment purposes, any gain or loss is capital gain or loss. 2011 tax form 1040 The same result also applies if you held the quota for the production of income, though not connected with a trade or business. 2011 tax form 1040 Gain treated as ordinary income. 2011 tax form 1040   If you previously deducted any of the following items, some or all of the capital gain must be recharacterized and reported as ordinary income. 2011 tax form 1040 Any resulting capital gain is taxed as ordinary income up to the amount previously deducted. 2011 tax form 1040 The cost of acquiring a quota. 2011 tax form 1040 Amounts for amortization, depletion, or depreciation. 2011 tax form 1040 Amounts to reflect a reduction in the quota pounds. 2011 tax form 1040   You should include the ordinary income on your return for the tax year even if you use the installment method to report the remainder of the gain. 2011 tax form 1040 Self-employment income. 2011 tax form 1040   The tobacco quota buyout payments are not self-employment income. 2011 tax form 1040 Income averaging for farmers. 2011 tax form 1040   The gain or loss resulting from the quota payments does not qualify for income averaging. 2011 tax form 1040 A tobacco quota is considered an interest in land. 2011 tax form 1040 Income averaging is not available for gain or loss arising from the sale or other disposition of land. 2011 tax form 1040 Involuntary conversion. 2011 tax form 1040   The buyout of the tobacco quota is not an involuntary conversion. 2011 tax form 1040 Form 1099-S. 2011 tax form 1040   A tobacco quota is considered an interest in land, so the USDA will generally report the total amount you receive under a contract on Form 1099-S, Proceeds From Real Estate Transactions, if the amount is $600 or more. 2011 tax form 1040 The USDA will generally report any portion of a payment treated as interest of $600 or more to you on Form 1099-INT, Interest Income, for the year in which the payment is made. 2011 tax form 1040 Like-kind exchange of quota. 2011 tax form 1040   You may postpone reporting the gain or loss from tobacco quota buyout payments by entering into a like-kind exchange if you comply with the requirements of section 1031 and the regulations thereunder. 2011 tax form 1040 See Notice 2005-57 for more information. 2011 tax form 1040 Tobacco Growers Contract payments you receive are determined by reference to the amount of quota under which you produced (or planted) quota tobacco during the 2002, 2003, and 2004 tobacco marketing years and are prorated based on the number of years that you produced (or planted) quota tobacco during those years. 2011 tax form 1040 Taxation of payments to tobacco growers. 2011 tax form 1040   Payments to growers replace ordinary income that would have been earned had the tobacco marketing quota and price support programs continued. 2011 tax form 1040 Individuals will generally report the payments as an Agricultural program payment on Schedule F. 2011 tax form 1040 If you are a landowner who does not materially participate in the operation or management of the farm and are receiving the grower payment because your farm rental income is based on the tobacco grown by a tenant, the grower payment should be reported on Form 4835. 2011 tax form 1040 Self-employment income. 2011 tax form 1040   Payments to growers generally represent self-employment income. 2011 tax form 1040 If the grower is an individual carrying on a trade or business and deriving income (other than farm rental income properly reported on Form 4835) from that trade or business, the payments are net earnings from self-employment. 2011 tax form 1040 Income averaging for farmers. 2011 tax form 1040   Payments to growers who are individuals qualify for farm income averaging. 2011 tax form 1040 Form 1099-G. 2011 tax form 1040   If the amount received in a taxable year is $600 or more, the amount will generally be reported by the USDA on a Form 1099-G. 2011 tax form 1040 Other Payments You must include most other government program payments in income. 2011 tax form 1040 Fertilizer and Lime Include in income the value of fertilizer or lime you receive under a government program. 2011 tax form 1040 How to claim the offsetting deduction is explained under Fertilizer and Lime in chapter 4. 2011 tax form 1040 Improvements If government payments are based on improvements, such as a pollution control facility, you must include them in income. 2011 tax form 1040 You must also capitalize the full cost of the improvement. 2011 tax form 1040 Since you have included the payments in income, they do not reduce your basis. 2011 tax form 1040 However, see Cost-Sharing Exclusion (Improvements) , earlier, for additional information. 2011 tax form 1040 National Tobacco Growers' Settlement Trust Fund Payments If you are a producer, landowner, or tobacco quota owner who receives money from the National Tobacco Growers' Settlement Trust Fund, you must report those payments as income. 2011 tax form 1040 You should receive a Form 1099-MISC, Miscellaneous Income, that shows the payment amount. 2011 tax form 1040 If you produce a tobacco crop, report the payments as income from farming on your Schedule F. 2011 tax form 1040 If you are a landowner or tobacco quota owner who leases tobacco-related property but you do not produce the crop, report the payments as farm rental income on Form 4835. 2011 tax form 1040 Payment to More Than One Person The USDA reports program payments to the IRS. 2011 tax form 1040 It reports a program payment intended for more than one person as having been paid to the person whose identification number is on record for that payment (payee of record). 2011 tax form 1040 If you, as the payee of record, receive a program payment belonging to someone else, such as your landlord, the amount belonging to the other person is a nominee distribution. 2011 tax form 1040 You should file Form 1099-G to report the identity of the actual recipient to the IRS. 2011 tax form 1040 You should also give this information to the recipient. 2011 tax form 1040 You can avoid the inconvenience of unnecessary inquiries about the identity of the recipient if you file this form. 2011 tax form 1040 Report the total amount reported to you as the payee of record on Schedule F, line 4a or 6a. 2011 tax form 1040 However, do not report as a taxable amount on line 4b or 6b any amount belonging to someone else. 2011 tax form 1040 See chapter 16 for information about ordering Form 1099-G. 2011 tax form 1040 Income From Cooperatives If you buy farm supplies through a cooperative, you may receive income from the cooperative in the form of patronage dividends (refunds). 2011 tax form 1040 If you sell your farm products through a cooperative, you may receive either patronage dividends or a per-unit retain certificate, explained later, from the cooperative. 2011 tax form 1040 Form 1099-PATR. 2011 tax form 1040   The cooperative will report the income to you on Form 1099-PATR or a similar form and send a copy to the IRS. 2011 tax form 1040 Form 1099-PATR may also show an alternative minimum tax adjustment that you must include on Form 6251, Alternative Minimum Tax—Individuals, if you are required to file the form. 2011 tax form 1040 For information on the alternative minimum tax, see the Instructions for Form 6251. 2011 tax form 1040 Patronage Dividends You generally report patronage dividends as income on Schedule F, lines 3a and 3b, for the tax year you receive them. 2011 tax form 1040 They include the following items. 2011 tax form 1040 Money paid as a patronage dividend, including cash advances received (for example, from a marketing cooperative). 2011 tax form 1040 The stated dollar value of qualified written notices of allocation. 2011 tax form 1040 The fair market value of other property. 2011 tax form 1040 Do not report as income on line 3b any patronage dividends you receive from expenditures that were not deductible, such as buying personal or family items, capital assets, or depreciable property. 2011 tax form 1040 You must reduce the cost or other basis of these items by the amount of such patronage dividends received. 2011 tax form 1040 Personal items include fuel purchased for personal use, basic local telephone service, and personal long distance calls. 2011 tax form 1040 If you cannot determine what the dividend is for, report it as income on lines 3a and 3b. 2011 tax form 1040 Qualified written notice of allocation. 2011 tax form 1040   If you receive a qualified written notice of allocation as part of a patronage dividend, you must generally include its stated dollar value in your income on Schedule F, lines 3a and 3b, in the year you receive it. 2011 tax form 1040 A written notice of allocation is qualified if at least 20% of the patronage dividend is paid in money or by qualified check and either of the following conditions is met. 2011 tax form 1040 The notice must be redeemable in cash for at least 90 days after it is issued, and you must have received a written notice of your right of redemption at the same time as the written notice of allocation. 2011 tax form 1040 You must have agreed to include the stated dollar value in income in the year you receive the notice by doing one of the following. 2011 tax form 1040 Signing and giving a written agreement to the cooperative. 2011 tax form 1040 Getting or keeping membership in the cooperative after it adopted a bylaw providing that membership constitutes agreement. 2011 tax form 1040 The cooperative must notify you in writing of this bylaw and give you a copy. 2011 tax form 1040 Endorsing and cashing a qualified check paid as part of the same patronage dividend. 2011 tax form 1040 You must cash the check by the 90th day after the close of the payment period for the cooperative's tax year for which the patronage dividend was paid. 2011 tax form 1040 Qualified check. 2011 tax form 1040   A qualified check is any instrument that is redeemable in money and meets both of the following requirements. 2011 tax form 1040 It is part of a patronage dividend that also includes a qualified written notice of allocation for which you met condition 2(c), above. 2011 tax form 1040 It is imprinted with a statement that endorsing and cashing it constitutes the payee's consent to include in income the stated dollar value of any written notices of allocation paid as part of the same patronage dividend. 2011 tax form 1040 Loss on redemption. 2011 tax form 1040   You can deduct on Schedule F, Part II, any loss incurred on the redemption of a qualified written notice of allocation you received in the ordinary course of your farming business. 2011 tax form 1040 The loss is the difference between the stated dollar amount of the qualified written notice you included in income and the amount you received when you redeemed it. 2011 tax form 1040 Nonqualified notice of allocation. 2011 tax form 1040   Do not include the stated dollar value of any nonqualified notice of allocation in income when you receive it. 2011 tax form 1040 Your basis in the notice is zero. 2011 tax form 1040 You must include in income for the tax year of disposition any amount you receive from its sale, redemption, or other disposition. 2011 tax form 1040 Report that amount, up to the stated dollar value of the notice, on Schedule F, lines 3a and 3b. 2011 tax form 1040 However, do not include that amount in your income if the notice resulted from buying or selling capital assets or depreciable property or from buying personal items, as explained in the following discussions. 2011 tax form 1040   If the amount you receive is more than the stated dollar value of the notice, report the excess as the type of income it represents. 2011 tax form 1040 For example, if it represents interest income, report it on your return as interest. 2011 tax form 1040 Buying or selling capital assets or depreciable property. 2011 tax form 1040   Do not include in income patronage dividends from buying capital assets or depreciable property used in your business. 2011 tax form 1040 You must, however, reduce the basis of these assets by the dividends. 2011 tax form 1040 This reduction is taken into account as of the first day of the tax year in which the dividends are received. 2011 tax form 1040 If the dividends are more than your unrecovered basis, reduce the unrecovered basis to zero and include the difference on Schedule F, line 3a, for the tax year you receive them. 2011 tax form 1040   This rule and the exceptions explained below also apply to amounts you receive from the sale, redemption, or other disposition of a nonqualified notice of allocation that resulted from buying or selling capital assets or depreciable property. 2011 tax form 1040 Example. 2011 tax form 1040 On July 1, 2012, Mr. 2011 tax form 1040 Brown, a patron of a cooperative association, bought a machine for his dairy farm business from the association for $2,900. 2011 tax form 1040 The machine has a life of 7 years under MACRS (as provided in the Table of Class Lives and Recovery Periods in Appendix B of Publication 946, Depreciation and Amortization). 2011 tax form 1040 Mr. 2011 tax form 1040 Brown files his return on a calendar year basis. 2011 tax form 1040 For 2012, he claimed a depreciation deduction of $311, using the 10. 2011 tax form 1040 71% depreciation rate from the 150% declining balance, half-year convention table (shown in Table A-14 in Appendix A of Publication 946). 2011 tax form 1040 On July 2, 2013, the cooperative association paid Mr. 2011 tax form 1040 Brown a $300 cash patronage dividend for buying the machine. 2011 tax form 1040 Mr. 2011 tax form 1040 Brown adjusts the basis of the machine and figures his depreciation deduction for 2013 (and later years) as follows. 2011 tax form 1040 Cost of machine on July 1, 2012 $2,900 Minus: 2012 depreciation $311     2013 cash dividend 300 611 Adjusted basis for  depreciation for 2013: $2,289 Depreciation rate: 1 ÷ 6½ (remaining recovery period as of 1/1/2012) = 15. 2011 tax form 1040 38% × 1. 2011 tax form 1040 5 = 23. 2011 tax form 1040 07% Depreciation deduction for 2013 ($2,289 × 23. 2011 tax form 1040 07%) $528 Exceptions. 2011 tax form 1040   If the dividends are for buying or selling capital assets or depreciable property you did not own at any time during the year you received the dividends, you must include them on Schedule F, lines 3a and 3b, unless one of the following rules applies. 2011 tax form 1040 If the dividends relate to a capital asset you held for more than 1 year for which a loss was or would have been deductible, treat them as gain from the sale or exchange of a capital asset held for more than 1 year. 2011 tax form 1040 If the dividends relate to a capital asset for which a loss was not or would not have been deductible, do not report them as income (ordinary or capital gain). 2011 tax form 1040   If the dividends are for selling capital assets or depreciable property during the year you received the dividends, treat them as an additional amount received on the sale. 2011 tax form 1040 Personal purchases. 2011 tax form 1040   Because you cannot deduct the cost of personal, living, or family items, such as supplies, equipment, or services not related to the production of farm income, you can omit from the taxable amount of patronage dividends on Schedule F, line 3b, any dividends from buying those items (and you must reduce the cost or other basis of those items by the amount of the dividends). 2011 tax form 1040 This rule also applies to amounts you receive from the sale, redemption, or other disposition of a nonqualified written notice of allocation resulting from these purchases. 2011 tax form 1040 Per-Unit Retain Certificates A per-unit retain certificate is any written notice that shows the stated dollar amount of a per-unit retain allocation made to you by the cooperative. 2011 tax form 1040 A per-unit retain allocation is an amount paid to patrons for products sold for them that is fixed without regard to the net earnings of the cooperative. 2011 tax form 1040 These allocations can be paid in money, other property, or qualified certificates. 2011 tax form 1040 Per-unit retain certificates issued by a cooperative generally receive the same tax treatment as patronage dividends, discussed earlier. 2011 tax form 1040 Qualified certificates. 2011 tax form 1040   Qualified per-unit retain certificates are those issued to patrons who have agreed to include the stated dollar amount of these certificates in income in the year of receipt. 2011 tax form 1040 The agreement may be made in writing or by getting or keeping membership in a cooperative whose bylaws or charter states that membership constitutes agreement. 2011 tax form 1040 If you receive qualified per-unit retain certificates, include the stated dollar amount of the certificates in income on Schedule F, lines 3a and 3b, for the tax year you receive them. 2011 tax form 1040 Nonqualified certificates. 2011 tax form 1040   Do not include the stated dollar value of a nonqualified per-unit retain certificate in income when you receive it. 2011 tax form 1040 Your basis in the certificate is zero. 2011 tax form 1040 You must include in income any amount you receive from its sale, redemption, or other disposition. 2011 tax form 1040 Report the amount you receive from the disposition as ordinary income on Schedule F, lines 3a and 3b, for the tax year of disposition. 2011 tax form 1040 Cancellation of Debt This section explains the general rule for including canceled debt in income and the exceptions to the general rule. 2011 tax form 1040 For more information on canceled debt, see Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. 2011 tax form 1040 General Rule Generally, if your debt is canceled or forgiven, other than as a gift or bequest to you, you must include the canceled amount in gross income for tax purposes. 2011 tax form 1040 Discharge of qualified farm indebtedness (defined below) is one of the exceptions to the general rule. 2011 tax form 1040 It is excluded from taxable income (see Exclusions , later). 2011 tax form 1040 Report the canceled amount on Schedule F, line 8, if you incurred the debt in your farming business. 2011 tax form 1040 If the debt is a nonbusiness debt, report the canceled amount as other income on Form 1040, line 21. 2011 tax form 1040 Election to defer income from discharge of indebtedness. 2011 tax form 1040   You can elect to defer income from a discharge of business indebtedness that occurred after 2008 and before 2011. 2011 tax form 1040 Generally, if the election is made, the deferred income is included in gross income ratably over a 5-year period beginning in 2014 (for calendar year taxpayers) and the exclusions listed below do not apply. 2011 tax form 1040 See IRC section 108(i) and Publication 4681 for details. 2011 tax form 1040 Form 1099-C. 2011 tax form 1040   If a federal agency, financial institution, credit union, finance company, or credit card company cancels or forgives your debt of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. 2011 tax form 1040 The amount of debt canceled is shown in box 2. 2011 tax form 1040 Exceptions The following discussion covers some exceptions to the general rule for canceled debt. 2011 tax form 1040 These exceptions apply before the exclusions discussed below. 2011 tax form 1040 Price reduced after purchase. 2011 tax form 1040   If your purchase of property was financed by the seller and the seller reduces the amount of the debt at a time when you are not insolvent and the reduction does not occur in a chapter 11 bankruptcy case, the amount of the debt reduction will be treated as a reduction in the purchase price of the property. 2011 tax form 1040 Reduce your basis in the property by the amount of the reduction in the debt. 2011 tax form 1040 The rules that apply to bankruptcy and insolvency are explained below under Exclusions . 2011 tax form 1040 Deductible debt. 2011 tax form 1040   You do not realize income from a canceled debt to the extent the payment of the debt would have been a deductible expense. 2011 tax form 1040 This exception applies before the price reduction exception discussed above and the bankruptcy and insolvency exclusions discussed next. 2011 tax form 1040 Example. 2011 tax form 1040 You get accounting services for your farm on credit. 2011 tax form 1040 Later, you have trouble paying your farm debts, but you are not bankrupt or insolvent. 2011 tax form 1040 Your accountant forgives part of the amount you owe for the accounting services. 2011 tax form 1040 How you treat the canceled debt depends on your method of accounting. 2011 tax form 1040 Cash method — You do not include the canceled debt in income because payment of the debt would have been deductible as a business expense. 2011 tax form 1040 Accrual method — You include the canceled debt in income because the expense was deductible when you incurred the debt. 2011 tax form 1040 Exclusions Do not include canceled debt in income in the following situations. 2011 tax form 1040 The cancellation takes place in a bankruptcy case under title 11 of the U. 2011 tax form 1040 S. 2011 tax form 1040 Code. 2011 tax form 1040 The cancellation takes place when you are insolvent. 2011 tax form 1040 The canceled debt is a qualified farm debt. 2011 tax form 1040 The canceled debt is a qualified real property business debt (in the case of a taxpayer other than a C corporation). 2011 tax form 1040 See Publication 334, Tax Guide for Small Business, chapter 5. 2011 tax form 1040 The canceled debt is qualified principal residence indebtedness which is discharged after 2006 and before 2014. 2011 tax form 1040 The exclusions do not apply in the following situations: If a canceled debt is excluded from income because it takes place in a bankruptcy case, the exclusions in situations (2), (3), (4), and (5) do not apply. 2011 tax form 1040 If a canceled debt is excluded from income because it takes place when you are insolvent, the exclusions in situations (3) and (4) do not apply to the extent you are insolvent. 2011 tax form 1040 If a canceled debt is excluded from income because it is qualified principal residence indebtedness, the exclusion in situation (2) does not apply unless you elect to apply situation (2) instead of the exclusion for qualified principal residence indebtedness. 2011 tax form 1040 See Form 982 , later, for information on how to claim an exclusion for a canceled debt. 2011 tax form 1040 Debt. 2011 tax form 1040   For this discussion, debt includes any debt for which you are liable or that attaches to property you hold. 2011 tax form 1040 Bankruptcy and Insolvency You can exclude a canceled debt from income if you are bankrupt or to the extent you are insolvent. 2011 tax form 1040 Bankruptcy. 2011 tax form 1040   A bankruptcy case is a case under title 11 of the U. 2011 tax form 1040 S. 2011 tax form 1040 Code if you are under the jurisdiction of the court and the cancellation of the debt is granted by the court or is the result of a plan approved by the court. 2011 tax form 1040   Do not include debt canceled in a bankruptcy case in your income in the year it is canceled. 2011 tax form 1040 Instead, you must use the amount canceled to reduce your tax attributes, explained below under Reduction of tax attributes . 2011 tax form 1040 Insolvency. 2011 tax form 1040   You are insolvent to the extent your liabilities are more than the fair market value of your assets immediately before the cancellation of debt. 2011 tax form 1040   You can exclude canceled debt from gross income up to the amount by which you are insolvent. 2011 tax form 1040 If the canceled debt is more than this amount and the debt qualifies, you can apply the rules for qualified farm debt or qualified real property business debt to the difference. 2011 tax form 1040 Otherwise, you include the difference in gross income. 2011 tax form 1040 Use the amount excluded because of insolvency to reduce any tax attributes, as explained below under Reduction of tax attributes . 2011 tax form 1040 You must reduce the tax attributes under the insolvency rules before applying the rules for qualified farm debt or for qualified real property business debt. 2011 tax form 1040 Example. 2011 tax form 1040 You had a $15,000 debt that was not qualified principal residence debt canceled outside of bankruptcy. 2011 tax form 1040 Immediately before the cancellation, your liabilities totaled $80,000 and your assets totaled $75,000. 2011 tax form 1040 Since your liabilities were more than your assets, you were insolvent to the extent of $5,000 ($80,000 − $75,000). 2011 tax form 1040 You can exclude this amount from income. 2011 tax form 1040 The remaining canceled debt ($10,000) may be subject to the qualified farm debt or qualified real property business debt rules. 2011 tax form 1040 If not, you must include it in income. 2011 tax form 1040 Reduction of tax attributes. 2011 tax form 1040   If you exclude canceled debt from income in a bankruptcy case or during insolvency, you must use the excluded debt to reduce certain tax attributes. 2011 tax form 1040 Order of reduction. 2011 tax form 1040   You must use the excluded canceled debt to reduce the following tax attributes in the order listed unless you elect to reduce the basis of depreciable property first, as explained later. 2011 tax form 1040 Net operating loss (NOL). 2011 tax form 1040 Reduce any NOL for the tax year of the debt cancellation, and then any NOL carryover to that year. 2011 tax form 1040 Reduce the NOL or NOL carryover one dollar for each dollar of excluded canceled debt. 2011 tax form 1040 General business credit carryover. 2011 tax form 1040 Reduce the credit carryover to or from the tax year of the debt cancellation. 2011 tax form 1040 Reduce the carryover 331/3 cents for each dollar of excluded canceled debt. 2011 tax form 1040 Minimum tax credit. 2011 tax form 1040 Reduce the minimum tax credit available at the beginning of the tax year following the tax year of the debt cancellation. 2011 tax form 1040 Reduce the credit 331/3 cents for each dollar of excluded canceled debt. 2011 tax form 1040 Capital loss. 2011 tax form 1040 Reduce any net capital loss for the tax year of the debt cancellation, and then any capital loss carryover to that year. 2011 tax form 1040 Reduce the capital loss or loss carryover one dollar for each dollar of excluded canceled debt. 2011 tax form 1040 Basis. 2011 tax form 1040 Reduce the basis of the property you hold at the beginning of the tax year following the tax year of the debt cancellation in the following order. 2011 tax form 1040 Real property (except inventory) used in your trade or business or held for investment that secured the canceled debt. 2011 tax form 1040 Personal property (except inventory and accounts and notes receivable) used in your trade or business or held for investment that secured the canceled debt. 2011 tax form 1040 Other property (except inventory and accounts and notes receivable) used in your trade or business or held for investment. 2011 tax form 1040 Inventory and accounts and notes receivable. 2011 tax form 1040 Other property. 2011 tax form 1040 Reduce the basis one dollar for each dollar of excluded canceled debt. 2011 tax form 1040 However, the reduction cannot be more than the total basis of property and the amount of money you hold immediately after the debt cancellation minus your total liabilities immediately after the cancellation. 2011 tax form 1040 For allocation rules that apply to basis reductions for multiple canceled debts, see Regulations section 1. 2011 tax form 1040 1017-1(b)(2). 2011 tax form 1040 Also see Electing to reduce the basis of depreciable property
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Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

Kentucky Office of the Attorney General

Website: Kentucky Office of the Attorney General

Address: Kentucky Office of the Attorney General
Consumer Protection Division
1024 Capital Center Dr.
Frankfort, KY 40601

Phone Number: 502-696-5389

Toll-free: 1-888-432-9257 (Hotline)

Kentucky Office of the Attorney General - Louisville

Website: Kentucky Office of the Attorney General - Louisville

Address: Kentucky Office of the Attorney General - Louisville
Consumer Protection Division
310 Whittington Pkwy., Suite 101
Louisville, KY 40222

Phone Number: 502-429-7134

Toll-free: 1-888-432-9257 (Hotline)

Kentucky Office of the Attorney General - Prestonsburg

Website: Kentucky Office of the Attorney General - Prestonsburg

Address: Kentucky Office of the Attorney General - Prestonsburg
361 N. Lake Dr.
Prestonsburg, KY 41653

Phone Number: 606-889-1821

Toll-free: 1-888-432-9257 (Hotline)

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

Department of Financial Institutions

Website: Department of Financial Institutions

Address: Department of Financial Institutions
1025 Capitol Center Dr., Suite 200
Frankfort, KY 40601

Phone Number: 502-573-3390

Toll-free: 1-800-223-2579

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Department of Insurance

Website: Department of Insurance

Address: Department of Insurance
Consumer Protection Division
PO Box 517
Frankfort, KY 40602-0517

Phone Number: 502-564-6034

Toll-free: 1-800-595-6053

TTY: 1-800-648-6056

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Department of Financial Institutions

Website: Department of Financial Institutions

Address: Department of Financial Institutions
Securities Division
1025 Capitol Center Dr., Suite 200
Frankfort, KY 40601

Phone Number: 502-573-3390

Toll-free: 1-800-223-2579

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Public Service Commission

Website: Public Service Commission

Address: Public Service Commission
Consumer Services
PO Box 615
Frankfort, KY 40602

Phone Number: 502-564-3940

Toll-free: 1-800-772-4636

TTY: 1-800-648-6056

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The 2011 Tax Form 1040

2011 tax form 1040 26. 2011 tax form 1040   Car Expenses and Other Employee Business Expenses Table of Contents What's New Introduction Useful Items - You may want to see: Travel ExpensesTraveling Away From Home Tax Home Temporary Assignment or Job What Travel Expenses Are Deductible? Travel in the United States Travel Outside the United States Conventions Entertainment Expenses50% Limit What Entertainment Expenses Are Deductible? What Entertainment Expenses Are Not Deductible? Gift Expenses Transportation ExpensesArmed Forces reservists. 2011 tax form 1040 Parking fees. 2011 tax form 1040 Advertising display on car. 2011 tax form 1040 Car pools. 2011 tax form 1040 Hauling tools or instruments. 2011 tax form 1040 Union members' trips from a union hall. 2011 tax form 1040 Car Expenses RecordkeepingHow To Prove Expenses How Long To Keep Records and Receipts How To ReportGifts. 2011 tax form 1040 Statutory employees. 2011 tax form 1040 Reimbursements Completing Forms 2106 and 2106-EZ Special Rules What's New Standard mileage rate. 2011 tax form 1040  For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. 2011 tax form 1040 Car expenses and use of the standard mileage rate are explained under Transportation Expenses , later. 2011 tax form 1040 Depreciation limits on cars, trucks, and vans. 2011 tax form 1040  For 2013, the first-year limit on the total section 179 deduction, special depreciation allowance, and depreciation deduction for cars remains at $11,160 ($3,160 if you elect not to claim the special depreciation allowance). 2011 tax form 1040 For trucks and vans the first-year limit remains at $11,360 ($3,360 if you elect not to claim the special depreciation allowance). 2011 tax form 1040 For more information, see Depreciation limits in Publication 463. 2011 tax form 1040 Introduction You may be able to deduct the ordinary and necessary business-related expenses you have for: Travel, Entertainment, Gifts, or Transportation. 2011 tax form 1040 An ordinary expense is one that is common and accepted in your trade or business. 2011 tax form 1040 A necessary expense is one that is helpful and appropriate for your business. 2011 tax form 1040 An expense does not have to be required to be considered necessary. 2011 tax form 1040 This chapter explains the following. 2011 tax form 1040 What expenses are deductible. 2011 tax form 1040 How to report your expenses on your return. 2011 tax form 1040 What records you need to prove your expenses. 2011 tax form 1040 How to treat any expense reimbursements you may receive. 2011 tax form 1040 Who does not need to use this chapter. 2011 tax form 1040   If you are an employee, you will not need to read this chapter if all of the following are true. 2011 tax form 1040 You fully accounted to your employer for your work-related expenses. 2011 tax form 1040 You received full reimbursement for your expenses. 2011 tax form 1040 Your employer required you to return any excess reimbursement and you did so. 2011 tax form 1040 There is no amount shown with a code “L” in box 12 of your Form W-2, Wage and Tax Statement. 2011 tax form 1040 If you meet all of these conditions, there is no need to show the expenses or the reimbursements on your return. 2011 tax form 1040 See Reimbursements , later, if you would like more information on reimbursements and accounting to your employer. 2011 tax form 1040    If you meet these conditions and your employer included reimbursements on your Form W-2 in error, ask your employer for a corrected Form W-2. 2011 tax form 1040 Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule C (Form 1040) Profit or Loss From Business Schedule C-EZ (Form 1040) Net Profit From Business Schedule F (Form 1040) Profit or Loss From Farming Form 2106 Employee Business Expenses Form 2106-EZ Unreimbursed Employee Business Expenses Travel Expenses If you temporarily travel away from your tax home, you can use this section to determine if you have deductible travel expenses. 2011 tax form 1040 This section discusses: Traveling away from home, Tax home, Temporary assignment or job, and What travel expenses are deductible. 2011 tax form 1040 It also discusses the standard meal allowance, rules for travel inside and outside the United States, and deductible convention expenses. 2011 tax form 1040 Travel expenses defined. 2011 tax form 1040   For tax purposes, travel expenses are the ordinary and necessary expenses (defined earlier) of traveling away from home for your business, profession, or job. 2011 tax form 1040   You will find examples of deductible travel expenses in Table 26-1 . 2011 tax form 1040 Traveling Away From Home You are traveling away from home if: Your duties require you to be away from the general area of your tax home (defined later) substantially longer than an ordinary day's work, and You need to sleep or rest to meet the demands of your work while away from home. 2011 tax form 1040 This rest requirement is not satisfied by merely napping in your car. 2011 tax form 1040 You do not have to be away from your tax home for a whole day or from dusk to dawn as long as your relief from duty is long enough to get necessary sleep or rest. 2011 tax form 1040 Example 1. 2011 tax form 1040 You are a railroad conductor. 2011 tax form 1040 You leave your home terminal on a regularly scheduled round-trip run between two cities and return home 16 hours later. 2011 tax form 1040 During the run, you have 6 hours off at your turnaround point where you eat two meals and rent a hotel room to get necessary sleep before starting the return trip. 2011 tax form 1040 You are considered to be away from home. 2011 tax form 1040 Example 2. 2011 tax form 1040 You are a truck driver. 2011 tax form 1040 You leave your terminal and return to it later the same day. 2011 tax form 1040 You get an hour off at your turnaround point to eat. 2011 tax form 1040 Because you are not off to get necessary sleep and the brief time off is not an adequate rest period, you are not traveling away from home. 2011 tax form 1040 Members of the Armed Forces. 2011 tax form 1040   If you are a member of the U. 2011 tax form 1040 S. 2011 tax form 1040 Armed Forces on a permanent duty assignment overseas, you are not traveling away from home. 2011 tax form 1040 You cannot deduct your expenses for meals and lodging. 2011 tax form 1040 You cannot deduct these expenses even if you have to maintain a home in the United States for your family members who are not allowed to accompany you overseas. 2011 tax form 1040 If you are transferred from one permanent duty station to another, you may have deductible moving expenses, which are explained in Publication 521, Moving Expenses. 2011 tax form 1040    A naval officer assigned to permanent duty aboard a ship that has regular eating and living facilities has a tax home aboard ship for travel expense purposes. 2011 tax form 1040 Tax Home To determine whether you are traveling away from home, you must first determine the location of your tax home. 2011 tax form 1040 Generally, your tax home is your regular place of business or post of duty, regardless of where you maintain your family home. 2011 tax form 1040 It includes the entire city or general area in which your business or work is located. 2011 tax form 1040 If you have more than one regular place of business, your tax home is your main place of business. 2011 tax form 1040 See Main place of business or work , later. 2011 tax form 1040 If you do not have a regular or a main place of business because of the nature of your work, then your tax home may be the place where you regularly live. 2011 tax form 1040 See No main place of business or work , later. 2011 tax form 1040 If you do not have a regular or a main place of business or post of duty and there is no place where you regularly live, you are considered an itinerant (a transient) and your tax home is wherever you work. 2011 tax form 1040 As an itinerant, you cannot claim a travel expense deduction because you are never considered to be traveling away from home. 2011 tax form 1040 Main place of business or work. 2011 tax form 1040   If you have more than one place of business or work, consider the following when determining which one is your main place of business or work. 2011 tax form 1040 The total time you ordinarily spend in each place. 2011 tax form 1040 The level of your business activity in each place. 2011 tax form 1040 Whether your income from each place is significant or insignificant. 2011 tax form 1040 Example. 2011 tax form 1040 You live in Cincinnati where you have a seasonal job for 8 months each year and earn $40,000. 2011 tax form 1040 You work the other 4 months in Miami, also at a seasonal job, and earn $15,000. 2011 tax form 1040 Cincinnati is your main place of work because you spend most of your time there and earn most of your income there. 2011 tax form 1040 No main place of business or work. 2011 tax form 1040   You may have a tax home even if you do not have a regular or main place of business or work. 2011 tax form 1040 Your tax home may be the home where you regularly live. 2011 tax form 1040 Factors used to determine tax home. 2011 tax form 1040   If you do not have a regular or main place of business or work, use the following three factors to determine where your tax home is. 2011 tax form 1040 You perform part of your business in the area of your main home and use that home for lodging while doing business in the area. 2011 tax form 1040 You have living expenses at your main home that you duplicate because your business requires you to be away from that home. 2011 tax form 1040 You have not abandoned the area in which both your historical place of lodging and your claimed main home are located; you have a member or members of your family living at your main home; or you often use that home for lodging. 2011 tax form 1040   If you satisfy all three factors, your tax home is the home where you regularly live. 2011 tax form 1040 If you satisfy only two factors, you may have a tax home depending on all the facts and circumstances. 2011 tax form 1040 If you satisfy only one factor, you are an itinerant; your tax home is wherever you work and you cannot deduct travel expenses. 2011 tax form 1040 Example. 2011 tax form 1040 You are single and live in Boston in an apartment you rent. 2011 tax form 1040 You have worked for your employer in Boston for a number of years. 2011 tax form 1040 Your employer enrolls you in a 12-month executive training program. 2011 tax form 1040 You do not expect to return to work in Boston after you complete your training. 2011 tax form 1040 During your training, you do not do any work in Boston. 2011 tax form 1040 Instead, you receive classroom and on-the-job training throughout the United States. 2011 tax form 1040 You keep your apartment in Boston and return to it frequently. 2011 tax form 1040 You use your apartment to conduct your personal business. 2011 tax form 1040 You also keep up your community contacts in Boston. 2011 tax form 1040 When you complete your training, you are transferred to Los Angeles. 2011 tax form 1040 You do not satisfy factor (1) because you did not work in Boston. 2011 tax form 1040 You satisfy factor (2) because you had duplicate living expenses. 2011 tax form 1040 You also satisfy factor (3) because you did not abandon your apartment in Boston as your main home, you kept your community contacts, and you frequently returned to live in your apartment. 2011 tax form 1040 Therefore, you have a tax home in Boston. 2011 tax form 1040 Tax home different from family home. 2011 tax form 1040   If you (and your family) do not live at your tax home (defined earlier), you cannot deduct the cost of traveling between your tax home and your family home. 2011 tax form 1040 You also cannot deduct the cost of meals and lodging while at your tax home. 2011 tax form 1040 See Example 1 . 2011 tax form 1040   If you are working temporarily in the same city where you and your family live, you may be considered as traveling away from home. 2011 tax form 1040 See Example 2 . 2011 tax form 1040 Example 1. 2011 tax form 1040 You are a truck driver and you and your family live in Tucson. 2011 tax form 1040 You are employed by a trucking firm that has its terminal in Phoenix. 2011 tax form 1040 At the end of your long runs, you return to your home terminal in Phoenix and spend one night there before returning home. 2011 tax form 1040 You cannot deduct any expenses you have for meals and lodging in Phoenix or the cost of traveling from Phoenix to Tucson. 2011 tax form 1040 This is because Phoenix is your tax home. 2011 tax form 1040 Example 2. 2011 tax form 1040 Your family home is in Pittsburgh, where you work 12 weeks a year. 2011 tax form 1040 The rest of the year you work for the same employer in Baltimore. 2011 tax form 1040 In Baltimore, you eat in restaurants and sleep in a rooming house. 2011 tax form 1040 Your salary is the same whether you are in Pittsburgh or Baltimore. 2011 tax form 1040 Because you spend most of your working time and earn most of your salary in Baltimore, that city is your tax home. 2011 tax form 1040 You cannot deduct any expenses you have for meals and lodging there. 2011 tax form 1040 However, when you return to work in Pittsburgh, you are away from your tax home even though you stay at your family home. 2011 tax form 1040 You can deduct the cost of your round trip between Baltimore and Pittsburgh. 2011 tax form 1040 You can also deduct your part of your family's living expenses for meals and lodging while you are living and working in Pittsburgh. 2011 tax form 1040 Temporary Assignment or Job You may regularly work at your tax home and also work at another location. 2011 tax form 1040 It may not be practical to return to your tax home from this other location at the end of each work day. 2011 tax form 1040 Temporary assignment vs. 2011 tax form 1040 indefinite assignment. 2011 tax form 1040   If your assignment or job away from your main place of work is temporary, your tax home does not change. 2011 tax form 1040 You are considered to be away from home for the whole period you are away from your main place of work. 2011 tax form 1040 You can deduct your travel expenses if they otherwise qualify for deduction. 2011 tax form 1040 Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less. 2011 tax form 1040   However, if your assignment or job is indefinite, the location of the assignment or job becomes your new tax home and you cannot deduct your travel expenses while there. 2011 tax form 1040 An assignment or job in a single location is considered indefinite if it is realistically expected to last for more than 1 year, whether or not it actually lasts for more than 1 year. 2011 tax form 1040   If your assignment is indefinite, you must include in your income any amounts you receive from your employer for living expenses, even if they are called travel allowances and you account to your employer for them. 2011 tax form 1040 You may be able to deduct the cost of relocating to your new tax home as a moving expense. 2011 tax form 1040 See Publication 521 for more information. 2011 tax form 1040 Exception for federal crime investigations or prosecutions. 2011 tax form 1040   If you are a federal employee participating in a federal crime investigation or prosecution, you are not subject to the 1-year rule. 2011 tax form 1040 This means you may be able to deduct travel expenses even if you are away from your tax home for more than 1 year, provided you meet the other requirements for deductibility. 2011 tax form 1040   For you to qualify, the Attorney General (or his or her designee) must certify that you are traveling: For the federal government, In a temporary duty status, and To investigate or prosecute, or provide support services for the investigation or prosecution of a federal crime. 2011 tax form 1040 Determining temporary or indefinite. 2011 tax form 1040   You must determine whether your assignment is temporary or indefinite when you start work. 2011 tax form 1040 If you expect an assignment or job to last for 1 year or less, it is temporary unless there are facts and circumstances that indicate otherwise. 2011 tax form 1040 An assignment or job that is initially temporary may become indefinite due to changed circumstances. 2011 tax form 1040 A series of assignments to the same location, all for short periods but that together cover a long period, may be considered an indefinite assignment. 2011 tax form 1040 Going home on days off. 2011 tax form 1040   If you go back to your tax home from a temporary assignment on your days off, you are not considered away from home while you are in your hometown. 2011 tax form 1040 You cannot deduct the cost of your meals and lodging there. 2011 tax form 1040 However, you can deduct your travel expenses, including meals and lodging, while traveling between your temporary place of work and your tax home. 2011 tax form 1040 You can claim these expenses up to the amount it would have cost you to stay at your temporary place of work. 2011 tax form 1040   If you keep your hotel room during your visit home, you can deduct the cost of your hotel room. 2011 tax form 1040 In addition, you can deduct your expenses of returning home up to the amount you would have spent for meals had you stayed at your temporary place of work. 2011 tax form 1040 Probationary work period. 2011 tax form 1040   If you take a job that requires you to move, with the understanding that you will keep the job if your work is satisfactory during a probationary period, the job is indefinite. 2011 tax form 1040 You cannot deduct any of your expenses for meals and lodging during the probationary period. 2011 tax form 1040 What Travel Expenses Are Deductible? Once you have determined that you are traveling away from your tax home, you can determine what travel expenses are deductible. 2011 tax form 1040 You can deduct ordinary and necessary expenses you have when you travel away from home on business. 2011 tax form 1040 The type of expense you can deduct depends on the facts and your circumstances. 2011 tax form 1040 Table 26-1 summarizes travel expenses you may be able to deduct. 2011 tax form 1040 You may have other deductible travel expenses that are not covered there, depending on the facts and your circumstances. 2011 tax form 1040 When you travel away from home on business, you should keep records of all the expenses you have and any advances you receive from your employer. 2011 tax form 1040 You can use a log, diary, notebook, or any other written record to keep track of your expenses. 2011 tax form 1040 The types of expenses you need to record, along with supporting documentation, are described in Table 26-2 , later. 2011 tax form 1040 Separating costs. 2011 tax form 1040   If you have one expense that includes the costs of meals, entertainment, and other services (such as lodging or transportation), you must allocate that expense between the cost of meals and entertainment and the cost of other services. 2011 tax form 1040 You must have a reasonable basis for making this allocation. 2011 tax form 1040 For example, you must allocate your expenses if a hotel includes one or more meals in its room charge. 2011 tax form 1040 Travel expenses for another individual. 2011 tax form 1040   If a spouse, dependent, or other individual goes with you (or your employee) on a business trip or to a business convention, you generally cannot deduct his or her travel expenses. 2011 tax form 1040 Employee. 2011 tax form 1040   You can deduct the travel expenses of someone who goes with you if that person: Is your employee, Has a bona fide business purpose for the travel, and Would otherwise be allowed to deduct the travel expenses. 2011 tax form 1040 Business associate. 2011 tax form 1040   If a business associate travels with you and meets the conditions in (2) and (3) above, you can deduct the travel expenses you have for that person. 2011 tax form 1040 A business associate is someone with whom you could reasonably expect to engage or deal in the active conduct of your business. 2011 tax form 1040 A business associate can be a current or prospective (likely to become) customer, client, supplier, employee, agent, partner, or professional advisor. 2011 tax form 1040 Bona fide business purpose. 2011 tax form 1040   A bona fide business purpose exists if you can prove a real business purpose for the individual's presence. 2011 tax form 1040 Incidental services, such as typing notes or assisting in entertaining customers, are not enough to make the expenses deductible. 2011 tax form 1040 Example. 2011 tax form 1040 Jerry drives to Chicago on business and takes his wife, Linda, with him. 2011 tax form 1040 Linda is not Jerry's employee. 2011 tax form 1040 Linda occasionally types notes, performs similar services, and accompanies Jerry to luncheons and dinners. 2011 tax form 1040 The performance of these services does not establish that her presence on the trip is necessary to the conduct of Jerry's business. 2011 tax form 1040 Her expenses are not deductible. 2011 tax form 1040 Jerry pays $199 a day for a double room. 2011 tax form 1040 A single room costs $149 a day. 2011 tax form 1040 He can deduct the total cost of driving his car to and from Chicago, but only $149 a day for his hotel room. 2011 tax form 1040 If he uses public transportation, he can deduct only his fare. 2011 tax form 1040 Table 26-1. 2011 tax form 1040 Travel Expenses You Can Deduct This chart summarizes expenses you can deduct when you travel away from home for business purposes. 2011 tax form 1040 IF you have expenses for. 2011 tax form 1040 . 2011 tax form 1040 . 2011 tax form 1040 THEN you can deduct the cost of. 2011 tax form 1040 . 2011 tax form 1040 . 2011 tax form 1040 transportation travel by airplane, train, bus, or car between your home and your business destination. 2011 tax form 1040 If you were provided with a ticket or you are riding free as a result of a frequent traveler or similar program, your cost is zero. 2011 tax form 1040 If you travel by ship, see Luxury Water Travel and Cruise ships (under Conventions) in Publication 463 for additional rules and limits. 2011 tax form 1040 taxi, commuter bus, and airport limousine fares for these and other types of transportation that take you between: The airport or station and your hotel, and The hotel and the work location of your customers or clients, your business meeting place, or your temporary work location. 2011 tax form 1040 baggage and shipping sending baggage and sample or display material between your regular and temporary work locations. 2011 tax form 1040 car operating and maintaining your car when traveling away from home on business. 2011 tax form 1040 You can deduct actual expenses or the standard mileage rate as well as business-related tolls and parking. 2011 tax form 1040 If you rent a car while away from home on business, you can deduct only the business-use portion of the expenses. 2011 tax form 1040 lodging and meals your lodging and meals if your business trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties. 2011 tax form 1040 Meals include amounts spent for food, beverages, taxes, and related tips. 2011 tax form 1040 See Meals and Incidental Expenses for additional rules and limits. 2011 tax form 1040 cleaning dry cleaning and laundry. 2011 tax form 1040 telephone business calls while on your business trip. 2011 tax form 1040 This includes business communication by fax machine or other communication devices. 2011 tax form 1040 tips tips you pay for any expenses in this chart. 2011 tax form 1040 other other similar ordinary and necessary expenses related to your business travel. 2011 tax form 1040 These expenses might include transportation to or from a business meal, public stenographer's fees, computer rental fees, and operating and maintaining a house trailer. 2011 tax form 1040 Meals and Incidental Expenses You can deduct the cost of meals in either of the following situations. 2011 tax form 1040 It is necessary for you to stop for substantial sleep or rest to properly perform your duties while traveling away from home on business. 2011 tax form 1040 The meal is business-related entertainment. 2011 tax form 1040 Business-related entertainment is discussed under Entertainment Expenses , later. 2011 tax form 1040 The following discussion deals only with meals (and incidental expenses) that are not business-related entertainment. 2011 tax form 1040 Lavish or extravagant. 2011 tax form 1040   You cannot deduct expenses for meals that are lavish or extravagant. 2011 tax form 1040 An expense is not considered lavish or extravagant if it is reasonable based on the facts and circumstances. 2011 tax form 1040 Expenses will not be disallowed merely because they are more than a fixed dollar amount or take place at deluxe restaurants, hotels, nightclubs, or resorts. 2011 tax form 1040 50% limit on meals. 2011 tax form 1040   You can figure your meal expenses using either of the following methods. 2011 tax form 1040 Actual cost. 2011 tax form 1040 The standard meal allowance. 2011 tax form 1040 Both of these methods are explained below. 2011 tax form 1040 But, regardless of the method you use, you generally can deduct only 50% of the unreimbursed cost of your meals. 2011 tax form 1040   If you are reimbursed for the cost of your meals, how you apply the 50% limit depends on whether your employer's reimbursement plan was accountable or nonaccountable. 2011 tax form 1040 If you are not reimbursed, the 50% limit applies whether the unreimbursed meal expense is for business travel or business entertainment. 2011 tax form 1040 The 50% limit is explained later under Entertainment Expenses . 2011 tax form 1040 Accountable and nonaccountable plans are discussed later under Reimbursements . 2011 tax form 1040 Actual cost. 2011 tax form 1040   You can use the actual cost of your meals to figure the amount of your expense before reimbursement and application of the 50% deduction limit. 2011 tax form 1040 If you use this method, you must keep records of your actual cost. 2011 tax form 1040 Standard meal allowance. 2011 tax form 1040   Generally, you can use the “standard meal allowance” method as an alternative to the actual cost method. 2011 tax form 1040 It allows you to use a set amount for your daily meals and incidental expenses (M&IE), instead of keeping records of your actual costs. 2011 tax form 1040 The set amount varies depending on where and when you travel. 2011 tax form 1040 In this chapter, “standard meal allowance” refers to the federal rate for M&IE, discussed later under Amount of standard meal allowance . 2011 tax form 1040 If you use the standard meal allowance, you still must keep records to prove the time, place, and business purpose of your travel. 2011 tax form 1040 See Recordkeeping , later. 2011 tax form 1040 Incidental expenses. 2011 tax form 1040   The term “incidental expenses” means fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. 2011 tax form 1040 Incidental expenses do not include expenses for laundry, cleaning and pressing of clothing, lodging taxes, costs of telegrams or telephone calls, transportation between places of lodging or business and places where meals are taken, or the mailing cost of filing travel vouchers and paying employer-sponsored charge card billings. 2011 tax form 1040 Incidental expenses only method. 2011 tax form 1040   You can use an optional method (instead of actual cost) for deducting incidental expenses only. 2011 tax form 1040 The amount of the deduction is $5 a day. 2011 tax form 1040 You can use this method only if you did not pay or incur any meal expenses. 2011 tax form 1040 You cannot use this method on any day that you use the standard meal allowance. 2011 tax form 1040    Federal employees should refer to the Federal Travel Regulations at  www. 2011 tax form 1040 gsa. 2011 tax form 1040 gov. 2011 tax form 1040 Find “What GSA Offers” and click on “Regulations: FMR, FTR, & FAR” for Federal Travel Regulation (FTR) for changes affecting claims for reimbursement. 2011 tax form 1040 50% limit may apply. 2011 tax form 1040   If you use the standard meal allowance method for meal expenses and you are not reimbursed or you are reimbursed under a nonaccountable plan, you can generally deduct only 50% of the standard meal allowance. 2011 tax form 1040 If you are reimbursed under an accountable plan and you are deducting amounts that are more than your reimbursements, you can deduct only 50% of the excess amount. 2011 tax form 1040 The 50% limit is explained later under Entertainment Expenses . 2011 tax form 1040 Accountable and nonaccountable plans are discussed later under Reimbursements . 2011 tax form 1040 There is no optional standard lodging amount similar to the standard meal allowance. 2011 tax form 1040 Your allowable lodging expense deduction is your actual cost. 2011 tax form 1040 Who can use the standard meal allowance. 2011 tax form 1040   You can use the standard meal allowance whether you are an employee or self-employed, and whether or not you are reimbursed for your traveling expenses. 2011 tax form 1040   Use of the standard meal allowance for other travel. 2011 tax form 1040    You can use the standard meal allowance to figure your meal expenses when you travel in connection with investment and other income-producing property. 2011 tax form 1040 You can also use it to figure your meal expenses when you travel for qualifying educational purposes. 2011 tax form 1040 You cannot use the standard meal allowance to figure the cost of your meals when you travel for medical or charitable purposes. 2011 tax form 1040 Amount of standard meal allowance. 2011 tax form 1040   The standard meal allowance is the federal M&IE rate. 2011 tax form 1040 For travel in 2013, the daily rate for most small localities in the United States is $46. 2011 tax form 1040   Most major cities and many other localities in the United States are designated as high-cost areas, qualifying for higher standard meal allowances. 2011 tax form 1040 You can find this information (organized by state) on the Internet at www. 2011 tax form 1040 gsa. 2011 tax form 1040 gov. 2011 tax form 1040 Click on “Per Diem Rates,” then select “2013” for the period January 1, 2013 – September 30, 2013, and select “2014” for the period October 1, 2013 – December 31, 2013. 2011 tax form 1040 However, you can apply the rates in effect before October 1, 2013, for expenses of all travel within the United States for 2013 instead of the updated rates. 2011 tax form 1040 You must consistently use either the rates for the first 9 months for all of 2013 or the updated rates for the period of October 1, 2013, through December 31, 2013. 2011 tax form 1040   If you travel to more than one location in one day, use the rate in effect for the area where you stop for sleep or rest. 2011 tax form 1040 If you work in the transportation industry, however, see Special rate for transportation workers , later. 2011 tax form 1040 Standard meal allowance for areas outside the continental United States. 2011 tax form 1040    The standard meal allowance rates above do not apply to travel in Alaska, Hawaii, or any other location outside the continental United States. 2011 tax form 1040 The Department of Defense establishes per diem rates for Alaska, Hawaii, Puerto Rico, American Samoa, Guam, Midway, the Northern Mariana Islands, the U. 2011 tax form 1040 S. 2011 tax form 1040 Virgin Islands, Wake Island, and other non-foreign areas outside the continental United States. 2011 tax form 1040 The Department of State establishes per diem rates for all other foreign areas. 2011 tax form 1040    You can access per diem rates for non-foreign areas outside the continental United States at: www. 2011 tax form 1040 defensetravel. 2011 tax form 1040 dod. 2011 tax form 1040 mil/site/perdiemCalc. 2011 tax form 1040 cfm. 2011 tax form 1040 You can access all other foreign per diem rates at www. 2011 tax form 1040 state. 2011 tax form 1040 gov/travel/. 2011 tax form 1040 Click on “Travel Per Diem Allowances for Foreign Areas” under “Foreign Per Diem Rates,” to obtain the latest foreign per diem rates. 2011 tax form 1040 Special rate for transportation workers. 2011 tax form 1040   You can use a special standard meal allowance if you work in the transportation industry. 2011 tax form 1040 You are in the transportation industry if your work: Directly involves moving people or goods by airplane, barge, bus, ship, train, or truck, and Regularly requires you to travel away from home and, during any single trip, usually involves travel to areas eligible for different standard meal allowance rates. 2011 tax form 1040 If this applies to you, you can claim a standard daily meal allowance of $59 ($65 for travel outside the continental United States). 2011 tax form 1040   Using the special rate for transportation workers eliminates the need for you to determine the standard meal allowance for every area where you stop for sleep or rest. 2011 tax form 1040 If you choose to use the special rate for any trip, you must use the special rate (and not use the regular standard meal allowance rates) for all trips you take that year. 2011 tax form 1040 Travel for days you depart and return. 2011 tax form 1040   For both the day you depart for and the day you return from a business trip, you must prorate the standard meal allowance (figure a reduced amount for each day). 2011 tax form 1040 You can do so by one of two methods. 2011 tax form 1040 Method 1: You can claim 3/4 of the standard meal allowance. 2011 tax form 1040 Method 2: You can prorate using any method that you consistently apply and that is in accordance with reasonable business practice. 2011 tax form 1040 Example. 2011 tax form 1040 Jen is employed in New Orleans as a convention planner. 2011 tax form 1040 In March, her employer sent her on a 3-day trip to Washington, DC, to attend a planning seminar. 2011 tax form 1040 She left her home in New Orleans at 10 a. 2011 tax form 1040 m. 2011 tax form 1040 on Wednesday and arrived in Washington, DC, at 5:30 p. 2011 tax form 1040 m. 2011 tax form 1040 After spending two nights there, she flew back to New Orleans on Friday and arrived back home at 8:00 p. 2011 tax form 1040 m. 2011 tax form 1040 Jen's employer gave her a flat amount to cover her expenses and included it with her wages. 2011 tax form 1040 Under Method 1, Jen can claim 2½ days of the standard meal allowance for Washington, DC: 3/4 of the daily rate for Wednesday and Friday (the days she departed and returned), and the full daily rate for Thursday. 2011 tax form 1040 Under Method 2, Jen could also use any method that she applies consistently and that is in accordance with reasonable business practice. 2011 tax form 1040 For example, she could claim 3 days of the standard meal allowance even though a federal employee would have to use Method 1 and be limited to only 2½ days. 2011 tax form 1040 Travel in the United States The following discussion applies to travel in the United States. 2011 tax form 1040 For this purpose, the United States includes only the 50 states and the District of Columbia. 2011 tax form 1040 The treatment of your travel expenses depends on how much of your trip was business related and on how much of your trip occurred within the United States. 2011 tax form 1040 See Part of Trip Outside the United States , later. 2011 tax form 1040 Trip Primarily for Business You can deduct all your travel expenses if your trip was entirely business related. 2011 tax form 1040 If your trip was primarily for business and, while at your business destination, you extended your stay for a vacation, made a personal side trip, or had other personal activities, you can deduct your business-related travel expenses. 2011 tax form 1040 These expenses include the travel costs of getting to and from your business destination and any business-related expenses at your business destination. 2011 tax form 1040 Example. 2011 tax form 1040 You work in Atlanta and take a business trip to New Orleans in May. 2011 tax form 1040 On your way home, you stop in Mobile to visit your parents. 2011 tax form 1040 You spend $1,996 for the 9 days you are away from home for travel, meals, lodging, and other travel expenses. 2011 tax form 1040 If you had not stopped in Mobile, you would have been gone only 6 days, and your total cost would have been $1,696. 2011 tax form 1040 You can deduct $1,696 for your trip, including the cost of round-trip transportation to and from New Orleans. 2011 tax form 1040 The deduction for your meals is subject to the 50% limit on meals mentioned earlier. 2011 tax form 1040 Trip Primarily for Personal Reasons If your trip was primarily for personal reasons, such as a vacation, the entire cost of the trip is a nondeductible personal expense. 2011 tax form 1040 However, you can deduct any expenses you have while at your destination that are directly related to your business. 2011 tax form 1040 A trip to a resort or on a cruise ship may be a vacation even if the promoter advertises that it is primarily for business. 2011 tax form 1040 The scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, will not change what is really a vacation into a business trip. 2011 tax form 1040 Part of Trip Outside the United States If part of your trip is outside the United States, use the rules described later under Travel Outside the United States for that part of the trip. 2011 tax form 1040 For the part of your trip that is inside the United States, use the rules for travel in the United States. 2011 tax form 1040 Travel outside the United States does not include travel from one point in the United States to another point in the United States. 2011 tax form 1040 The following discussion can help you determine whether your trip was entirely within the United States. 2011 tax form 1040 Public transportation. 2011 tax form 1040   If you travel by public transportation, any place in the United States where that vehicle makes a scheduled stop is a point in the United States. 2011 tax form 1040 Once the vehicle leaves the last scheduled stop in the United States on its way to a point outside the United States, you apply the rules under Travel Outside the United States . 2011 tax form 1040 Example. 2011 tax form 1040 You fly from New York to Puerto Rico with a scheduled stop in Miami. 2011 tax form 1040 You return to New York nonstop. 2011 tax form 1040 The flight from New York to Miami is in the United States, so only the flight from Miami to Puerto Rico is outside the United States. 2011 tax form 1040 Because there are no scheduled stops between Puerto Rico and New York, all of the return trip is outside the United States. 2011 tax form 1040 Private car. 2011 tax form 1040   Travel by private car in the United States is travel between points in the United States, even when you are on your way to a destination outside the United States. 2011 tax form 1040 Example. 2011 tax form 1040 You travel by car from Denver to Mexico City and return. 2011 tax form 1040 Your travel from Denver to the border and from the border back to Denver is travel in the United States, and the rules in this section apply. 2011 tax form 1040 The rules under Travel Outside the United States apply to your trip from the border to Mexico City and back to the border. 2011 tax form 1040 Travel Outside the United States If any part of your business travel is outside the United States, some of your deductions for the cost of getting to and from your destination may be limited. 2011 tax form 1040 For this purpose, the United States includes only the 50 states and the District of Columbia. 2011 tax form 1040 How much of your travel expenses you can deduct depends in part upon how much of your trip outside the United States was business related. 2011 tax form 1040 See chapter 1 of Publication 463 for information on luxury water travel. 2011 tax form 1040 Travel Entirely for Business or Considered Entirely for Business You can deduct all your travel expenses of getting to and from your business destination if your trip is entirely for business or considered entirely for business. 2011 tax form 1040 Travel entirely for business. 2011 tax form 1040   If you travel outside the United States and you spend the entire time on business activities, you can deduct all of your travel expenses. 2011 tax form 1040 Travel considered entirely for business. 2011 tax form 1040   Even if you did not spend your entire time on business activities, your trip is considered entirely for business if you meet at least one of the following four exceptions. 2011 tax form 1040 Exception 1 - No substantial control. 2011 tax form 1040   Your trip is considered entirely for business if you did not have substantial control over arranging the trip. 2011 tax form 1040 The fact that you control the timing of your trip does not, by itself, mean that you have substantial control over arranging your trip. 2011 tax form 1040   You do not have substantial control over your trip if you: Are an employee who was reimbursed or paid a travel expense allowance, Are not related to your employer, and Are not a managing executive. 2011 tax form 1040    “Related to your employer” is defined later in this chapter under Per Diem and Car Allowances . 2011 tax form 1040   A “managing executive” is an employee who has the authority and responsibility, without being subject to the veto of another, to decide on the need for the business travel. 2011 tax form 1040    A self-employed person generally has substantial control over arranging business trips. 2011 tax form 1040 Exception 2 - Outside United States no more than a week. 2011 tax form 1040   Your trip is considered entirely for business if you were outside the United States for a week or less, combining business and nonbusiness activities. 2011 tax form 1040 One week means 7 consecutive days. 2011 tax form 1040 In counting the days, do not count the day you leave the United States, but do count the day you return to the United States. 2011 tax form 1040 Exception 3 - Less than 25% of time on personal activities. 2011 tax form 1040   Your trip is considered entirely for business if: You were outside the United States for more than a week, and You spent less than 25% of the total time you were outside the United States on nonbusiness activities. 2011 tax form 1040 For this purpose, count both the day your trip began and the day it ended. 2011 tax form 1040 Exception 4 - Vacation not a major consideration. 2011 tax form 1040   Your trip is considered entirely for business if you can establish that a personal vacation was not a major consideration, even if you have substantial control over arranging the trip. 2011 tax form 1040 Travel Primarily for Business If you travel outside the United States primarily for business but spend some of your time on nonbusiness activities, you generally cannot deduct all of your travel expenses. 2011 tax form 1040 You can only deduct the business portion of your cost of getting to and from your destination. 2011 tax form 1040 You must allocate the costs between your business and nonbusiness activities to determine your deductible amount. 2011 tax form 1040 These travel allocation rules are discussed in chapter 1 of Publication 463. 2011 tax form 1040 You do not have to allocate your travel expense deduction if you meet one of the four exceptions listed earlier under Travel considered entirely for business. 2011 tax form 1040 In those cases, you can deduct the total cost of getting to and from your destination. 2011 tax form 1040 Travel Primarily for Personal Reasons If you travel outside the United States primarily for vacation or for investment purposes, the entire cost of the trip is a nondeductible personal expense. 2011 tax form 1040 If you spend some time attending brief professional seminars or a continuing education program, you can deduct your registration fees and other expenses you have that are directly related to your business. 2011 tax form 1040 Conventions You can deduct your travel expenses when you attend a convention if you can show that your attendance benefits your trade or business. 2011 tax form 1040 You cannot deduct the travel expenses for your family. 2011 tax form 1040 If the convention is for investment, political, social, or other purposes unrelated to your trade or business, you cannot deduct the expenses. 2011 tax form 1040 Your appointment or election as a delegate does not, in itself, determine whether you can deduct travel expenses. 2011 tax form 1040 You can deduct your travel expenses only if your attendance is connected to your own trade or business. 2011 tax form 1040 Convention agenda. 2011 tax form 1040   The convention agenda or program generally shows the purpose of the convention. 2011 tax form 1040 You can show your attendance at the convention benefits your trade or business by comparing the agenda with the official duties and responsibilities of your position. 2011 tax form 1040 The agenda does not have to deal specifically with your official duties and responsibilities; it will be enough if the agenda is so related to your position that it shows your attendance was for business purposes. 2011 tax form 1040 Conventions held outside the North American area. 2011 tax form 1040    See chapter 1 of Publication 463 for information on conventions held outside the North American area. 2011 tax form 1040 Entertainment Expenses You may be able to deduct business-related entertainment expenses you have for entertaining a client, customer, or employee. 2011 tax form 1040 You can deduct entertainment expenses only if they are both ordinary and necessary (defined earlier in the Introduction ) and meet one of the following tests. 2011 tax form 1040 Directly-related test. 2011 tax form 1040 Associated test. 2011 tax form 1040 Both of these tests are explained in chapter 2 of Publication 463. 2011 tax form 1040 The amount you can deduct for entertainment expenses may be limited. 2011 tax form 1040 Generally, you can deduct only 50% of your unreimbursed entertainment expenses. 2011 tax form 1040 This limit is discussed next. 2011 tax form 1040 50% Limit In general, you can deduct only 50% of your business-related meal and entertainment expenses. 2011 tax form 1040 (If you are subject to the Department of Transportation's “hours of service” limits, you can deduct 80% of your business-related meal and entertainment expenses. 2011 tax form 1040 See Individuals subject to “hours of service” limits , later. 2011 tax form 1040 ) The 50% limit applies to employees or their employers, and to self-employed persons (including independent contractors) or their clients, depending on whether the expenses are reimbursed. 2011 tax form 1040 Figure 26-A summarizes the general rules explained in this section. 2011 tax form 1040 The 50% limit applies to business meals or entertainment expenses you have while: Traveling away from home (whether eating alone or with others) on business, Entertaining customers at your place of business, a restaurant, or other location, or Attending a business convention or reception, business meeting, or business luncheon at a club. 2011 tax form 1040 Included expenses. 2011 tax form 1040   Expenses subject to the 50% limit include: Taxes and tips relating to a business meal or entertainment activity, Cover charges for admission to a nightclub, Rent paid for a room in which you hold a dinner or cocktail party, and Amounts paid for parking at a sports arena. 2011 tax form 1040 However, the cost of transportation to and from a business meal or a business-related entertainment activity is not subject to the 50% limit. 2011 tax form 1040 Application of 50% limit. 2011 tax form 1040   The 50% limit on meal and entertainment expenses applies if the expense is otherwise deductible and is not covered by one of the exceptions discussed later in this section. 2011 tax form 1040   The 50% limit also applies to certain meal and entertainment expenses that are not business related. 2011 tax form 1040 It applies to meal and entertainment expenses incurred for the production of income, including rental or royalty income. 2011 tax form 1040 It also applies to the cost of meals included in deductible educational expenses. 2011 tax form 1040 When to apply the 50% limit. 2011 tax form 1040   You apply the 50% limit after determining the amount that would otherwise qualify for a deduction. 2011 tax form 1040 You first have to determine the amount of meal and entertainment expenses that would be deductible under the other rules discussed in this chapter. 2011 tax form 1040 Example 1. 2011 tax form 1040 You spend $200 for a business-related meal. 2011 tax form 1040 If $110 of that amount is not allowable because it is lavish and extravagant, the remaining $90 is subject to the 50% limit. 2011 tax form 1040 Your deduction cannot be more than $45 (. 2011 tax form 1040 50 × $90). 2011 tax form 1040 Example 2. 2011 tax form 1040 You purchase two tickets to a concert and give them to a client. 2011 tax form 1040 You purchased the tickets through a ticket agent. 2011 tax form 1040 You paid $200 for the two tickets, which had a face value of $80 each ($160 total). 2011 tax form 1040 Your deduction cannot be more than $80 (. 2011 tax form 1040 50 × $160). 2011 tax form 1040 Exceptions to the 50% Limit Generally, business-related meal and entertainment expenses are subject to the 50% limit. 2011 tax form 1040 Figure 26-A can help you determine if the 50% limit applies to you. 2011 tax form 1040 Your meal or entertainment expense is not subject to the 50% limit if the expense meets one of the following exceptions. 2011 tax form 1040 Employee's reimbursed expenses. 2011 tax form 1040   If you are an employee, you are not subject to the 50% limit on expenses for which your employer reimburses you under an accountable plan. 2011 tax form 1040 Accountable plans are discussed later under Reimbursements . 2011 tax form 1040 Individuals subject to “hours of service” limits. 2011 tax form 1040   You can deduct a higher percentage of your meal expenses while traveling away from your tax home if the meals take place during or incident to any period subject to the Department of Transportation's “hours of service” limits. 2011 tax form 1040 The percentage is 80%. 2011 tax form 1040   Individuals subject to the Department of Transportation's “hours of service” limits include the following persons. 2011 tax form 1040 Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations. 2011 tax form 1040 Interstate truck operators and bus drivers who are under Department of Transportation regulations. 2011 tax form 1040 Certain railroad employees (such as engineers, conductors, train crews, dispatchers, and control operations personnel) who are under Federal Railroad Administration regulations. 2011 tax form 1040 Certain merchant mariners who are under Coast Guard regulations. 2011 tax form 1040 Other exceptions. 2011 tax form 1040   There are also exceptions for the self-employed, advertising expenses, selling meals or entertainment, and charitable sports events. 2011 tax form 1040 These are discussed in Publication 463. 2011 tax form 1040 Figure 26-A. 2011 tax form 1040 Does the 50% Limit Apply to Your Expenses? There are exceptions to these rules. 2011 tax form 1040 See Exceptions to the 50% Limit . 2011 tax form 1040 Please click here for the text description of the image. 2011 tax form 1040 Entertainment expenses: 50% limit What Entertainment Expenses Are Deductible? This section explains different types of entertainment expenses you may be able to deduct. 2011 tax form 1040 Entertainment. 2011 tax form 1040    Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation. 2011 tax form 1040 Examples include entertaining guests at nightclubs; at social, athletic, and sporting clubs; at theaters; at sporting events; or on hunting, fishing, vacation, and similar trips. 2011 tax form 1040 A meal as a form of entertainment. 2011 tax form 1040   Entertainment includes the cost of a meal you provide to a customer or client, whether the meal is a part of other entertainment or by itself. 2011 tax form 1040 A meal expense includes the cost of food, beverages, taxes, and tips for the meal. 2011 tax form 1040 To deduct an entertainment-related meal, you or your employee must be present when the food or beverages are provided. 2011 tax form 1040 You cannot claim the cost of your meal both as an entertainment expense and as a travel expense. 2011 tax form 1040 Separating costs. 2011 tax form 1040   If you have one expense that includes the costs of entertainment and other services (such as lodging or transportation), you must allocate that expense between the cost of entertainment and the cost of other services. 2011 tax form 1040 You must have a reasonable basis for making this allocation. 2011 tax form 1040 For example, you must allocate your expenses if a hotel includes entertainment in its lounge on the same bill with your room charge. 2011 tax form 1040 Taking turns paying for meals or entertainment. 2011 tax form 1040   If a group of business acquaintances take turns picking up each others' meal or entertainment checks without regard to whether any business purposes are served, no member of the group can deduct any part of the expense. 2011 tax form 1040 Lavish or extravagant expenses. 2011 tax form 1040   You cannot deduct expenses for entertainment that are lavish or extravagant. 2011 tax form 1040 An expense is not considered lavish or extravagant if it is reasonable considering the facts and circumstances. 2011 tax form 1040 Expenses will not be disallowed just because they are more than a fixed dollar amount or take place at deluxe restaurants, hotels, nightclubs, or resorts. 2011 tax form 1040 Trade association meetings. 2011 tax form 1040    You can deduct entertainment expenses that are directly related to, and necessary for, attending business meetings or conventions of certain exempt organizations if the expenses of your attendance are related to your active trade or business. 2011 tax form 1040 These organizations include business leagues, chambers of commerce, real estate boards, trade associations, and professional associations. 2011 tax form 1040 Entertainment tickets. 2011 tax form 1040   Generally, you cannot deduct more than the face value of an entertainment ticket, even if you paid a higher price. 2011 tax form 1040 For example, you cannot deduct service fees you pay to ticket agencies or brokers or any amount over the face value of the tickets you pay to scalpers. 2011 tax form 1040 What Entertainment Expenses Are Not Deductible? This section explains different types of entertainment expenses you generally may not be able to deduct. 2011 tax form 1040 Club dues and membership fees. 2011 tax form 1040   You cannot deduct dues (including initiation fees) for membership in any club organized for: Business, Pleasure, Recreation, or Other social purpose. 2011 tax form 1040 This rule applies to any membership organization if one of its principal purposes is either: To conduct entertainment activities for members or their guests, or To provide members or their guests with access to entertainment facilities. 2011 tax form 1040   The purposes and activities of a club, not its name, will determine whether or not you can deduct the dues. 2011 tax form 1040 You cannot deduct dues paid to: Country clubs, Golf and athletic clubs, Airline clubs, Hotel clubs, and Clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. 2011 tax form 1040 Entertainment facilities. 2011 tax form 1040   Generally, you cannot deduct any expense for the use of an entertainment facility. 2011 tax form 1040 This includes expenses for depreciation and operating costs such as rent, utilities, maintenance, and protection. 2011 tax form 1040   An entertainment facility is any property you own, rent, or use for entertainment. 2011 tax form 1040 Examples include a yacht, hunting lodge, fishing camp, swimming pool, tennis court, bowling alley, car, airplane, apartment, hotel suite, or home in a vacation resort. 2011 tax form 1040 Out-of-pocket expenses. 2011 tax form 1040   You can deduct out-of-pocket expenses, such as for food and beverages, catering, gas, and fishing bait, that you provided during entertainment at a facility. 2011 tax form 1040 These are not expenses for the use of an entertainment facility. 2011 tax form 1040 However, these expenses are subject to the directly-related and associated tests and to the 50% Limit discussed earlier. 2011 tax form 1040 Additional information. 2011 tax form 1040   For more information on entertainment expenses, including discussions of the directly-related and associated tests, see chapter 2 of Publication 463. 2011 tax form 1040 Gift Expenses If you give gifts in the course of your trade or business, you can deduct all or part of the cost. 2011 tax form 1040 This section explains the limits and rules for deducting the costs of gifts. 2011 tax form 1040 $25 limit. 2011 tax form 1040   You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year. 2011 tax form 1040 A gift to a company that is intended for the eventual personal use or benefit of a particular person or a limited class of people will be considered an indirect gift to that particular person or to the individuals within that class of people who receive the gift. 2011 tax form 1040   If you give a gift to a member of a customer's family, the gift is generally considered to be an indirect gift to the customer. 2011 tax form 1040 This rule does not apply if you have a bona fide, independent business connection with that family member and the gift is not intended for the customer's eventual use or benefit. 2011 tax form 1040   If you and your spouse both give gifts, both of you are treated as one taxpayer. 2011 tax form 1040 It does not matter whether you have separate businesses, are separately employed, or whether each of you has an independent connection with the recipient. 2011 tax form 1040 If a partnership gives gifts, the partnership and the partners are treated as one taxpayer. 2011 tax form 1040 Incidental costs. 2011 tax form 1040   Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25 limit. 2011 tax form 1040   A cost is incidental only if it does not add substantial value to the gift. 2011 tax form 1040 For example, the cost of customary gift wrapping is an incidental cost. 2011 tax form 1040 However, the purchase of an ornamental basket for packaging fruit is not an incidental cost if the value of the basket is substantial compared to the value of the fruit. 2011 tax form 1040 Exceptions. 2011 tax form 1040   The following items are not considered gifts for purposes of the $25 limit. 2011 tax form 1040 An item that costs $4 or less and: Has your name clearly and permanently imprinted on the gift, and Is one of a number of identical items you widely distribute. 2011 tax form 1040 Examples include pens, desk sets, and plastic bags and cases. 2011 tax form 1040 Signs, display racks, or other promotional material to be used on the business premises of the recipient. 2011 tax form 1040 Gift or entertainment. 2011 tax form 1040   Any item that might be considered either a gift or entertainment generally will be considered entertainment. 2011 tax form 1040 However, if you give a customer packaged food or beverages you intend the customer to use at a later date, treat it as a gift. 2011 tax form 1040    If you give a customer tickets to a theater performance or sporting event and you do not go with the customer to the performance or event, you have a choice. 2011 tax form 1040 You can treat the cost of the tickets as either a gift expense or an entertainment expense, whichever is to your advantage. 2011 tax form 1040    If you go with the customer to the event, you must treat the cost of the tickets as an entertainment expense. 2011 tax form 1040 You cannot choose, in this case, to treat the cost of the tickets as a gift expense. 2011 tax form 1040 Transportation Expenses This section discusses expenses you can deduct for business transportation when you are not traveling away from home as defined earlier under Travel Expenses . 2011 tax form 1040 These expenses include the cost of transportation by air, rail, bus, taxi, etc. 2011 tax form 1040 , and the cost of driving and maintaining your car. 2011 tax form 1040 Transportation expenses include the ordinary and necessary costs of all of the following. 2011 tax form 1040 Getting from one workplace to another in the course of your business or profession when you are traveling within the area of your tax home. 2011 tax form 1040 (Tax home is defined earlier under Travel Expenses . 2011 tax form 1040 ) Visiting clients or customers. 2011 tax form 1040 Going to a business meeting away from your regular workplace. 2011 tax form 1040 Getting from your home to a temporary workplace when you have one or more regular places of work. 2011 tax form 1040 These temporary workplaces can be either within the area of your tax home or outside that area. 2011 tax form 1040 Transportation expenses do not include expenses you have while traveling away from home overnight. 2011 tax form 1040 Those expenses are travel expenses, discussed earlier. 2011 tax form 1040 However, if you use your car while traveling away from home overnight, use the rules in this section to figure your car expense deduction. 2011 tax form 1040 See Car Expenses , later. 2011 tax form 1040 Illustration of transportation expenses. 2011 tax form 1040    Figure 26-B illustrates the rules for when you can deduct transportation expenses when you have a regular or main job away from your home. 2011 tax form 1040 You may want to refer to it when deciding whether you can deduct your transportation expenses. 2011 tax form 1040 Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses. 2011 tax form 1040 However, there are many exceptions for deducting transportation expenses, like whether your work location is temporary (inside or outside the metropolitan area), traveling for same trade or business, or if you have a home office. 2011 tax form 1040 Temporary work location. 2011 tax form 1040   If you have one or more regular work locations away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location, regardless of distance. 2011 tax form 1040   If your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary unless there are facts and circumstances that would indicate otherwise. 2011 tax form 1040   If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year. 2011 tax form 1040   If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. 2011 tax form 1040 It will not be treated as temporary after the date you determine it will last more than 1 year. 2011 tax form 1040   If the temporary work location is beyond the general area of your regular place of work and you stay overnight, you are traveling away from home. 2011 tax form 1040 You may have deductible travel expenses as discussed earlier in this chapter. 2011 tax form 1040 No regular place of work. 2011 tax form 1040   If you have no regular place of work but ordinarily work in the metropolitan area where you live, you can deduct daily transportation costs between home and a temporary work site outside that metropolitan area. 2011 tax form 1040   Generally, a metropolitan area includes the area within the city limits and the suburbs that are considered part of that metropolitan area. 2011 tax form 1040   You cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. 2011 tax form 1040 These are nondeductible commuting expenses. 2011 tax form 1040 Two places of work. 2011 tax form 1040   If you work at two places in one day, whether or not for the same employer, you can deduct the expense of getting from one workplace to the other. 2011 tax form 1040 However, if for some personal reason you do not go directly from one location to the other, you cannot deduct more than the amount it would have cost you to go directly from the first location to the second. 2011 tax form 1040   Transportation expenses you have in going between home and a part-time job on a day off from your main job are commuting expenses. 2011 tax form 1040 You cannot deduct them. 2011 tax form 1040 Armed Forces reservists. 2011 tax form 1040   A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. 2011 tax form 1040 You can deduct the expense of getting from one workplace to the other as just discussed under Two places of work , earlier. 2011 tax form 1040   You usually cannot deduct the expense if the reserve meeting is held on a day on which you do not work at your regular job. 2011 tax form 1040 In this case, your transportation generally is a nondeductible commuting expense. 2011 tax form 1040 However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work. 2011 tax form 1040   If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses. 2011 tax form 1040   If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. 2011 tax form 1040 These expenses are discussed earlier under Travel Expenses . 2011 tax form 1040   If you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you may be able to deduct some of your reserve-related travel costs as an adjustment to income rather than as an itemized deduction. 2011 tax form 1040 See Armed Forces reservists traveling more than 100 miles from home under Special Rules, later. 2011 tax form 1040 Commuting expenses. 2011 tax form 1040   You cannot deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work. 2011 tax form 1040 These costs are personal commuting expenses. 2011 tax form 1040 You cannot deduct commuting expenses no matter how far your home is from your regular place of work. 2011 tax form 1040 You cannot deduct commuting expenses even if you work during the commuting trip. 2011 tax form 1040 Example. 2011 tax form 1040 You sometimes use your cell phone to make business calls while commuting to and from work. 2011 tax form 1040 Sometimes business associates ride with you to and from work, and you have a business discussion in the car. 2011 tax form 1040 These activities do not change the trip from personal to business. 2011 tax form 1040 You cannot deduct your commuting expenses. 2011 tax form 1040 Parking fees. 2011 tax form 1040   Fees you pay to park your car at your place of business are nondeductible commuting expenses. 2011 tax form 1040 You can, however, deduct business-related parking fees when visiting a customer or client. 2011 tax form 1040 Advertising display on car. 2011 tax form 1040   Putting display material that advertises your business on your car does not change the use of your car from personal use to business use. 2011 tax form 1040 If you use this car for commuting or other personal uses, you still cannot deduct your expenses for those uses. 2011 tax form 1040 Car pools. 2011 tax form 1040   You cannot deduct the cost of using your car in a nonprofit car pool. 2011 tax form 1040 Do not include payments you receive from the passengers in your income. 2011 tax form 1040 These payments are considered reimbursements of your expenses. 2011 tax form 1040 However, if you operate a car pool for a profit, you must include payments from passengers in your income. 2011 tax form 1040 You can then deduct your car expenses (using the rules in this chapter). 2011 tax form 1040 Hauling tools or instruments. 2011 tax form 1040   Hauling tools or instruments in your car while commuting to and from work does not make your car expenses deductible. 2011 tax form 1040 However, you can deduct any additional costs you have for hauling tools or instruments (such as for renting a trailer you tow with your car). 2011 tax form 1040 Union members' trips from a union hall. 2011 tax form 1040   If you get your work assignments at a union hall and then go to your place of work, the costs of getting from the union hall to your place of work are nondeductible commuting expenses. 2011 tax form 1040 Although you need the union to get your work assignments, you are employed where you work, not where the union hall is located. 2011 tax form 1040 Office in the home. 2011 tax form 1040   If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. 2011 tax form 1040 (See chapter 28 for information on determining if your home office qualifies as a principal place of business. 2011 tax form 1040 ) Figure 26-B. 2011 tax form 1040 When Are Transportation Expenses Deductible? Most employees and self-employed persons can use this chart. 2011 tax form 1040 (Do not use this chart if your home is your principal place of business. 2011 tax form 1040 See Office in the home . 2011 tax form 1040 ) Please click here for the text description of the image. 2011 tax form 1040 Figure 26-B. 2011 tax form 1040 Local Transportation Examples of deductible transportation. 2011 tax form 1040   The following examples show when you can deduct transportation expenses based on the location of your work and your home. 2011 tax form 1040 Example 1. 2011 tax form 1040 You regularly work in an office in the city where you live. 2011 tax form 1040 Your employer sends you to a 1-week training session at a different office in the same city. 2011 tax form 1040 You travel directly from your home to the training location and return each day. 2011 tax form 1040 You can deduct the cost of your daily round-trip transportation between your home and the training location. 2011 tax form 1040 Example 2. 2011 tax form 1040 Your principal place of business is in your home. 2011 tax form 1040 You can deduct the cost of round-trip transportation between your qualifying home office and your client's or customer's place of business. 2011 tax form 1040 Example 3. 2011 tax form 1040 You have no regular office, and you do not have an office in your home. 2011 tax form 1040 In this case, the location of your first business contact inside the metropolitan area is considered your office. 2011 tax form 1040 Transportation expenses between your home and this first contact are nondeductible commuting expenses. 2011 tax form 1040 Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. 2011 tax form 1040 While you cannot deduct the costs of these first and last trips, you can deduct the costs of going from one client or customer to another. 2011 tax form 1040 With no regular or home office, the costs of travel between two or more business contacts in a metropolitan area are deductible while the costs of travel between the home to (and from) business contacts are not deductible. 2011 tax form 1040 Car Expenses If you use your car for business purposes, you may be able to deduct car expenses. 2011 tax form 1040 You generally can use one of the two following methods to figure your deductible expenses. 2011 tax form 1040 Standard mileage rate. 2011 tax form 1040 Actual car expenses. 2011 tax form 1040 If you use actual car expenses to figure your deduction for a car you lease, there are rules that affect the amount of your lease payments you can deduct. 2011 tax form 1040 See Leasing a car under Actual Car Expenses, later. 2011 tax form 1040 In this chapter, “car” includes a van, pickup, or panel truck. 2011 tax form 1040 Rural mail carriers. 2011 tax form 1040   If you are a rural mail carrier, you may be able to treat the amount of qualified reimbursement you received as the amount of your allowable expense. 2011 tax form 1040 Because the qualified reimbursement is treated as paid under an accountable plan, your employer should not include the amount of reimbursement in your income. 2011 tax form 1040   If your vehicle expenses are more than the amount of your reimbursement, you can deduct the unreimbursed expenses as an itemized deduction on Schedule A (Form 1040). 2011 tax form 1040 You must complete Form 2106 and attach it to your Form 1040. 2011 tax form 1040   A “qualified reimbursement” is the reimbursement you receive that meets both of the following conditions. 2011 tax form 1040 It is given as an equipment maintenance allowance (EMA) to employees of the U. 2011 tax form 1040 S. 2011 tax form 1040 Postal Service. 2011 tax form 1040 It is at the rate contained in the 1991 collective bargaining agreement. 2011 tax form 1040 Any later agreement cannot increase the qualified reimbursement amount by more than the rate of inflation. 2011 tax form 1040 See your employer for information on your reimbursement. 2011 tax form 1040 If you are a rural mail carrier and received a qualified reimbursement, you cannot use the standard mileage rate. 2011 tax form 1040 Standard Mileage Rate You may be able to use the standard mileage rate to figure the deductible costs of operating your car for business purposes. 2011 tax form 1040 For 2013, the standard mileage rate for business use is 56½ cents per mile. 2011 tax form 1040 If you use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year, but see Parking fees and tolls, later. 2011 tax form 1040 You generally can use the standard mileage rate whether or not you are reimbursed and whether or not any reimbursement is more or less than the amount figured using the standard mileage rate. 2011 tax form 1040 See Reimbursements under How To Report, later. 2011 tax form 1040 Choosing the standard mileage rate. 2011 tax form 1040   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. 2011 tax form 1040 Then in later years, you can choose to use either the standard mileage rate or actual expenses. 2011 tax form 1040   If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. 2011 tax form 1040   You must make the choice to use the standard mileage rate by the due date (including extensions) of your return. 2011 tax form 1040 You cannot revoke the choice. 2011 tax form 1040 However, in a later year, you can switch from the standard mileage rate to the actual expenses method. 2011 tax form 1040 If you change to the actual expenses method in a later year, but before your car is fully depreciated, you have to estimate the remaining useful life of the car and use straight line depreciation. 2011 tax form 1040 Example. 2011 tax form 1040 Larry is an employee who occasionally uses his own car for business purposes. 2011 tax form 1040 He purchased the car in 2011, but he did not claim any unreimburse