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2011 Tax Software Download

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2011 Tax Software Download

2011 tax software download 6. 2011 tax software download   Basis of Assets Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Cost BasisReal Property Allocating the Basis Uniform Capitalization Rules Adjusted BasisIncreases to Basis Decreases to Basis Basis Other Than CostTaxable Exchanges Involuntary Conversions Nontaxable Exchanges Property Received as a Gift Property Transferred From a Spouse Inherited Property Property Distributed From a Partnership or Corporation Introduction Your basis is the amount of your investment in property for tax purposes. 2011 tax software download Use basis to figure the gain or loss on the sale, exchange, or other disposition of property. 2011 tax software download Also use basis to figure depreciation, amortization, depletion, and casualty losses. 2011 tax software download If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. 2011 tax software download Only the basis allocated to the business or investment use of the property can be depreciated. 2011 tax software download Your original basis in property is adjusted (increased or decreased) by certain events. 2011 tax software download For example, if you make improvements to the property, increase your basis. 2011 tax software download If you take deductions for depreciation, or casualty losses, or claim certain credits, reduce your basis. 2011 tax software download Keep accurate records of all items that affect the basis of your assets. 2011 tax software download For information on keeping records, see chapter 1. 2011 tax software download Topics - This chapter discusses: Cost basis Adjusted basis Basis other than cost Useful Items - You may want to see: Publication 535 Business Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 946 How To Depreciate Property See chapter 16 for information about getting publications and forms. 2011 tax software download Cost Basis The basis of property you buy is usually its cost. 2011 tax software download Cost is the amount you pay in cash, debt obligations, other property, or services. 2011 tax software download Your cost includes amounts you pay for sales tax, freight, installation, and testing. 2011 tax software download The basis of real estate and business assets will include other items, discussed later. 2011 tax software download Basis generally does not include interest payments. 2011 tax software download However, see Carrying charges and Capitalized interest in chapter 4 of Publication 535. 2011 tax software download You also may have to capitalize (add to basis) certain other costs related to buying or producing property. 2011 tax software download Under the uniform capitalization rules, discussed later, you may have to capitalize direct costs and certain indirect costs of producing property. 2011 tax software download Loans with low or no interest. 2011 tax software download   If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price minus the amount considered to be unstated interest. 2011 tax software download You generally have unstated interest if your interest rate is less than the applicable federal rate. 2011 tax software download See the discussion of unstated interest in Publication 537, Installment Sales. 2011 tax software download Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. 2011 tax software download If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. 2011 tax software download Some of these expenses are discussed next. 2011 tax software download Lump sum purchase. 2011 tax software download   If you buy improvements, such as buildings, and the land on which they stand for a lump sum, allocate your cost basis between the land and improvements. 2011 tax software download Allocate the cost basis according to the respective fair market values (FMVs) of the land and improvements at the time of purchase. 2011 tax software download Figure the basis of each asset by multiplying the lump sum by a fraction. 2011 tax software download The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. 2011 tax software download Fair market value (FMV). 2011 tax software download   FMV is the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. 2011 tax software download Sales of similar property on or about the same date may help in figuring the FMV of the property. 2011 tax software download If you are not certain of the FMV of the land and improvements, you can allocate the basis according to their assessed values for real estate tax purposes. 2011 tax software download Real estate taxes. 2011 tax software download   If you pay the real estate taxes the seller owed on real property you bought, and the seller did not reimburse you, treat those taxes as part of your basis. 2011 tax software download   If you reimburse the seller for taxes the seller paid for you, you generally can deduct that amount as a tax expense. 2011 tax software download Whether or not you reimburse the seller, do not include that amount in the basis of your property. 2011 tax software download Settlement costs. 2011 tax software download   Your basis includes the settlement fees and closing costs for buying the property. 2011 tax software download See Publication 551 for a detailed list of items you can and cannot include in basis. 2011 tax software download   Do not include fees and costs for getting a loan on the property. 2011 tax software download Also, do not include amounts placed in escrow for the future payment of items such as taxes and insurance. 2011 tax software download Points. 2011 tax software download   If you pay points to get a loan (including a mortgage, second mortgage, or line-of-credit), do not add the points to the basis of the related property. 2011 tax software download You may be able to deduct the points currently or over the term of the loan. 2011 tax software download For more information about deducting points, see Points in chapter 4 of Publication 535. 2011 tax software download Assumption of a mortgage. 2011 tax software download   If you buy property and assume (or buy the property subject to) an existing mortgage, your basis includes the amount you pay for the property plus the amount you owe on the mortgage. 2011 tax software download Example. 2011 tax software download If you buy a farm for $100,000 cash and assume a mortgage of $400,000, your basis is $500,000. 2011 tax software download Constructing assets. 2011 tax software download   If you build property or have assets built for you, your expenses for this construction are part of your basis. 2011 tax software download Some of these expenses include the following costs: Land, Labor and materials, Architect's fees, Building permit charges, Payments to contractors, Payments for rental equipment, and Inspection fees. 2011 tax software download   In addition, if you use your own employees, farm materials, and equipment to build an asset, do not deduct the following expenses. 2011 tax software download You must capitalize them (include them in the asset's basis). 2011 tax software download Employee wages paid for the construction work, reduced by any employment credits allowed. 2011 tax software download Depreciation on equipment you own while it is used in the construction. 2011 tax software download Operating and maintenance costs for equipment used in the construction. 2011 tax software download The cost of business supplies and materials used in the construction. 2011 tax software download    Do not include the value of your own labor, or any other labor you did not pay for, in the basis of any property you construct. 2011 tax software download Allocating the Basis In some instances, the rules for determining basis apply to a group of assets acquired in the same transaction or to property that consists of separate items. 2011 tax software download To determine the basis of these assets or separate items, there must be an allocation of basis. 2011 tax software download Group of assets acquired. 2011 tax software download   If you buy multiple assets for a lump sum, allocate the amount you pay among the assets. 2011 tax software download Use this allocation to figure your basis for depreciation and gain or loss on a later disposition of any of these assets. 2011 tax software download You and the seller may agree in the sales contract to a specific allocation of the purchase price among the assets. 2011 tax software download If this allocation is based on the value of each asset and you and the seller have adverse tax interests, the allocation generally will be accepted. 2011 tax software download Farming business acquired. 2011 tax software download   If you buy a group of assets that makes up a farming business, there are special rules you must use to allocate the purchase price among the assets. 2011 tax software download Generally, reduce the purchase price by any cash received. 2011 tax software download Allocate the remaining purchase price to the other business assets received in proportion to (but not more than) their FMV and in a certain order. 2011 tax software download See Trade or Business Acquired under Allocating the Basis in Publication 551 for more information. 2011 tax software download Transplanted embryo. 2011 tax software download   If you buy a cow that is pregnant with a transplanted embryo, allocate to the basis of the cow the part of the purchase price equal to the FMV of the cow without the implant. 2011 tax software download Allocate the rest of the purchase price to the basis of the calf. 2011 tax software download Neither the cost allocated to the cow nor the cost allocated to the calf is deductible as a current business expense. 2011 tax software download Uniform Capitalization Rules Under the uniform capitalization rules, you must include certain direct and indirect costs in the basis of property you produce or in your inventory costs, rather than claim them as a current deduction. 2011 tax software download You recover these costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. 2011 tax software download Generally, you are subject to the uniform capitalization rules if you do any of the following: Produce real or tangible personal property, or Acquire property for resale. 2011 tax software download However, this rule does not apply to personal property if your average annual gross receipts for the 3-tax-year period ending with the year preceding the current tax year are $10 million or less. 2011 tax software download You produce property if you construct, build, install, manufacture, develop, improve, or create the property. 2011 tax software download You are not subject to the uniform capitalization rules if the property is produced for personal use. 2011 tax software download In a farming business, you produce property if you raise or grow any agricultural or horticultural commodity, including plants and animals. 2011 tax software download Plants. 2011 tax software download   A plant produced in a farming business includes the following items: A fruit, nut, or other crop-bearing tree; An ornamental tree; A vine; A bush; Sod; and The crop or yield of a plant that will have more than one crop or yield. 2011 tax software download Animals. 2011 tax software download   An animal produced in a farming business includes any stock, poultry or other bird, and fish or other sea life. 2011 tax software download The direct and indirect costs of producing plants or animals include preparatory costs and preproductive period costs. 2011 tax software download Preparatory costs include the acquisition costs of the seed, seedling, plant, or animal. 2011 tax software download For plants, preproductive period costs include the costs of items such as irrigation, pruning, frost protection, spraying, and harvesting. 2011 tax software download For animals, preproductive period costs include the costs of items such as feed, maintaining pasture or pen areas, breeding, veterinary services, and bedding. 2011 tax software download Exceptions. 2011 tax software download   In a farming business, the uniform capitalization rules do not apply to: Any animal, Any plant with a preproductive period of 2 years or less, or Any costs of replanting certain plants lost or damaged due to casualty. 2011 tax software download   Exceptions (1) and (2) do not apply to a corporation, partnership, or tax shelter required to use an accrual method of accounting. 2011 tax software download See Accrual Method Required under Accounting Methods in chapter 2. 2011 tax software download   In addition, you can elect not to use the uniform capitalization rules for plants with a preproductive period of more than 2 years. 2011 tax software download If you make this election, special rules apply. 2011 tax software download This election cannot be made by a corporation, partnership, or tax shelter required to use an accrual method of accounting. 2011 tax software download This election also does not apply to any costs incurred for the planting, cultivation, maintenance, or development of any citrus or almond grove (or any part thereof) within the first 4 years the trees were planted. 2011 tax software download    If you elect not to use the uniform capitalization rules, you must use the alternative depreciation system for all property used in any of your farming businesses and placed in service in any tax year during which the election is in effect. 2011 tax software download See chapter 7, for additional information on depreciation. 2011 tax software download Example. 2011 tax software download You grow trees that have a preproductive period of more than 2 years. 2011 tax software download The trees produce an annual crop. 2011 tax software download You are an individual and the uniform capitalization rules apply to your farming business. 2011 tax software download You must capitalize the direct costs and an allocable part of indirect costs incurred due to the production of the trees. 2011 tax software download You are not required to capitalize the costs of producing the annual crop because its preproductive period is 2 years or less. 2011 tax software download Preproductive period of more than 2 years. 2011 tax software download   The preproductive period of plants grown in commercial quantities in the United States is based on their nationwide weighted average preproductive period. 2011 tax software download Plants producing the crops or yields shown in Table 6-1 have a nationwide weighted average preproductive period of more than 2 years. 2011 tax software download Other plants (not shown in Table 6-1) may also have a nationwide weighted average preproductive period of more than 2 years. 2011 tax software download More information. 2011 tax software download   For more information on the uniform capitalization rules that apply to property produced in a farming business, see Regulations section 1. 2011 tax software download 263A-4. 2011 tax software download Table 6-1. 2011 tax software download Plants With a Preproductive Period of More Than 2 Years Plants producing the following crops or yields have a nationwide weighted average preproductive period of more than 2 years. 2011 tax software download Almonds Apples Apricots Avocados Blueberries Cherries Chestnuts Coffee beans Currants Dates Figs Grapefruit Grapes Guavas Kiwifruit Kumquats Lemons Limes Macadamia nuts Mangoes Nectarines Olives Oranges Peaches Pears Pecans Persimmons Pistachio nuts Plums Pomegranates Prunes Tangelos Tangerines Tangors Walnuts Adjusted Basis Before figuring gain or loss on a sale, exchange, or other disposition of property or figuring allowable depreciation, depletion, or amortization, you must usually make certain adjustments to the cost basis or basis other than cost (discussed later) of the property. 2011 tax software download The adjustments to the original basis are increases or decreases to the cost basis or other basis which result in the adjusted basis of the property. 2011 tax software download Increases to Basis Increase the basis of any property by all items properly added to a capital account. 2011 tax software download These include the cost of any improvements having a useful life of more than 1 year. 2011 tax software download The following costs increase the basis of property. 2011 tax software download The cost of extending utility service lines to property. 2011 tax software download Legal fees, such as the cost of defending and perfecting title. 2011 tax software download Legal fees for seeking a decrease in an assessment levied against property to pay for local improvements. 2011 tax software download Assessments for items such as paving roads and building ditches that increase the value of the property assessed. 2011 tax software download Do not deduct these expenses as taxes. 2011 tax software download However, you can deduct as taxes amounts assessed for maintenance or repairs, or for meeting interest charges related to the improvements. 2011 tax software download If you make additions or improvements to business property, depreciate the basis of each addition or improvement as separate depreciable property using the rules that would apply to the original property if you had placed it in service at the same time you placed the addition or improvement in service. 2011 tax software download See chapter 7. 2011 tax software download Deducting vs. 2011 tax software download capitalizing costs. 2011 tax software download   Do not add to your basis costs you can deduct as current expenses. 2011 tax software download For example, amounts paid for incidental repairs or maintenance are deductible as business expenses and are not added to basis. 2011 tax software download However, you can elect either to deduct or to capitalize certain other costs. 2011 tax software download See chapter 7 in Publication 535. 2011 tax software download Decreases to Basis The following are some items that reduce the basis of property. 2011 tax software download Section 179 deduction. 2011 tax software download Deductions previously allowed or allowable for amortization, depreciation, and depletion. 2011 tax software download Alternative motor vehicle credit. 2011 tax software download See Form 8910. 2011 tax software download Alternative fuel vehicle refueling property credit. 2011 tax software download See Form 8911. 2011 tax software download Residential energy efficient property credits. 2011 tax software download See Form 5695. 2011 tax software download Investment credit (part or all) taken. 2011 tax software download Casualty and theft losses and insurance reimbursements. 2011 tax software download Payments you receive for granting an easement. 2011 tax software download Exclusion from income of subsidies for energy conservation measures. 2011 tax software download Certain canceled debt excluded from income. 2011 tax software download Rebates from a manufacturer or seller. 2011 tax software download Patronage dividends received from a cooperative association as a result of a purchase of property. 2011 tax software download See Patronage Dividends in chapter 3. 2011 tax software download Gas-guzzler tax. 2011 tax software download See Form 6197. 2011 tax software download Some of these items are discussed next. 2011 tax software download For a more detailed list of items that decrease basis, see section 1016 of the Internal Revenue Code and Publication 551. 2011 tax software download Depreciation and section 179 deduction. 2011 tax software download   The adjustments you must make to the basis of the property if you take the section 179 deduction or depreciate the property are explained next. 2011 tax software download For more information on these deductions, see chapter 7. 2011 tax software download Section 179 deduction. 2011 tax software download   If you take the section 179 expense deduction for all or part of the cost of qualifying business property, decrease the basis of the property by the deduction. 2011 tax software download Depreciation. 2011 tax software download   Decrease the basis of property by the depreciation you deducted or could have deducted on your tax returns under the method of depreciation you chose. 2011 tax software download If you took less depreciation than you could have under the method chosen, decrease the basis by the amount you could have taken under that method. 2011 tax software download If you did not take a depreciation deduction, reduce the basis by the full amount of the depreciation you could have taken. 2011 tax software download   If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted plus the part of the excess depreciation you deducted that actually reduced your tax liability for any year. 2011 tax software download   See chapter 7 for information on figuring the depreciation you should have claimed. 2011 tax software download   In decreasing your basis for depreciation, take into account the amount deducted on your tax returns as depreciation and any depreciation you must capitalize under the uniform capitalization rules. 2011 tax software download Casualty and theft losses. 2011 tax software download   If you have a casualty or theft loss, decrease the basis of the property by any insurance or other reimbursement. 2011 tax software download Also, decrease it by any deductible loss not covered by insurance. 2011 tax software download See chapter 11 for information about figuring your casualty or theft loss. 2011 tax software download   You must increase your basis in the property by the amount you spend on clean-up costs (such as debris removal) and repairs that restore the property to its pre-casualty condition. 2011 tax software download To make this determination, compare the repaired property to the property before the casualty. 2011 tax software download Easements. 2011 tax software download   The amount you receive for granting an easement is usually considered to be proceeds from the sale of an interest in the real property. 2011 tax software download It reduces the basis of the affected part of the property. 2011 tax software download If the amount received is more than the basis of the part of the property affected by the easement, reduce your basis in that part to zero and treat the excess as a recognized gain. 2011 tax software download See Easements and rights-of-way in chapter 3. 2011 tax software download Exclusion from income of subsidies for energy conservation measures. 2011 tax software download   You can exclude from gross income any subsidy you received from a public utility company for the purchase or installation of an energy conservation measure for a dwelling unit. 2011 tax software download Reduce the basis of the property by the excluded amount. 2011 tax software download Canceled debt excluded from income. 2011 tax software download   If a debt you owe is canceled or forgiven, other than as a gift or bequest, you generally must include the canceled amount in your gross income for tax purposes. 2011 tax software download A debt includes any indebtedness for which you are liable or which attaches to property you hold. 2011 tax software download   You can exclude your canceled debt from income if the debt is any of the following. 2011 tax software download Debt canceled in a bankruptcy case or when you are insolvent. 2011 tax software download Qualified farm debt. 2011 tax software download Qualified real property business debt (provided you are not a C corporation). 2011 tax software download Qualified principal residence indebtedness. 2011 tax software download Discharge of certain indebtedness of a qualified individual because of Midwestern disasters. 2011 tax software download If you exclude canceled debt described in (1) or (2), you may have to reduce the basis of your depreciable and nondepreciable property. 2011 tax software download If you exclude canceled debt described in (3), you must only reduce the basis of your depreciable property by the excluded amount. 2011 tax software download   For more information about canceled debt in a bankruptcy case, see Publication 908, Bankruptcy Tax Guide. 2011 tax software download For more information about insolvency and canceled debt that is qualified farm debt or qualified principal residence indebtedness, see chapter 3. 2011 tax software download For more information about qualified real property business debt, see Publication 334, Tax Guide for Small Business. 2011 tax software download For more information about canceled debt in Midwestern disaster areas, see Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. 2011 tax software download Basis Other Than Cost There are times when you cannot use cost as basis. 2011 tax software download In these situations, the fair market value or the adjusted basis of property may be used. 2011 tax software download Examples are discussed next. 2011 tax software download Property changed from personal to business or rental use. 2011 tax software download   When you hold property for personal use and then change it to business use or use it to produce rent, you must figure its basis for depreciation. 2011 tax software download An example of changing property from personal to business use would be changing the use of your pickup truck that you originally purchased for your personal use to use in your farming business. 2011 tax software download   The basis for depreciation is the lesser of: The FMV of the property on the date of the change, or Your adjusted basis on the date of the change. 2011 tax software download   If you later sell or dispose of this property, the basis you use will depend on whether you are figuring a gain or loss. 2011 tax software download The basis for figuring a gain is your adjusted basis in the property when you sell the property. 2011 tax software download Figure the basis for a loss starting with the smaller of your adjusted basis or the FMV of the property at the time of the change to business or rental use. 2011 tax software download Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . 2011 tax software download Property received for services. 2011 tax software download   If you receive property for services, include the property's FMV in income. 2011 tax software download The amount you include in income becomes your basis. 2011 tax software download If the services were performed for a price agreed on beforehand, it will be accepted as the FMV of the property if there is no evidence to the contrary. 2011 tax software download Example. 2011 tax software download George Smith is an accountant and also operates a farming business. 2011 tax software download George agreed to do some accounting work for his neighbor in exchange for a dairy cow. 2011 tax software download The accounting work and the cow are each worth $1,500. 2011 tax software download George must include $1,500 in income for his accounting services. 2011 tax software download George's basis in the cow is $1,500. 2011 tax software download Taxable Exchanges A taxable exchange is one in which the gain is taxable, or the loss is deductible. 2011 tax software download A taxable gain or deductible loss also is known as a recognized gain or loss. 2011 tax software download A taxable exchange occurs when you receive cash or get property that is not similar or related in use to the property exchanged. 2011 tax software download If you receive property in exchange for other property in a taxable exchange, the basis of the property you receive is usually its FMV at the time of the exchange. 2011 tax software download Example. 2011 tax software download You trade a tract of farmland with an adjusted basis of $2,000 for a tractor that has an FMV of $6,000. 2011 tax software download You must report a taxable gain of $4,000 for the land. 2011 tax software download The tractor has a basis of $6,000. 2011 tax software download Involuntary Conversions If you receive property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, figure the basis of the replacement property you receive using the basis of the converted property. 2011 tax software download Similar or related property. 2011 tax software download   If the replacement property is similar or related in service or use to the converted property, the replacement property's basis is the same as the old property's basis on the date of the conversion. 2011 tax software download However, make the following adjustments. 2011 tax software download Decrease the basis by the following amounts. 2011 tax software download Any loss you recognize on the involuntary conversion. 2011 tax software download Any money you receive that you do not spend on similar property. 2011 tax software download Increase the basis by the following amounts. 2011 tax software download Any gain you recognize on the involuntary conversion. 2011 tax software download Any cost of acquiring the replacement property. 2011 tax software download Money or property not similar or related. 2011 tax software download   If you receive money or property not similar or related in service or use to the converted property and you buy replacement property similar or related in service or use to the converted property, the basis of the replacement property is its cost decreased by the gain not recognized on the involuntary conversion. 2011 tax software download Allocating the basis. 2011 tax software download   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. 2011 tax software download Basis for depreciation. 2011 tax software download   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. 2011 tax software download For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. 2011 tax software download For more information about involuntary conversions, see chapter 11. 2011 tax software download Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. 2011 tax software download A nontaxable gain or loss also is known as an unrecognized gain or loss. 2011 tax software download If you receive property in a nontaxable exchange, its basis is usually the same as the basis of the property you transferred. 2011 tax software download Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. 2011 tax software download For an exchange to qualify as a like-kind exchange, you must hold for business or investment purposes both the property you transfer and the property you receive. 2011 tax software download There must also be an exchange of like-kind property. 2011 tax software download For more information, see Like-Kind Exchanges in  chapter 8. 2011 tax software download The basis of the property you receive generally is the same as the adjusted basis of the property you gave up. 2011 tax software download Example 1. 2011 tax software download You traded a truck you used in your farming business for a new smaller truck to use in farming. 2011 tax software download The adjusted basis of the old truck was $10,000. 2011 tax software download The FMV of the new truck is $30,000. 2011 tax software download Because this is a nontaxable exchange, you do not recognize any gain, and your basis in the new truck is $10,000, the same as the adjusted basis of the truck you traded. 2011 tax software download Example 2. 2011 tax software download You trade a field cultivator (adjusted basis of $8,000) for a planter (FMV of $9,000). 2011 tax software download You use both the field cultivator and the planter in your farming business. 2011 tax software download The basis of the planter you receive is $8,000, the same as the field cultivator traded Exchange expenses. 2011 tax software download   Exchange expenses generally are the closing costs that you pay. 2011 tax software download They include such items as brokerage commissions, attorney fees, and deed preparation fees. 2011 tax software download Add them to the basis of the like-kind property you receive. 2011 tax software download Property plus cash. 2011 tax software download   If you trade property in a like-kind exchange and also pay money, the basis of the property you receive is the adjusted basis of the property you gave up plus the money you paid. 2011 tax software download Example. 2011 tax software download You trade in a truck (adjusted basis of $3,000) for another truck (FMV of $7,500) and pay $4,000. 2011 tax software download Your basis in the new truck is $7,000 (the $3,000 adjusted basis of the old truck plus the $4,000 cash). 2011 tax software download Special rules for related persons. 2011 tax software download   If a like-kind exchange takes place directly or indirectly between related persons and either party disposes of the property within 2 years after the exchange, the exchange no longer qualifies for like-kind exchange treatment. 2011 tax software download Each person must report any gain or loss not recognized on the original exchange unless the loss is not deductible under the related party rules. 2011 tax software download Each person reports it on the tax return filed for the year in which the later disposition occurred. 2011 tax software download If this rule applies, the basis of the property received in the original exchange will be its FMV. 2011 tax software download For more information, see chapter 8. 2011 tax software download Exchange of business property. 2011 tax software download   Exchanging the property of one business for the property of another business generally is a multiple property exchange. 2011 tax software download For information on figuring basis, see Multiple Property Exchanges in chapter 1 of Publication 544. 2011 tax software download Basis for depreciation. 2011 tax software download   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind transaction. 2011 tax software download For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. 2011 tax software download Partially Nontaxable Exchanges A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. 2011 tax software download The basis of the property you receive is the same as the adjusted basis of the property you gave up with the following adjustments. 2011 tax software download Decrease the basis by the following amounts. 2011 tax software download Any money you receive. 2011 tax software download Any loss you recognize on the exchange. 2011 tax software download Increase the basis by the following amounts. 2011 tax software download Any additional costs you incur. 2011 tax software download Any gain you recognize on the exchange. 2011 tax software download If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. 2011 tax software download Example 1. 2011 tax software download You trade farmland (basis of $100,000) for another tract of farmland (FMV of $110,000) and $30,000 cash. 2011 tax software download You realize a gain of $40,000. 2011 tax software download This is the FMV of the land received plus the cash minus the basis of the land you traded ($110,000 + $30,000 − $100,000). 2011 tax software download Include your gain in income (recognize gain) only to the extent of the cash received. 2011 tax software download Your basis in the land you received is figured as follows. 2011 tax software download Basis of land traded $100,000 Minus: Cash received (adjustment 1(a)) − 30,000   $70,000 Plus: Gain recognized (adjustment 2(b)) + 30,000 Basis of land received $100,000 Example 2. 2011 tax software download You trade a truck (adjusted basis of $22,750) for another truck (FMV of $20,000) and $10,000 cash. 2011 tax software download You realize a gain of $7,250. 2011 tax software download This is the FMV of the truck received plus the cash minus the adjusted basis of the truck you traded ($20,000 + $10,000 − $22,750). 2011 tax software download You include all the gain in your income (recognize gain) because the gain is less than the cash you received. 2011 tax software download Your basis in the truck you received is figured as follows. 2011 tax software download Adjusted basis of truck traded $22,750 Minus: Cash received (adjustment 1(a)) −10,000   $12,750 Plus: Gain recognized (adjustment 2(b)) + 7,250 Basis of truck received $20,000 Allocation of basis. 2011 tax software download   If you receive like-kind and unlike properties in the exchange, allocate the basis first to the unlike property, other than money, up to its FMV on the date of the exchange. 2011 tax software download The rest is the basis of the like-kind property. 2011 tax software download Example. 2011 tax software download You traded a tractor with an adjusted basis of $15,000 for another tractor that had an FMV of $12,500. 2011 tax software download You also received $1,000 cash and a truck that had an FMV of $3,000. 2011 tax software download The truck is unlike property. 2011 tax software download You realized a gain of $1,500. 2011 tax software download This is the FMV of the tractor received plus the FMV of the truck received plus the cash minus the adjusted basis of the tractor you traded ($12,500 + $3,000 + $1,000 − $15,000). 2011 tax software download You include in income (recognize) all $1,500 of the gain because it is less than the FMV of the unlike property plus the cash received. 2011 tax software download Your basis in the properties you received is figured as follows. 2011 tax software download Adjusted basis of old tractor $15,000 Minus: Cash received (adjustment 1(a)) − 1,000   $14,000 Plus: Gain recognized (adjustment 2(b)) + 1,500 Total basis of properties received $15,500 Allocate the total basis of $15,500 first to the unlike property—the truck ($3,000). 2011 tax software download This is the truck's FMV. 2011 tax software download The rest ($12,500) is the basis of the tractor. 2011 tax software download Sale and Purchase If you sell property and buy similar property in two mutually dependent transactions, you may have to treat the sale and purchase as a single nontaxable exchange. 2011 tax software download Example. 2011 tax software download You used a tractor on your farm for 3 years. 2011 tax software download Its adjusted basis is $22,000 and its FMV is $40,000. 2011 tax software download You are interested in a new tractor, which sells for $60,000. 2011 tax software download Ordinarily, you would trade your old tractor for the new one and pay the dealer $20,000. 2011 tax software download Your basis for depreciating the new tractor would then be $42,000 ($20,000 + $22,000, the adjusted basis of your old tractor). 2011 tax software download However, you want a higher basis for depreciating the new tractor, so you agree to pay the dealer $60,000 for the new tractor if he will pay you $40,000 for your old tractor. 2011 tax software download Because the two transactions are dependent on each other, you are treated as having exchanged your old tractor for the new one and paid $20,000 ($60,000 − $40,000). 2011 tax software download Your basis for depreciating the new tractor is $42,000, the same as if you traded the old tractor. 2011 tax software download Property Received as a Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined earlier) to the donor just before it was given to you. 2011 tax software download You also must know its FMV at the time it was given to you and any gift tax paid on it. 2011 tax software download FMV equal to or greater than donor's adjusted basis. 2011 tax software download   If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis when you received the gift. 2011 tax software download Increase your basis by all or part of any gift tax paid, depending on the date of the gift. 2011 tax software download   Also, for figuring gain or loss from a sale or other disposition of the property, or for figuring depreciation, depletion, or amortization deductions on business property, you must increase or decrease your basis (the donor's adjusted basis) by any required adjustments to basis while you held the property. 2011 tax software download See Adjusted Basis , earlier. 2011 tax software download   If you received a gift during the tax year, increase your basis in the gift (the donor's adjusted basis) by the part of the gift tax paid on it due to the net increase in value of the gift. 2011 tax software download Figure the increase by multiplying the gift tax paid by the following fraction. 2011 tax software download Net increase in value of the gift Amount of the gift   The net increase in value of the gift is the FMV of the gift minus the donor's adjusted basis. 2011 tax software download The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. 2011 tax software download Example. 2011 tax software download In 2013, you received a gift of property from your mother that had an FMV of $50,000. 2011 tax software download Her adjusted basis was $20,000. 2011 tax software download The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). 2011 tax software download She paid a gift tax of $7,320. 2011 tax software download Your basis, $26,076, is figured as follows. 2011 tax software download Fair market value $50,000 Minus: Adjusted basis −20,000 Net increase in value $30,000 Gift tax paid $7,320 Multiplied by ($30,000 ÷ $36,000) × . 2011 tax software download 83 Gift tax due to net increase in value $6,076 Adjusted basis of property to your mother +20,000 Your basis in the property $26,076 Note. 2011 tax software download If you received a gift before 1977, your basis in the gift (the donor's adjusted basis) includes any gift tax paid on it. 2011 tax software download However, your basis cannot exceed the FMV of the gift when it was given to you. 2011 tax software download FMV less than donor's adjusted basis. 2011 tax software download   If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. 2011 tax software download Your basis for figuring gain is the donor's adjusted basis plus or minus any required adjustments to basis while you held the property. 2011 tax software download Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustments to basis while you held the property. 2011 tax software download (See Adjusted Basis , earlier. 2011 tax software download )   If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and get a gain, you have neither gain nor loss on the sale or other disposition of the property. 2011 tax software download Example. 2011 tax software download You received farmland as a gift from your parents when they retired from farming. 2011 tax software download At the time of the gift, the land had an FMV of $80,000. 2011 tax software download Your parents' adjusted basis was $100,000. 2011 tax software download After you received the land, no events occurred that would increase or decrease your basis. 2011 tax software download If you sell the land for $120,000, you will have a $20,000 gain because you must use the donor's adjusted basis at the time of the gift ($100,000) as your basis to figure a gain. 2011 tax software download If you sell the land for $70,000, you will have a $10,000 loss because you must use the FMV at the time of the gift ($80,000) as your basis to figure a loss. 2011 tax software download If the sales price is between $80,000 and $100,000, you have neither gain nor loss. 2011 tax software download For instance, if the sales price was $90,000 and you tried to figure a gain using the donor's adjusted basis ($100,000), you would get a $10,000 loss. 2011 tax software download If you then tried to figure a loss using the FMV ($80,000), you would get a $10,000 gain. 2011 tax software download Business property. 2011 tax software download   If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deductions is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property. 2011 tax software download Property Transferred From a Spouse The basis of property transferred to you or transferred in trust for your benefit by your spouse is the same as your spouse's adjusted basis. 2011 tax software download The same rule applies to a transfer by your former spouse if the transfer is incident to divorce. 2011 tax software download However, for property transferred in trust, adjust your basis for any gain recognized by your spouse or former spouse if the liabilities assumed plus the liabilities to which the property is subject are more than the adjusted basis of the property transferred. 2011 tax software download The transferor must give you the records needed to determine the adjusted basis and holding period of the property as of the date of the transfer. 2011 tax software download For more information, see Property Settlements in Publication 504, Divorced or Separated Individuals. 2011 tax software download Inherited Property Your basis in property you inherited from a decedent, who died before January 1, 2010, or after December 31, 2010, is generally one of the following: The FMV of the property at the date of the decedent's death. 2011 tax software download If a federal estate return is filed, you can use its appraised value. 2011 tax software download The FMV on the alternate valuation date, if the personal representative for the estate elects to use alternate valuation. 2011 tax software download For information on the alternate valuation, see the Instructions for Form 706. 2011 tax software download The decedent's adjusted basis in land to the extent of the value that is excluded from the decedent's taxable estate as a qualified conservation easement. 2011 tax software download If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes. 2011 tax software download Special-use valuation method. 2011 tax software download   Under certain conditions, when a person dies, the executor or personal representative of that person's estate may elect to value qualified real property at other than its FMV. 2011 tax software download If so, the executor or personal representative values the qualified real property based on its use as a farm or other closely held business. 2011 tax software download If the executor or personal representative elects this method of valuation for estate tax purposes, this value is the basis of the property for the qualified heirs. 2011 tax software download The qualified heirs should be able to get the necessary value from the executor or personal representative of the estate. 2011 tax software download   If you are a qualified heir who received special-use valuation property, increase your basis by any gain recognized by the estate or trust because of post-death appreciation. 2011 tax software download Post-death appreciation is the property's FMV on the date of distribution minus the property's FMV either on the date of the individual's death or on the alternate valuation date. 2011 tax software download Figure all FMVs without regard to the special-use valuation. 2011 tax software download   You may be liable for an additional estate tax if, within 10 years after the death of the decedent, you transfer the property or the property stops being used as a farm. 2011 tax software download This tax does not apply if you dispose of the property in a like-kind exchange or in an involuntary conversion in which all of the proceeds are reinvested in qualified replacement property. 2011 tax software download The tax also does not apply if you transfer the property to a member of your family and certain requirements are met. 2011 tax software download   You can elect to increase your basis in special-use valuation property if it becomes subject to the additional estate tax. 2011 tax software download To increase your basis, you must make an irrevocable election and pay interest on the additional estate tax figured from the date 9 months after the decedent's death until the date of payment of the additional estate tax. 2011 tax software download If you meet these requirements, increase your basis in the property to its FMV on the date of the decedent's death or the alternate valuation date. 2011 tax software download The increase in your basis is considered to have occurred immediately before the event that resulted in the additional estate tax. 2011 tax software download   You make the election by filing, with Form 706-A, United States Additional Estate Tax Return, a statement that: Contains your (and the estate's) name, address, and taxpayer identification number; Identifies the election as an election under section 1016(c) of the Internal Revenue Code; Specifies the property for which you are making the election; and Provides any additional information required by the Form 706-A instructions. 2011 tax software download   For more information, see Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, Form 706-A, and the related instructions. 2011 tax software download Property inherited from a decedent who died in 2010. 2011 tax software download   If you inherited property from a decedent who died in 2010, different rules may apply. 2011 tax software download See Publication 4895, Tax Treatment of Property Acquired From a Decendent Dying in 2010, for details. 2011 tax software download Property Distributed From a Partnership or Corporation The following rules apply to determine a partner's basis and a shareholder's basis in property distributed respectively from a partnership to the partner with respect to the partner's interest in the partnership and from a corporation to the shareholder with respect to the shareholder's ownership of stock in the corporation. 2011 tax software download Partner's basis. 2011 tax software download   Unless there is a complete liquidation of a partner's interest, the basis of property (other than money) distributed by a partnership to the partner is its adjusted basis to the partnership immediately before the distribution. 2011 tax software download However, the basis of the property to the partner cannot be more than the adjusted basis of his or her interest in the partnership reduced by any money received in the same transaction. 2011 tax software download For more information, see Partner's Basis for Distributed Property in Publication 541, Partnerships. 2011 tax software download Shareholder's basis. 2011 tax software download   The basis of property distributed by a corporation to a shareholder is its fair market value. 2011 tax software download For more information about corporate distributions, see Distributions to Shareholders in Publication 542, Corporations. 2011 tax software download Prev  Up  Next   Home   More Online Publications
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The 2011 Tax Software Download

2011 tax software download 11. 2011 tax software download   Departing Aliens and the Sailing or Departure Permit Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Aliens Not Required To Obtain Sailing or Departure Permits Aliens Required To Obtain Sailing or Departure PermitsGetting a Sailing or Departure Permit Forms To File Paying Taxes and Obtaining Refunds Bond To Ensure Payment Filing Annual U. 2011 tax software download S. 2011 tax software download Income Tax Returns Introduction Before leaving the United States, all aliens (except those listed under Aliens Not Required To Obtain Sailing or Departure Permits must obtain a certificate of compliance. 2011 tax software download This document, also popularly known as the sailing permit or departure permit, is part of the income tax form you must file before leaving. 2011 tax software download You will receive a sailing or departure permit after filing a Form 1040-C or Form 2063. 2011 tax software download These forms are discussed in this chapter. 2011 tax software download To find out if you need a sailing or departure permit, first read Aliens Not Required To Obtain Sailing or Departure Permits . 2011 tax software download If you do not fall into one of the categories in that discussion, you must obtain a sailing or departure permit. 2011 tax software download Read Aliens Required To Obtain Sailing or Departure Permits . 2011 tax software download Topics - This chapter discusses: Who needs a sailing permit, How to get a sailing permit, and Forms you file to get a sailing permit. 2011 tax software download Useful Items - You may want to see: Form (and Instructions) 1040-C U. 2011 tax software download S. 2011 tax software download Departing Alien Income Tax Return 2063 U. 2011 tax software download S. 2011 tax software download Departing Alien Income Tax Statement See chapter 12 for information about getting these forms. 2011 tax software download Aliens Not Required To Obtain Sailing or Departure Permits If you are included in one of the following categories, you do not have to get a sailing or departure permit before leaving the United States. 2011 tax software download If you are in one of these categories and do not have to get a sailing or departure permit, you must be able to support your claim for exemption with proper identification or give the authority for the exemption. 2011 tax software download Category 1. 2011 tax software download   Representatives of foreign governments with diplomatic passports, whether accredited to the United States or other countries, members of their households, and servants accompanying them. 2011 tax software download Servants who are leaving, but not with a person with a diplomatic passport, must get a sailing or departure permit. 2011 tax software download However, they can get a sailing or departure permit on Form 2063 without examination of their income tax liability by presenting a letter from the chief of their diplomatic mission certifying that: Their name appears on the “White List” (a list of employees of diplomatic missions), and They do not owe to the United States any income tax, and will not owe any tax up to and including the intended date of departure. 2011 tax software download   The statement must be presented to an IRS office. 2011 tax software download Category 2. 2011 tax software download    Employees of international organizations and foreign governments (other than diplomatic representatives exempt under category 1) and members of their households: Whose compensation for official services is exempt from U. 2011 tax software download S. 2011 tax software download tax under U. 2011 tax software download S. 2011 tax software download tax laws (described in chapter 10), and Who receive no other income from U. 2011 tax software download S. 2011 tax software download sources. 2011 tax software download If you are an alien in category (1) or (2), above, who filed the waiver under section 247(b) of the Immigration and Nationality Act, you must get a sailing or departure permit. 2011 tax software download This is true even if your income is exempt from U. 2011 tax software download S. 2011 tax software download tax because of an income tax treaty, consular agreement, or international agreement. 2011 tax software download Category 3. 2011 tax software download   Alien students, industrial trainees, and exchange visitors, including their spouses and children, who enter on an “F-1,” “F-2,” “H-3,” “H-4,” “J-1,” “J-2,” or “Q” visa only and who receive no income from U. 2011 tax software download S. 2011 tax software download sources while in the United States under those visas other than: Allowances to cover expenses incident to study or training in the United States, such as expenses for travel, maintenance, and tuition, The value of any services or food and lodging connected with this study or training, Income from employment authorized by the U. 2011 tax software download S. 2011 tax software download Citizenship and Immigration Services (USCIS), or Interest income on deposits that is not effectively connected with a U. 2011 tax software download S. 2011 tax software download trade or business. 2011 tax software download (See Interest Income in chapter 3. 2011 tax software download ) Category 4. 2011 tax software download   Alien students, including their spouses and children, who enter on an “M-1” or “M-2” visa only and who receive no income from U. 2011 tax software download S. 2011 tax software download sources while in the United States under those visas, other than: Income from employment authorized by the U. 2011 tax software download S. 2011 tax software download Citizenship and Immigration Services (USCIS) or Interest income on deposits that is not effectively connected with a U. 2011 tax software download S. 2011 tax software download trade or business. 2011 tax software download (See Interest Income in chapter 3. 2011 tax software download ) Category 5. 2011 tax software download   Certain other aliens temporarily in the United States who have received no taxable income during the tax year up to and including the date of departure or during the preceding tax year. 2011 tax software download If the IRS has reason to believe that an alien has received income subject to tax and that the collection of income tax is jeopardized by departure, it may then require the alien to obtain a sailing or departure permit. 2011 tax software download Aliens in this category are: Alien military trainees who enter the United States for training under the sponsorship of the Department of Defense and who leave the United States on official military travel orders, Alien visitors for business on a “B-1” visa, or on both a “B-1” visa and a “B-2” visa, who do not remain in the United States or a U. 2011 tax software download S. 2011 tax software download possession for more than 90 days during the tax year, Alien visitors for pleasure on a “B-2” visa, Aliens in transit through the United States or any of its possessions on a “C-1” visa, or under a contract, such as a bond agreement, between a transportation line and the Attorney General, and Aliens who enter the United States on a border-crossing identification card or for whom passports, visas, and border-crossing identification cards are not required, if they are: Visitors for pleasure, Visitors for business who do not remain in the United States or a U. 2011 tax software download S. 2011 tax software download possession for more than 90 days during the tax year, or In transit through the United States or any of its possessions. 2011 tax software download Category 6. 2011 tax software download   Alien residents of Canada or Mexico who frequently commute between that country and the United States for employment, and whose wages are subject to the withholding of U. 2011 tax software download S. 2011 tax software download tax. 2011 tax software download Aliens Required To Obtain Sailing or Departure Permits If you do not fall into one of the categories listed under Aliens Not Required To Obtain Sailing or Departure Permits, you must obtain a sailing or departure permit. 2011 tax software download To obtain a permit, file Form 1040-C or Form 2063 (whichever applies) with your local IRS office before you leave the United States. 2011 tax software download See Forms To File , later. 2011 tax software download You must also pay all the tax shown as due on Form 1040-C and any taxes due for past years. 2011 tax software download See Paying Taxes and Obtaining Refunds , later. 2011 tax software download Getting a Sailing or Departure Permit The following discussion covers when and where to get your sailing permit. 2011 tax software download Where to get a sailing or departure permit. 2011 tax software download   If you have been working in the United States, you should get the permit from an IRS office in the area of your employment, or you may obtain one from an IRS office in the area of your departure. 2011 tax software download When to get a sailing or departure permit. 2011 tax software download   You should get your sailing or departure permit at least 2 weeks before you plan to leave. 2011 tax software download You cannot apply earlier than 30 days before your planned departure date. 2011 tax software download Do not wait until the last minute in case there are unexpected problems. 2011 tax software download Papers to submit. 2011 tax software download   Getting your sailing or departure permit will go faster if you bring to the IRS office papers and documents related to your income and your stay in the United States. 2011 tax software download Bring the following records with you if they apply. 2011 tax software download Your passport and alien registration card or visa. 2011 tax software download Copies of your U. 2011 tax software download S. 2011 tax software download income tax returns filed for the past 2 years. 2011 tax software download If you were in the United States for less than 2 years, bring the income tax returns you filed for that period. 2011 tax software download Receipts for income taxes paid on these returns. 2011 tax software download Receipts, bank records, canceled checks, and other documents that prove your deductions, business expenses, and dependents claimed on your returns. 2011 tax software download A statement from each employer showing wages paid and tax withheld from January 1 of the current year to the date of departure if you were an employee. 2011 tax software download If you were self-employed, you must bring a statement of income and expenses up to the date you plan to leave. 2011 tax software download Proof of estimated tax payments for the past year and this year. 2011 tax software download Documents showing any gain or loss from the sale of personal property and/or real property, including capital assets and merchandise. 2011 tax software download Documents relating to scholarship or fellowship grants including: Verification of the grantor, source, and purpose of the grant. 2011 tax software download Copies of the application for, and approval of, the grant. 2011 tax software download A statement of the amount paid, and your duties and obligations under the grant. 2011 tax software download A list of any previous grants. 2011 tax software download Documents indicating you qualify for any special tax treaty benefits claimed. 2011 tax software download Document verifying your date of departure from the United States, such as an airline ticket. 2011 tax software download Document verifying your U. 2011 tax software download S. 2011 tax software download taxpayer identification number, such as a social security card or an IRS issued Notice CP 565 showing your individual taxpayer identification number (ITIN). 2011 tax software download Note. 2011 tax software download   If you are married and reside in a community property state, also bring the above-listed documents for your spouse. 2011 tax software download This applies whether or not your spouse requires a permit. 2011 tax software download Forms To File If you must get a sailing or departure permit, you must file Form 2063 or Form 1040-C. 2011 tax software download Employees in the IRS office can assist in filing these forms. 2011 tax software download Both forms have a “certificate of compliance” section. 2011 tax software download When the certificate of compliance is signed by an agent of the Field Assistance Area Director, it certifies that your U. 2011 tax software download S. 2011 tax software download tax obligations have been satisfied according to available information. 2011 tax software download Your Form 1040-C copy of the signed certificate, or the one detached from Form 2063, is your sailing or departure permit. 2011 tax software download Form 2063 This is a short form that asks for certain information but does not include a tax computation. 2011 tax software download The following departing aliens can get their sailing or departure permits by filing Form 2063. 2011 tax software download Aliens, whether resident or nonresident, who have had no taxable income for the tax year up to and including the date of departure and for the preceding year, if the period for filing the income tax return for that year has not expired. 2011 tax software download Resident aliens who have received taxable income during the tax year or preceding year and whose departure will not hinder the collection of any tax. 2011 tax software download However, if the IRS has information indicating that the aliens are leaving to avoid paying their income tax, they must file a Form 1040-C. 2011 tax software download Aliens in either of these categories who have not filed an income tax return or paid income tax for any tax year must file the return and pay the income tax before they can be issued a sailing or departure permit on Form 2063. 2011 tax software download The sailing or departure permit detached from Form 2063 can be used for all departures during the current year. 2011 tax software download However, the IRS may cancel the sailing or departure permit for any later departure if it believes the collection of income tax is jeopardized by that later departure. 2011 tax software download Form 1040-C If you must get a sailing or departure permit and you do not qualify to file Form 2063, you must file Form 1040-C. 2011 tax software download Ordinarily, all income received or reasonably expected to be received during the tax year up to and including the date of departure must be reported on Form 1040-C and the tax on it must be paid. 2011 tax software download When you pay any tax shown as due on the Form 1040-C, and you file all returns and pay all tax due for previous years, you will receive a sailing or departure permit. 2011 tax software download However, the IRS may permit you to furnish a bond guaranteeing payment instead of paying the taxes for certain years. 2011 tax software download See Bond To Ensure Payment , discussed later. 2011 tax software download The sailing or departure permit issued under the conditions in this paragraph is only for the specific departure for which it is issued. 2011 tax software download Returning to the United States. 2011 tax software download   If you furnish the IRS with information showing, to the satisfaction of the IRS, that you intend to return to the United States and that your departure does not jeopardize the collection of income tax, you can get a sailing or departure permit by filing Form 1040-C without having to pay the tax shown on it. 2011 tax software download You must, however, file all income tax returns that have not yet been filed as required, and pay all income tax that is due on these returns. 2011 tax software download   Your Form 1040-C must include all income received and reasonably expected to be received during the entire year of departure. 2011 tax software download The sailing or departure permit issued with this Form 1040-C can be used for all departures during the current year. 2011 tax software download However, the Service may cancel the sailing or departure permit for any later departure if the payment of income tax appears to be in jeopardy. 2011 tax software download Joint return on Form 1040-C. 2011 tax software download   Departing husbands and wives who are nonresident aliens cannot file joint returns. 2011 tax software download However, if both spouses are resident aliens, they can file a joint return on Form 1040-C if: Both spouses can reasonably be expected to qualify to file a joint return at the normal close of their tax year, and The tax years of the spouses end at the same time. 2011 tax software download Paying Taxes and Obtaining Refunds You must pay all tax shown as due on the Form 1040-C at the time of filing it, except when a bond is furnished, or the IRS is satisfied that your departure does not jeopardize the collection of income tax. 2011 tax software download You must also pay any taxes due for past years. 2011 tax software download If the tax computation on Form 1040-C results in an overpayment, there is no tax to pay at the time you file that return. 2011 tax software download However, the IRS cannot provide a refund at the time of departure. 2011 tax software download If you are due a refund, you must file either Form 1040NR or Form 1040NR-EZ at the end of the tax year. 2011 tax software download Bond To Ensure Payment Usually, you must pay the tax shown as due on Form 1040-C when you file it. 2011 tax software download However, if you pay all taxes due that you owe for prior years, you can furnish a bond guaranteeing payment instead of paying the income taxes shown as due on the Form 1040-C or the tax return for the preceding year if the period for filing that return has not expired. 2011 tax software download The bond must equal the tax due plus interest to the date of payment as figured by the IRS. 2011 tax software download Information about the form of bond and security on it can be obtained from your IRS office. 2011 tax software download Filing Annual U. 2011 tax software download S. 2011 tax software download Income Tax Returns Form 1040-C is not an annual U. 2011 tax software download S. 2011 tax software download income tax return. 2011 tax software download If an income tax return is required by law, that return must be filed even though a Form 1040-C has already been filed. 2011 tax software download Chapters 5 and 7 discuss filing an annual U. 2011 tax software download S. 2011 tax software download income tax return. 2011 tax software download The tax paid with Form 1040-C should be taken as a credit against the tax liability for the entire tax year on your annual U. 2011 tax software download S. 2011 tax software download income tax return. 2011 tax software download Prev  Up  Next   Home   More Online Publications