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2012 Irs 1040ez Form

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2012 Irs 1040ez Form

2012 irs 1040ez form Publication 560 - Introductory Material Table of Contents Future Developments What's New Reminders IntroductionSEP plans. 2012 irs 1040ez form SIMPLE plans. 2012 irs 1040ez form Qualified plans. 2012 irs 1040ez form Ordering forms and publications. 2012 irs 1040ez form Tax questions. 2012 irs 1040ez form Future Developments For the latest information about developments related to Publication 560, such as legislation enacted after we release it, go to www. 2012 irs 1040ez form irs. 2012 irs 1040ez form gov/pub560. 2012 irs 1040ez form What's New Compensation limit increased for 2013 and 2014. 2012 irs 1040ez form  For 2013 the maximum compensation used for figuring contributions and benefits increases to $255,000. 2012 irs 1040ez form This limit increases to $260,000 for 2014. 2012 irs 1040ez form Elective deferral limit for 2013 and 2014. 2012 irs 1040ez form  The limit on elective deferrals, other than catch-up contributions, increases to $17,500 for 2013 and remains at $17,500 for 2014. 2012 irs 1040ez form These limits apply for participants in SARSEPs, 401(k) plans (excluding SIMPLE plans), section 403(b) plans and section 457(b) plans. 2012 irs 1040ez form Defined contribution limit increased for 2013 and 2014. 2012 irs 1040ez form  The limit on contributions, other than catch-up contributions, for a participant in a defined contribution plan increases to $51,000 for 2013. 2012 irs 1040ez form This limit increases to $52,000 for 2014. 2012 irs 1040ez form SIMPLE plan salary reduction contribution limit for 2013 and 2014. 2012 irs 1040ez form  The limit on salary reduction contributions, other than catch-up contributions, increases to $12,000 for 2013 and remains at $12,000 for 2014. 2012 irs 1040ez form Catch-up contribution limit remains unchanged for 2013 and 2014. 2012 irs 1040ez form  A plan can permit participants who are age 50 or over at the end of the calendar year to make catch-up contributions in addition to elective deferrals and SIMPLE plan salary reduction contributions. 2012 irs 1040ez form The catch-up contribution limitation for defined contribution plans other than SIMPLE plans remains unchanged at $5,500 for 2013 and 2014. 2012 irs 1040ez form The catch-up contribution limitation for SIMPLE plans remains unchanged at $2,500 for 2013 and 2014. 2012 irs 1040ez form The catch-up contributions a participant can make for a year cannot exceed the lesser of the following amounts. 2012 irs 1040ez form The catch-up contribution limit. 2012 irs 1040ez form The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. 2012 irs 1040ez form See “Catch-up contributions” under Contribution Limits and Limit on Elective Deferrals in chapters 3 and 4, respectively, for more information. 2012 irs 1040ez form All section references are to the Internal Revenue Code, unless otherwise stated. 2012 irs 1040ez form Reminders In-plan Roth rollovers. 2012 irs 1040ez form  Section 402A(c)(4) provides for a distribution from an individual's account in a 401(k) plan, other than from a designated Roth account, that is rolled over to the individual's designated Roth account in the same plan. 2012 irs 1040ez form An in-plan Roth rollover is not treated as a distribution for most purposes. 2012 irs 1040ez form Section 402A(c)(4) was added by the Small Business Jobs Act of 2010 and applies to distributions made after September 27, 2010. 2012 irs 1040ez form For additional guidance on in-plan Roth rollovers, see Notice 2010-84, 2010-51 I. 2012 irs 1040ez form R. 2012 irs 1040ez form B. 2012 irs 1040ez form 872, available at  www. 2012 irs 1040ez form irs. 2012 irs 1040ez form gov/irb/2010-51_IRB/ar11. 2012 irs 1040ez form html. 2012 irs 1040ez form In-plan Roth rollovers expanded. 2012 irs 1040ez form  Beginning in 2013, a plan with designated Roth accounts can permit a participant to roll over amounts into a designated Roth account from his or her other accounts in the same plan, regardless of whether the participant is eligible for a distribution from the other accounts. 2012 irs 1040ez form Section 402A(c)(4) was amended by the American Taxpayer Relief Act of 2012. 2012 irs 1040ez form For more information, see Notice 2013-74, 2013-52 I. 2012 irs 1040ez form R. 2012 irs 1040ez form B. 2012 irs 1040ez form 819, available at www. 2012 irs 1040ez form irs. 2012 irs 1040ez form gov/irb/2013-52_IRB/ar11. 2012 irs 1040ez form html. 2012 irs 1040ez form Credit for startup costs. 2012 irs 1040ez form  You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SEP, SIMPLE, or qualified plan. 2012 irs 1040ez form The credit equals 50% of the cost to set up and administer the plan and educate employees about the plan, up to a maximum of $500 per year for each of the first 3 years of the plan. 2012 irs 1040ez form You can choose to start claiming the credit in the tax year before the tax year in which the plan becomes effective. 2012 irs 1040ez form You must have had 100 or fewer employees who received at least $5,000 in compensation from you for the preceding year. 2012 irs 1040ez form At least one participant must be a non-highly compensated employee. 2012 irs 1040ez form The employees generally cannot be substantially the same employees for whom contributions were made or benefits accrued under a plan of any of the following employers in the 3-tax-year period immediately before the first year to which the credit applies. 2012 irs 1040ez form You. 2012 irs 1040ez form A member of a controlled group that includes you. 2012 irs 1040ez form A predecessor of (1) or (2). 2012 irs 1040ez form The credit is part of the general business credit, which can be carried back or forward to other tax years if it cannot be used in the current year. 2012 irs 1040ez form However, the part of the general business credit attributable to the small employer pension plan startup cost credit cannot be carried back to a tax year beginning before January 1, 2002. 2012 irs 1040ez form You cannot deduct the part of the startup costs equal to the credit claimed for a tax year, but you can choose not to claim the allowable credit for a tax year. 2012 irs 1040ez form To take the credit, use Form 8881, Credit for Small Employer Pension Plan Startup Costs. 2012 irs 1040ez form Retirement savings contributions credit. 2012 irs 1040ez form  Retirement plan participants (including self-employed individuals) who make contributions to their plan may qualify for the retirement savings contribution credit. 2012 irs 1040ez form The maximum contribution eligible for the credit is $2,000. 2012 irs 1040ez form To take the credit, use Form 8880, Credit for Qualified Retirement Savings Contributions. 2012 irs 1040ez form For more information on who is eligible for the credit, retirement plan contributions eligible for the credit and how to figure the credit, see Form 8880 and its instructions or go to the IRS website and search Retirement Topics-Retirement Savings Contributions Credit (Saver's Credit). 2012 irs 1040ez form Photographs of missing children. 2012 irs 1040ez form  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. 2012 irs 1040ez form Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. 2012 irs 1040ez form You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. 2012 irs 1040ez form Introduction This publication discusses retirement plans you can set up and maintain for yourself and your employees. 2012 irs 1040ez form In this publication, “you” refers to the employer. 2012 irs 1040ez form See chapter 1 for the definition of the term employer and the definitions of other terms used in this publication. 2012 irs 1040ez form This publication covers the following types of retirement plans. 2012 irs 1040ez form SEP (simplified employee pension) plans. 2012 irs 1040ez form SIMPLE (savings incentive match plan for employees) plans. 2012 irs 1040ez form Qualified plans (also called H. 2012 irs 1040ez form R. 2012 irs 1040ez form 10 plans or Keogh plans when covering self-employed individuals), including 401(k) plans. 2012 irs 1040ez form SEP, SIMPLE, and qualified plans offer you and your employees a tax-favored way to save for retirement. 2012 irs 1040ez form You can deduct contributions you make to the plan for your employees. 2012 irs 1040ez form If you are a sole proprietor, you can deduct contributions you make to the plan for yourself. 2012 irs 1040ez form You can also deduct trustees' fees if contributions to the plan do not cover them. 2012 irs 1040ez form Earnings on the contributions are generally tax free until you or your employees receive distributions from the plan. 2012 irs 1040ez form Under a 401(k) plan, employees can have you contribute limited amounts of their before-tax (after-tax, in the case of a qualified Roth contribution program) pay to the plan. 2012 irs 1040ez form These amounts (and the earnings on them) are generally tax free until your employees receive distributions from the plan or, in the case of a qualified distribution from a designated Roth account, completely tax free. 2012 irs 1040ez form What this publication covers. 2012 irs 1040ez form   This publication contains the information you need to understand the following topics. 2012 irs 1040ez form What type of plan to set up. 2012 irs 1040ez form How to set up a plan. 2012 irs 1040ez form How much you can contribute to a plan. 2012 irs 1040ez form How much of your contribution is deductible. 2012 irs 1040ez form How to treat certain distributions. 2012 irs 1040ez form How to report information about the plan to the IRS and your employees. 2012 irs 1040ez form Basic features of SEP, SIMPLE, and qualified plans. 2012 irs 1040ez form The key rules for SEP, SIMPLE, and qualified plans are outlined in Table 1. 2012 irs 1040ez form SEP plans. 2012 irs 1040ez form   SEPs provide a simplified method for you to make contributions to a retirement plan for yourself and your employees. 2012 irs 1040ez form Instead of setting up a profit-sharing or money purchase plan with a trust, you can adopt a SEP agreement and make contributions directly to a traditional individual retirement account or a traditional individual retirement annuity (SEP-IRA) set up for yourself and each eligible employee. 2012 irs 1040ez form SIMPLE plans. 2012 irs 1040ez form   Generally, if you had 100 or fewer employees who received at least $5,000 in compensation last year, you can set up a SIMPLE plan. 2012 irs 1040ez form Under a SIMPLE plan, employees can choose to make salary reduction contributions rather than receiving these amounts as part of their regular pay. 2012 irs 1040ez form In addition, you will contribute matching or nonelective contributions. 2012 irs 1040ez form The two types of SIMPLE plans are the SIMPLE IRA plan and the SIMPLE 401(k) plan. 2012 irs 1040ez form Qualified plans. 2012 irs 1040ez form   The qualified plan rules are more complex than the SEP plan and SIMPLE plan rules. 2012 irs 1040ez form However, there are advantages to qualified plans, such as increased flexibility in designing plans and increased contribution and deduction limits in some cases. 2012 irs 1040ez form Table 1. 2012 irs 1040ez form Key Retirement Plan Rules for 2013 Type  of  Plan Last Date for Contribution Maximum Contribution Maximum Deduction When To Set Up Plan SEP Due date of employer's return (including extensions). 2012 irs 1040ez form Smaller of $51,000 or 25%1 of participant's compensation. 2012 irs 1040ez form 2 25%1 of all participants' compensation. 2012 irs 1040ez form 2 Any time up to the due date of employer's return (including extensions). 2012 irs 1040ez form SIMPLE IRA and SIMPLE 401(k) Salary reduction contributions: 30 days after the end of the month for which the contributions are to be made. 2012 irs 1040ez form 4  Matching or nonelective contributions: Due date of employer's return (including extensions). 2012 irs 1040ez form Employee contribution: Salary reduction contribution up to $12,000, $14,500 if age 50 or over. 2012 irs 1040ez form   Employer contribution:  Either dollar-for-dollar matching contributions, up to 3% of employee's compensation,3 or fixed nonelective contributions of 2% of compensation. 2012 irs 1040ez form 2 Same as maximum contribution. 2012 irs 1040ez form Any time between 1/1 and 10/1 of the calendar year. 2012 irs 1040ez form   For a new employer coming into existence after 10/1, as soon as administratively feasible. 2012 irs 1040ez form Qualified Plan: Defined Contribution Plan  Elective deferral: Due date of employer's return (including extensions). 2012 irs 1040ez form 4   Employer contribution: Money Purchase or Profit-Sharing: Due date of employer's return (including extensions). 2012 irs 1040ez form  Employee contribution: Elective deferral up to $17,500, $23,000 if age 50 or over. 2012 irs 1040ez form   Employer contribution: Money Purchase: Smaller of $51,000 or 100%1 of participant's compensation. 2012 irs 1040ez form 2  Profit-Sharing: Smaller of $51,000 or 100%1 of participant's compensation. 2012 irs 1040ez form 2  25%1 of all participants' compensation2, plus amount of elective deferrals made. 2012 irs 1040ez form   By the end of the tax year. 2012 irs 1040ez form Qualified Plan: Defined Benefit Plan Contributions generally must be paid in quarterly installments, due 15 days after the end of each quarter. 2012 irs 1040ez form See Minimum Funding Requirement in chapter 4. 2012 irs 1040ez form Amount needed to provide an annual benefit no larger than the smaller of $205,000 or 100% of the participant's average compensation for his or her highest 3 consecutive calendar years. 2012 irs 1040ez form Based on actuarial assumptions and computations. 2012 irs 1040ez form By the end of the tax year. 2012 irs 1040ez form 1Net earnings from self-employment must take the contribution into account. 2012 irs 1040ez form See Deduction Limit for Self-Employed Individuals in chapters 2 and 4 . 2012 irs 1040ez form  2Compensation is generally limited to $255,000 in 2013. 2012 irs 1040ez form  3Under a SIMPLE 401(k) plan, compensation is generally limited to $255,000 in 2013. 2012 irs 1040ez form  4Certain plans subject to Department of Labor rules may have an earlier due date for salary reduction contributions and elective deferrals. 2012 irs 1040ez form What this publication does not cover. 2012 irs 1040ez form   Although the purpose of this publication is to provide general information about retirement plans you can set up for your employees, it does not contain all the rules and exceptions that apply to these plans. 2012 irs 1040ez form You may also need professional help and guidance. 2012 irs 1040ez form   Also, this publication does not cover all the rules that may be of interest to employees. 2012 irs 1040ez form For example, it does not cover the following topics. 2012 irs 1040ez form The comprehensive IRA rules an employee needs to know. 2012 irs 1040ez form These rules are covered in Publication 590, Individual Retirement Arrangements (IRAs). 2012 irs 1040ez form The comprehensive rules that apply to distributions from retirement plans. 2012 irs 1040ez form These rules are covered in Publication 575, Pension and Annuity Income. 2012 irs 1040ez form The comprehensive rules that apply to section 403(b) plans. 2012 irs 1040ez form These rules are covered in Publication 571, Tax-Sheltered Annuity Plans (403(b) Plans). 2012 irs 1040ez form Comments and suggestions. 2012 irs 1040ez form   We welcome your comments about this publication and your suggestions for future editions. 2012 irs 1040ez form   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. 2012 irs 1040ez form NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. 2012 irs 1040ez form Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. 2012 irs 1040ez form   You can send your comments from www. 2012 irs 1040ez form irs. 2012 irs 1040ez form gov/formspubs. 2012 irs 1040ez form Click on “More Information” and then on “Give us feedback. 2012 irs 1040ez form ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. 2012 irs 1040ez form Ordering forms and publications. 2012 irs 1040ez form   Visit www. 2012 irs 1040ez form irs. 2012 irs 1040ez form gov/formspubs to download forms  and publications, call 1-800-TAX-FORM  (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. 2012 irs 1040ez form Internal Revenue Service 1201 N. 2012 irs 1040ez form Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. 2012 irs 1040ez form   If you have a tax question, check the information available on IRS. 2012 irs 1040ez form gov or call 1-800-829-1040. 2012 irs 1040ez form We cannot answer tax questions sent to either of the above addresses. 2012 irs 1040ez form Note. 2012 irs 1040ez form Forms filed electronically with the Department of Labor are not available on the IRS website. 2012 irs 1040ez form Instead, see www. 2012 irs 1040ez form efast. 2012 irs 1040ez form dol. 2012 irs 1040ez form gov. 2012 irs 1040ez form Prev  Up  Next   Home   More Online Publications
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The 2012 Irs 1040ez Form

2012 irs 1040ez form 14. 2012 irs 1040ez form   Sale of Property Table of Contents Reminder Introduction Useful Items - You may want to see: Sales and TradesWhat Is a Sale or Trade? How To Figure Gain or Loss Nontaxable Trades Transfers Between Spouses Related Party Transactions Capital Gains and LossesCapital or Ordinary Gain or Loss Capital Assets and Noncapital Assets Holding Period Nonbusiness Bad Debts Wash Sales Rollover of Gain From Publicly Traded Securities Reminder Foreign income. 2012 irs 1040ez form  If you are a U. 2012 irs 1040ez form S. 2012 irs 1040ez form citizen who sells property located outside the United States, you must report all gains and losses from the sale of that property on your tax return unless it is exempt by U. 2012 irs 1040ez form S. 2012 irs 1040ez form law. 2012 irs 1040ez form This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the payer. 2012 irs 1040ez form Introduction This chapter discusses the tax consequences of selling or trading investment property. 2012 irs 1040ez form It explains the following. 2012 irs 1040ez form What a sale or trade is. 2012 irs 1040ez form Figuring gain or loss. 2012 irs 1040ez form Nontaxable trades. 2012 irs 1040ez form Related party transactions. 2012 irs 1040ez form Capital gains or losses. 2012 irs 1040ez form Capital assets and noncapital assets. 2012 irs 1040ez form Holding period. 2012 irs 1040ez form Rollover of gain from publicly traded securities. 2012 irs 1040ez form Other property transactions. 2012 irs 1040ez form   Certain transfers of property are not discussed here. 2012 irs 1040ez form They are discussed in other IRS publications. 2012 irs 1040ez form These include the following. 2012 irs 1040ez form Sales of a main home, covered in chapter 15. 2012 irs 1040ez form Installment sales, covered in Publication 537, Installment Sales. 2012 irs 1040ez form Transactions involving business property, covered in Publication 544, Sales and Other Dispositions of Assets. 2012 irs 1040ez form Dispositions of an interest in a passive activity, covered in Publication 925, Passive Activity and At-Risk Rules. 2012 irs 1040ez form    Publication 550, Investment Income and Expenses (Including Capital Gains and Losses), provides a more detailed discussion about sales and trades of investment property. 2012 irs 1040ez form Publication 550 includes information about the rules covering nonbusiness bad debts, straddles, section 1256 contracts, puts and calls, commodity futures, short sales, and wash sales. 2012 irs 1040ez form It also discusses investment-related expenses. 2012 irs 1040ez form Useful Items - You may want to see: Publication 550 Investment Income and Expenses Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 8949 Sales and Other Dispositions of Capital Assets 8824 Like-Kind Exchanges Sales and Trades If you sold property such as stocks, bonds, or certain commodities through a broker during the year, you should receive, for each sale, a Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or substitute statement, from the broker. 2012 irs 1040ez form Generally, you should receive the statement by February 15 of the next year. 2012 irs 1040ez form It will show the gross proceeds from the sale. 2012 irs 1040ez form If you sold a covered security in 2013, your 1099-B (or substitute statement) will show your basis. 2012 irs 1040ez form Generally, a covered security is a security you acquired after 2010, with certain exceptions. 2012 irs 1040ez form See the Instructions for Form 8949. 2012 irs 1040ez form The IRS will also get a copy of Form 1099-B from the broker. 2012 irs 1040ez form Use Form 1099-B (or substitute statement received from your broker) to complete Form 8949. 2012 irs 1040ez form What Is a Sale or Trade? This section explains what is a sale or trade. 2012 irs 1040ez form It also explains certain transactions and events that are treated as sales or trades. 2012 irs 1040ez form A sale is generally a transfer of property for money or a mortgage, note, or other promise to pay money. 2012 irs 1040ez form A trade is a transfer of property for other property or services and may be taxed in the same way as a sale. 2012 irs 1040ez form Sale and purchase. 2012 irs 1040ez form   Ordinarily, a transaction is not a trade when you voluntarily sell property for cash and immediately buy similar property to replace it. 2012 irs 1040ez form The sale and purchase are two separate transactions. 2012 irs 1040ez form But see Like-kind exchanges under Nontaxable Trades, later. 2012 irs 1040ez form Redemption of stock. 2012 irs 1040ez form   A redemption of stock is treated as a sale or trade and is subject to the capital gain or loss provisions unless the redemption is a dividend or other distribution on stock. 2012 irs 1040ez form Dividend versus sale or trade. 2012 irs 1040ez form   Whether a redemption is treated as a sale, trade, dividend, or other distribution depends on the circumstances in each case. 2012 irs 1040ez form Both direct and indirect ownership of stock will be considered. 2012 irs 1040ez form The redemption is treated as a sale or trade of stock if: The redemption is not essentially equivalent to a dividend (see chapter 8), There is a substantially disproportionate redemption of stock, There is a complete redemption of all the stock of the corporation owned by the shareholder, or The redemption is a distribution in partial liquidation of a corporation. 2012 irs 1040ez form Redemption or retirement of bonds. 2012 irs 1040ez form   A redemption or retirement of bonds or notes at their maturity is generally treated as a sale or trade. 2012 irs 1040ez form   In addition, a significant modification of a bond is treated as a trade of the original bond for a new bond. 2012 irs 1040ez form For details, see Regulations section 1. 2012 irs 1040ez form 1001-3. 2012 irs 1040ez form Surrender of stock. 2012 irs 1040ez form   A surrender of stock by a dominant shareholder who retains ownership of more than half of the corporation's voting shares is treated as a contribution to capital rather than as an immediate loss deductible from taxable income. 2012 irs 1040ez form The surrendering shareholder must reallocate his or her basis in the surrendered shares to the shares he or she retains. 2012 irs 1040ez form Worthless securities. 2012 irs 1040ez form    Stocks, stock rights, and bonds (other than those held for sale by a securities dealer) that became completely worthless during the tax year are treated as though they were sold on the last day of the tax year. 2012 irs 1040ez form This affects whether your capital loss is long term or short term. 2012 irs 1040ez form See Holding Period , later. 2012 irs 1040ez form   Worthless securities also include securities that you abandon after March 12, 2008. 2012 irs 1040ez form To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. 2012 irs 1040ez form All the facts and circumstances determine whether the transaction is properly characterized as an abandonment or other type of transaction, such as an actual sale or exchange, contribution to capital, dividend, or gift. 2012 irs 1040ez form    If you are a cash basis taxpayer and make payments on a negotiable promissory note that you issued for stock that became worthless, you can deduct these payments as losses in the years you actually make the payments. 2012 irs 1040ez form Do not deduct them in the year the stock became worthless. 2012 irs 1040ez form How to report loss. 2012 irs 1040ez form    Report worthless securities in Part I or Part II, whichever applies, of Form 8949. 2012 irs 1040ez form In column (a), enter “Worthless. 2012 irs 1040ez form ”    Report your worthless securities transactions on Form 8949 with the correct box checked for these transactions. 2012 irs 1040ez form See Form 8949 and the Instructions for Form 8949. 2012 irs 1040ez form For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. 2012 irs 1040ez form See also Schedule D (Form 1040), Form 8949, and their separate instructions. 2012 irs 1040ez form Filing a claim for refund. 2012 irs 1040ez form   If you do not claim a loss for a worthless security on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the loss. 2012 irs 1040ez form You must use Form 1040X, Amended U. 2012 irs 1040ez form S. 2012 irs 1040ez form Individual Income Tax Return, to amend your return for the year the security became worthless. 2012 irs 1040ez form You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. 2012 irs 1040ez form For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. 2012 irs 1040ez form How To Figure Gain or Loss You figure gain or loss on a sale or trade of property by comparing the amount you realize with the adjusted basis of the property. 2012 irs 1040ez form Gain. 2012 irs 1040ez form   If the amount you realize from a sale or trade is more than the adjusted basis of the property you transfer, the difference is a gain. 2012 irs 1040ez form Loss. 2012 irs 1040ez form   If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. 2012 irs 1040ez form Adjusted basis. 2012 irs 1040ez form   The adjusted basis of property is your original cost or other original basis properly adjusted (increased or decreased) for certain items. 2012 irs 1040ez form See chapter 13 for more information about determining the adjusted basis of property. 2012 irs 1040ez form Amount realized. 2012 irs 1040ez form   The amount you realize from a sale or trade of property is everything you receive for the property minus your expenses of sale (such as redemption fees, sales commissions, sales charges, or exit fees). 2012 irs 1040ez form Amount realized includes the money you receive plus the fair market value of any property or services you receive. 2012 irs 1040ez form If you received a note or other debt instrument for the property, see How To Figure Gain or Loss in chapter 4 of Publication 550 to figure the amount realized. 2012 irs 1040ez form If you finance the buyer's purchase of your property and the debt instrument does not provide for adequate stated interest, the unstated interest that you must report as ordinary income will reduce the amount realized from the sale. 2012 irs 1040ez form For more information, see Publication 537. 2012 irs 1040ez form Fair market value. 2012 irs 1040ez form   Fair market value is the price at which the property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. 2012 irs 1040ez form Example. 2012 irs 1040ez form You trade A Company stock with an adjusted basis of $7,000 for B Company stock with a fair market value of $10,000, which is your amount realized. 2012 irs 1040ez form Your gain is $3,000 ($10,000 − $7,000). 2012 irs 1040ez form Debt paid off. 2012 irs 1040ez form    A debt against the property, or against you, that is paid off as a part of the transaction, or that is assumed by the buyer, must be included in the amount realized. 2012 irs 1040ez form This is true even if neither you nor the buyer is personally liable for the debt. 2012 irs 1040ez form For example, if you sell or trade property that is subject to a nonrecourse loan, the amount you realize generally includes the full amount of the note assumed by the buyer even if the amount of the note is more than the fair market value of the property. 2012 irs 1040ez form Example. 2012 irs 1040ez form You sell stock that you had pledged as security for a bank loan of $8,000. 2012 irs 1040ez form Your basis in the stock is $6,000. 2012 irs 1040ez form The buyer pays off your bank loan and pays you $20,000 in cash. 2012 irs 1040ez form The amount realized is $28,000 ($20,000 + $8,000). 2012 irs 1040ez form Your gain is $22,000 ($28,000 − $6,000). 2012 irs 1040ez form Payment of cash. 2012 irs 1040ez form   If you trade property and cash for other property, the amount you realize is the fair market value of the property you receive. 2012 irs 1040ez form Determine your gain or loss by subtracting the cash you pay plus the adjusted basis of the property you trade in from the amount you realize. 2012 irs 1040ez form If the result is a positive number, it is a gain. 2012 irs 1040ez form If the result is a negative number, it is a loss. 2012 irs 1040ez form No gain or loss. 2012 irs 1040ez form   You may have to use a basis for figuring gain that is different from the basis used for figuring loss. 2012 irs 1040ez form In this case, you may have neither a gain nor a loss. 2012 irs 1040ez form See Basis Other Than Cost in chapter 13. 2012 irs 1040ez form Nontaxable Trades This section discusses trades that generally do not result in a taxable gain or deductible loss. 2012 irs 1040ez form For more information on nontaxable trades, see chapter 1 of Publication 544. 2012 irs 1040ez form Like-kind exchanges. 2012 irs 1040ez form   If you trade business or investment property for other business or investment property of a like kind, you do not pay tax on any gain or deduct any loss until you sell or dispose of the property you receive. 2012 irs 1040ez form To be nontaxable, a trade must meet all six of the following conditions. 2012 irs 1040ez form The property must be business or investment property. 2012 irs 1040ez form You must hold both the property you trade and the property you receive for productive use in your trade or business or for investment. 2012 irs 1040ez form Neither property may be property used for personal purposes, such as your home or family car. 2012 irs 1040ez form The property must not be held primarily for sale. 2012 irs 1040ez form The property you trade and the property you receive must not be property you sell to customers, such as merchandise. 2012 irs 1040ez form The property must not be stocks, bonds, notes, choses in action, certificates of trust or beneficial interest, or other securities or evidences of indebtedness or interest, including partnership interests. 2012 irs 1040ez form However, see Special rules for mutual ditch, reservoir, or irrigation company stock, in chapter 4 of Publication 550 for an exception. 2012 irs 1040ez form Also, you can have a nontaxable trade of corporate stocks under a different rule, as discussed later. 2012 irs 1040ez form There must be a trade of like property. 2012 irs 1040ez form The trade of real estate for real estate, or personal property for similar personal property, is a trade of like property. 2012 irs 1040ez form The trade of an apartment house for a store building, or a panel truck for a pickup truck, is a trade of like property. 2012 irs 1040ez form The trade of a piece of machinery for a store building is not a trade of like property. 2012 irs 1040ez form Real property located in the United States and real property located outside the United States are not like property. 2012 irs 1040ez form Also, personal property used predominantly within the United States and personal property used predominantly outside the United States are not like property. 2012 irs 1040ez form The property to be received must be identified in writing within 45 days after the date you transfer the property given up in the trade. 2012 irs 1040ez form The property to be received must be received by the earlier of: The 180th day after the date on which you transfer the property given up in the trade, or The due date, including extensions, for your tax return for the year in which the transfer of the property given up occurs. 2012 irs 1040ez form    If you trade property with a related party in a like-kind exchange, a special rule may apply. 2012 irs 1040ez form See Related Party Transactions , later in this chapter. 2012 irs 1040ez form Also, see chapter 1 of Publication 544 for more information on exchanges of business property and special rules for exchanges using qualified intermediaries or involving multiple properties. 2012 irs 1040ez form Partly nontaxable exchange. 2012 irs 1040ez form   If you receive money or unlike property in addition to like property, and the above six conditions are met, you have a partly nontaxable trade. 2012 irs 1040ez form You are taxed on any gain you realize, but only up to the amount of the money and the fair market value of the unlike property you receive. 2012 irs 1040ez form You cannot deduct a loss. 2012 irs 1040ez form Like property and unlike property transferred. 2012 irs 1040ez form   If you give up unlike property in addition to the like property, you must recognize gain or loss on the unlike property you give up. 2012 irs 1040ez form The gain or loss is the difference between the adjusted basis of the unlike property and its fair market value. 2012 irs 1040ez form Like property and money transferred. 2012 irs 1040ez form   If all of the above conditions (1) – (6) are met, you have a nontaxable trade even if you pay money in addition to the like property. 2012 irs 1040ez form Basis of property received. 2012 irs 1040ez form   To figure the basis of the property received, see Nontaxable Exchanges in chapter 13. 2012 irs 1040ez form How to report. 2012 irs 1040ez form   You must report the trade of like property on Form 8824. 2012 irs 1040ez form If you figure a recognized gain or loss on Form 8824, report it on Schedule D (Form 1040), or on Form 4797, Sales of Business Property, whichever applies. 2012 irs 1040ez form See the instructions for Line 22 in the Instructions for Form 8824. 2012 irs 1040ez form   For information on using Form 4797, see chapter 4 of Publication 544. 2012 irs 1040ez form Corporate stocks. 2012 irs 1040ez form   The following trades of corporate stocks generally do not result in a taxable gain or a deductible loss. 2012 irs 1040ez form Corporate reorganizations. 2012 irs 1040ez form   In some instances, a company will give you common stock for preferred stock, preferred stock for common stock, or stock in one corporation for stock in another corporation. 2012 irs 1040ez form If this is a result of a merger, recapitalization, transfer to a controlled corporation, bankruptcy, corporate division, corporate acquisition, or other corporate reorganization, you do not recognize gain or loss. 2012 irs 1040ez form Stock for stock of the same corporation. 2012 irs 1040ez form   You can exchange common stock for common stock or preferred stock for preferred stock in the same corporation without having a recognized gain or loss. 2012 irs 1040ez form This is true for a trade between two stockholders as well as a trade between a stockholder and the corporation. 2012 irs 1040ez form Convertible stocks and bonds. 2012 irs 1040ez form   You generally will not have a recognized gain or loss if you convert bonds into stock or preferred stock into common stock of the same corporation according to a conversion privilege in the terms of the bond or the preferred stock certificate. 2012 irs 1040ez form Property for stock of a controlled corporation. 2012 irs 1040ez form   If you transfer property to a corporation solely in exchange for stock in that corporation, and immediately after the trade you are in control of the corporation, you ordinarily will not recognize a gain or loss. 2012 irs 1040ez form This rule applies both to individuals and to groups who transfer property to a corporation. 2012 irs 1040ez form It does not apply if the corporation is an investment company. 2012 irs 1040ez form   For this purpose, to be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock of the corporation. 2012 irs 1040ez form   If this provision applies to you, you may have to attach to your return a complete statement of all facts pertinent to the exchange. 2012 irs 1040ez form For details, see Regulations section 1. 2012 irs 1040ez form 351-3. 2012 irs 1040ez form Additional information. 2012 irs 1040ez form   For more information on trades of stock, see Nontaxable Trades in chapter 4 of Publication 550. 2012 irs 1040ez form Insurance policies and annuities. 2012 irs 1040ez form   You will not have a recognized gain or loss if the insured or annuitant is the same under both contracts and you trade: A life insurance contract for another life insurance contract or for an endowment or annuity contract or for a qualified long-term care insurance contract, An endowment contract for another endowment contract that provides for regular payments beginning at a date no later than the beginning date under the old contract or for an annuity contract or for a qualified long-term insurance contract, An annuity contract for annuity contract or for a qualified long-term care insurance contract, or A qualified long-term care insurance contract for a qualified long-term care insurance contract. 2012 irs 1040ez form   You also may not have to recognize gain or loss on an exchange of a portion of an annuity contract for another annuity contract. 2012 irs 1040ez form For transfers completed before October 24, 2011, see Revenue Ruling 2003-76 in Internal Revenue Bulletin 2003-33 and Revenue Procedure 2008-24 in Internal Revenue Bulletin 2008-13. 2012 irs 1040ez form Revenue Ruling 2003-76 is available at www. 2012 irs 1040ez form irs. 2012 irs 1040ez form gov/irb/2003-33_IRB/ar11. 2012 irs 1040ez form html. 2012 irs 1040ez form Revenue Procedure 2008-24 is available at www. 2012 irs 1040ez form irs. 2012 irs 1040ez form gov/irb/2008-13_IRB/ar13. 2012 irs 1040ez form html. 2012 irs 1040ez form For transfers completed on or after October 24, 2011, see Revenue Ruling 2003-76, above, and Revenue Procedure 2011-38, in Internal Revenue Bulletin 2011-30. 2012 irs 1040ez form Revenue Procedure 2011-38 is available at www. 2012 irs 1040ez form irs. 2012 irs 1040ez form gov/irb/2011-30_IRB/ar09. 2012 irs 1040ez form html. 2012 irs 1040ez form   For tax years beginning after December 31, 2010, amounts received as an annuity for a period of 10 years or more, or for the lives of one or more individuals, under any portion of an annuity, endowment, or life insurance contract, are treated as a separate contract and are considered partial annuities. 2012 irs 1040ez form A portion of an annuity, endowment, or life insurance contract may be annuitized, provided that the annuitization period is for 10 years or more or for the lives of one or more individuals. 2012 irs 1040ez form The investment in the contract is allocated between the part of the contract from which amounts are received as an annuity and the part of the contract from which amounts are not received as an annuity. 2012 irs 1040ez form   Exchanges of contracts not included in this list, such as an annuity contract for an endowment contract, or an annuity or endowment contract for a life insurance contract, are taxable. 2012 irs 1040ez form Demutualization of life insurance companies. 2012 irs 1040ez form   If you received stock in exchange for your equity interest as a policyholder or an annuitant, you generally will not have a recognized gain or loss. 2012 irs 1040ez form See Demutualization of Life Insurance Companies in Publication 550. 2012 irs 1040ez form U. 2012 irs 1040ez form S. 2012 irs 1040ez form Treasury notes or bonds. 2012 irs 1040ez form   You can trade certain issues of U. 2012 irs 1040ez form S. 2012 irs 1040ez form Treasury obligations for other issues designated by the Secretary of the Treasury, with no gain or loss recognized on the trade. 2012 irs 1040ez form See Savings bonds traded in chapter 1 of Publication 550 for more information. 2012 irs 1040ez form Transfers Between Spouses Generally, no gain or loss is recognized on a transfer of property from an individual to (or in trust for the benefit of) a spouse, or if incident to a divorce, a former spouse. 2012 irs 1040ez form This nonrecognition rule does not apply in the following situations. 2012 irs 1040ez form The recipient spouse or former spouse is a nonresident alien. 2012 irs 1040ez form Property is transferred in trust and liability exceeds basis. 2012 irs 1040ez form Gain must be recognized to the extent the amount of the liabilities assumed by the trust, plus any liabilities on the property, exceed the adjusted basis of the property. 2012 irs 1040ez form For other situations, see Transfers Between Spouses in chapter 4 of Publication 550. 2012 irs 1040ez form Any transfer of property to a spouse or former spouse on which gain or loss is not recognized is treated by the recipient as a gift and is not considered a sale or exchange. 2012 irs 1040ez form The recipient's basis in the property will be the same as the adjusted basis of the giver immediately before the transfer. 2012 irs 1040ez form This carryover basis rule applies whether the adjusted basis of the transferred property is less than, equal to, or greater than either its fair market value at the time of transfer or any consideration paid by the recipient. 2012 irs 1040ez form This rule applies for purposes of determining loss as well as gain. 2012 irs 1040ez form Any gain recognized on a transfer in trust increases the basis. 2012 irs 1040ez form A transfer of property is incident to a divorce if the transfer occurs within 1 year after the date on which the marriage ends, or if the transfer is related to the ending of the marriage. 2012 irs 1040ez form Related Party Transactions Special rules apply to the sale or trade of property between related parties. 2012 irs 1040ez form Gain on sale or trade of depreciable property. 2012 irs 1040ez form   Your gain from the sale or trade of property to a related party may be ordinary income, rather than capital gain, if the property can be depreciated by the party receiving it. 2012 irs 1040ez form See chapter 3 of Publication 544 for more information. 2012 irs 1040ez form Like-kind exchanges. 2012 irs 1040ez form   Generally, if you trade business or investment property for other business or investment property of a like kind, no gain or loss is recognized. 2012 irs 1040ez form See Like-kind exchanges , earlier, under Nontaxable Trades. 2012 irs 1040ez form   This rule also applies to trades of property between related parties, defined next under Losses on sales or trades of property. 2012 irs 1040ez form However, if either you or the related party disposes of the like property within 2 years after the trade, you both must report any gain or loss not recognized on the original trade on your return filed for the year in which the later disposition occurs. 2012 irs 1040ez form See Related Party Transactions in chapter 4 of Publication 550 for exceptions. 2012 irs 1040ez form Losses on sales or trades of property. 2012 irs 1040ez form   You cannot deduct a loss on the sale or trade of property, other than a distribution in complete liquidation of a corporation, if the transaction is directly or indirectly between you and the following related parties. 2012 irs 1040ez form Members of your family. 2012 irs 1040ez form This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. 2012 irs 1040ez form ), and lineal descendants (children, grandchildren, etc. 2012 irs 1040ez form ). 2012 irs 1040ez form A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. 2012 irs 1040ez form A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. 2012 irs 1040ez form (See Constructive ownership of stock , later. 2012 irs 1040ez form ) A tax-exempt charitable or educational organization directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable. 2012 irs 1040ez form   In addition, a loss on the sale or trade of property is not deductible if the transaction is directly or indirectly between the following related parties. 2012 irs 1040ez form A grantor and fiduciary, or the fiduciary and beneficiary, of any trust. 2012 irs 1040ez form Fiduciaries of two different trusts, or the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. 2012 irs 1040ez form A trust fiduciary and a corporation of which more than 50% in value of the outstanding stock is directly or indirectly owned by or for the trust, or by or for the grantor of the trust. 2012 irs 1040ez form A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest, or the profits interest, in the partnership. 2012 irs 1040ez form Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. 2012 irs 1040ez form Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. 2012 irs 1040ez form An executor and a beneficiary of an estate (except in the case of a sale or trade to satisfy a pecuniary bequest). 2012 irs 1040ez form Two corporations that are members of the same controlled group. 2012 irs 1040ez form (Under certain conditions, however, these losses are not disallowed but must be deferred. 2012 irs 1040ez form ) Two partnerships if the same persons own, directly or indirectly, more than 50% of the capital interests or the profit interests in both partnerships. 2012 irs 1040ez form Multiple property sales or trades. 2012 irs 1040ez form   If you sell or trade to a related party a number of blocks of stock or pieces of property in a lump sum, you must figure the gain or loss separately for each block of stock or piece of property. 2012 irs 1040ez form The gain on each item may be taxable. 2012 irs 1040ez form However, you cannot deduct the loss on any item. 2012 irs 1040ez form Also, you cannot reduce gains from the sales of any of these items by losses on the sales of any of the other items. 2012 irs 1040ez form Indirect transactions. 2012 irs 1040ez form   You cannot deduct your loss on the sale of stock through your broker if, under a prearranged plan, a related party buys the same stock you had owned. 2012 irs 1040ez form This does not apply to a trade between related parties through an exchange that is purely coincidental and is not prearranged. 2012 irs 1040ez form Constructive ownership of stock. 2012 irs 1040ez form   In determining whether a person directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. 2012 irs 1040ez form Rule 1. 2012 irs 1040ez form   Stock directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. 2012 irs 1040ez form Rule 2. 2012 irs 1040ez form   An individual is considered to own the stock directly or indirectly owned by or for his or her family. 2012 irs 1040ez form Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. 2012 irs 1040ez form Rule 3. 2012 irs 1040ez form   An individual owning, other than by applying rule 2, any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. 2012 irs 1040ez form Rule 4. 2012 irs 1040ez form   When applying rule 1, 2, or 3, stock constructively owned by a person under rule 1 is treated as actually owned by that person. 2012 irs 1040ez form But stock constructively owned by an individual under rule 2 or rule 3 is not treated as owned by that individual for again applying either rule 2 or rule 3 to make another person the constructive owner of the stock. 2012 irs 1040ez form Property received from a related party. 2012 irs 1040ez form    If you sell or trade at a gain property you acquired from a related party, you recognize the gain only to the extent it is more than the loss previously disallowed to the related party. 2012 irs 1040ez form This rule applies only if you are the original transferee and you acquired the property by purchase or exchange. 2012 irs 1040ez form This rule does not apply if the related party's loss was disallowed because of the wash sale rules described in chapter 4 of Publication 550 under Wash Sales. 2012 irs 1040ez form   If you sell or trade at a loss property you acquired from a related party, you cannot recognize the loss that was not allowed to the related party. 2012 irs 1040ez form Example 1. 2012 irs 1040ez form Your brother sells you stock for $7,600. 2012 irs 1040ez form His cost basis is $10,000. 2012 irs 1040ez form Your brother cannot deduct the loss of $2,400. 2012 irs 1040ez form Later, you sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900. 2012 irs 1040ez form Your reportable gain is $500 (the $2,900 gain minus the $2,400 loss not allowed to your brother). 2012 irs 1040ez form Example 2. 2012 irs 1040ez form If, in Example 1, you sold the stock for $6,900 instead of $10,500, your recognized loss is only $700 (your $7,600 basis minus $6,900). 2012 irs 1040ez form You cannot deduct the loss that was not allowed to your brother. 2012 irs 1040ez form Capital Gains and Losses This section discusses the tax treatment of gains and losses from different types of investment transactions. 2012 irs 1040ez form Character of gain or loss. 2012 irs 1040ez form   You need to classify your gains and losses as either ordinary or capital gains or losses. 2012 irs 1040ez form You then need to classify your capital gains and losses as either short term or long term. 2012 irs 1040ez form If you have long-term gains and losses, you must identify your 28% rate gains and losses. 2012 irs 1040ez form If you have a net capital gain, you must also identify any unrecaptured section 1250 gain. 2012 irs 1040ez form   The correct classification and identification helps you figure the limit on capital losses and the correct tax on capital gains. 2012 irs 1040ez form Reporting capital gains and losses is explained in chapter 16. 2012 irs 1040ez form Capital or Ordinary Gain or Loss If you have a taxable gain or a deductible loss from a transaction, it may be either a capital gain or loss or an ordinary gain or loss, depending on the circumstances. 2012 irs 1040ez form Generally, a sale or trade of a capital asset (defined next) results in a capital gain or loss. 2012 irs 1040ez form A sale or trade of a noncapital asset generally results in ordinary gain or loss. 2012 irs 1040ez form Depending on the circumstances, a gain or loss on a sale or trade of property used in a trade or business may be treated as either capital or ordinary, as explained in Publication 544. 2012 irs 1040ez form In some situations, part of your gain or loss may be a capital gain or loss and part may be an ordinary gain or loss. 2012 irs 1040ez form Capital Assets and Noncapital Assets For the most part, everything you own and use for personal purposes, pleasure, or investment is a capital asset. 2012 irs 1040ez form Some examples are: Stocks or bonds held in your personal account, A house owned and used by you and your family, Household furnishings, A car used for pleasure or commuting, Coin or stamp collections, Gems and jewelry, and Gold, silver, or any other metal. 2012 irs 1040ez form Any property you own is a capital asset, except the following noncapital assets. 2012 irs 1040ez form Property held mainly for sale to customers or property that will physically become a part of the merchandise for sale to customers. 2012 irs 1040ez form For an exception, see Capital Asset Treatment for Self-Created Musical Works , later. 2012 irs 1040ez form Depreciable property used in your trade or business, even if fully depreciated. 2012 irs 1040ez form Real property used in your trade or business. 2012 irs 1040ez form A copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property that is: Created by your personal efforts, Prepared or produced for you (in the case of a letter, memorandum, or similar property), or Acquired under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced. 2012 irs 1040ez form For an exception to this rule, see Capital Asset Treatment for Self-Created Musical Works , later. 2012 irs 1040ez form Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of property described in (1). 2012 irs 1040ez form U. 2012 irs 1040ez form S. 2012 irs 1040ez form Government publications that you received from the government free or for less than the normal sales price, or that you acquired under circumstances entitling you to the basis of someone who received the publications free or for less than the normal sales price. 2012 irs 1040ez form Certain commodities derivative financial instruments held by commodities derivatives dealers. 2012 irs 1040ez form Hedging transactions, but only if the transaction is clearly identified as a hedging transaction before the close of the day on which it was acquired, originated, or entered into. 2012 irs 1040ez form Supplies of a type you regularly use or consume in the ordinary course of your trade or business. 2012 irs 1040ez form Investment Property Investment property is a capital asset. 2012 irs 1040ez form Any gain or loss from its sale or trade is generally a capital gain or loss. 2012 irs 1040ez form Gold, silver, stamps, coins, gems, etc. 2012 irs 1040ez form   These are capital assets except when they are held for sale by a dealer. 2012 irs 1040ez form Any gain or loss you have from their sale or trade generally is a capital gain or loss. 2012 irs 1040ez form Stocks, stock rights, and bonds. 2012 irs 1040ez form   All of these (including stock received as a dividend) are capital assets except when held for sale by a securities dealer. 2012 irs 1040ez form However, if you own small business stock, see Losses on Section 1244 (Small Business) Stock , later, and Losses on Small Business Investment Company Stock, in chapter 4 of Publication 550. 2012 irs 1040ez form Personal Use Property Property held for personal use only, rather than for investment, is a capital asset, and you must report a gain from its sale as a capital gain. 2012 irs 1040ez form However, you cannot deduct a loss from selling personal use property. 2012 irs 1040ez form Capital Asset Treatment for Self-Created Musical Works You can elect to treat musical compositions and copyrights in musical works as capital assets when you sell or exchange them if: Your personal efforts created the property, or You acquired the property under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced. 2012 irs 1040ez form You must make a separate election for each musical composition (or copyright in a musical work) sold or exchanged during the tax year. 2012 irs 1040ez form You must make the election on or before the due date (including extensions) of the income tax return for the tax year of the sale or exchange. 2012 irs 1040ez form You must make the election on Form 8949 by treating the sale or exchange as the sale or exchange of a capital asset, according to Form 8949, Schedule D (Form 1040), and their separate instructions. 2012 irs 1040ez form For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. 2012 irs 1040ez form See also Schedule D (Form 1040), Form 8949, and their separate instructions. 2012 irs 1040ez form You can revoke the election if you have IRS approval. 2012 irs 1040ez form To get IRS approval, you must submit a request for a letter ruling under the appropriate IRS revenue procedure. 2012 irs 1040ez form See, for example, Rev. 2012 irs 1040ez form Proc. 2012 irs 1040ez form 2013-1, corrected by Announcement 2013–9, and amplified and modified by Rev. 2012 irs 1040ez form Proc. 2012 irs 1040ez form 2013–32, available at www. 2012 irs 1040ez form irs. 2012 irs 1040ez form gov/irb/2013-01_IRB/ar06. 2012 irs 1040ez form html. 2012 irs 1040ez form Alternatively, you are granted an automatic 6-month extension from the due date of your income tax return (excluding extensions) to revoke the election, provided you timely file your income tax return, and within this 6-month extension period, you file Form 1040X that treats the sale or exchange as the sale or exchange of property that is not a capital asset. 2012 irs 1040ez form Discounted Debt Instruments Treat your gain or loss on the sale, redemption, or retirement of a bond or other debt instrument originally issued at a discount or bought at a discount as capital gain or loss, except as explained in the following discussions. 2012 irs 1040ez form Short-term government obligations. 2012 irs 1040ez form   Treat gains on short-term federal, state, or local government obligations (other than tax-exempt obligations) as ordinary income up to your ratable share of the acquisition discount. 2012 irs 1040ez form This treatment applies to obligations with a fixed maturity date not more than 1 year from the date of issue. 2012 irs 1040ez form Acquisition discount is the stated redemption price at maturity minus your basis in the obligation. 2012 irs 1040ez form   However, do not treat these gains as income to the extent you previously included the discount in income. 2012 irs 1040ez form See Discount on Short-Term Obligations in chapter 1 of Publication 550. 2012 irs 1040ez form Short-term nongovernment obligations. 2012 irs 1040ez form   Treat gains on short-term nongovernment obligations as ordinary income up to your ratable share of original issue discount (OID). 2012 irs 1040ez form This treatment applies to obligations with a fixed maturity date of not more than 1 year from the date of issue. 2012 irs 1040ez form   However, to the extent you previously included the discount in income, you do not have to include it in income again. 2012 irs 1040ez form See Discount on Short-Term Obligations in chapter 1 of Publication 550. 2012 irs 1040ez form Tax-exempt state and local government bonds. 2012 irs 1040ez form   If these bonds were originally issued at a discount before September 4, 1982, or you acquired them before March 2, 1984, treat your part of OID as tax-exempt interest. 2012 irs 1040ez form To figure your gain or loss on the sale or trade of these bonds, reduce the amount realized by your part of OID. 2012 irs 1040ez form   If the bonds were issued after September 3, 1982, and acquired after March 1, 1984, increase the adjusted basis by your part of OID to figure gain or loss. 2012 irs 1040ez form For more information on the basis of these bonds, see Discounted Debt Instruments in chapter 4 of Publication 550. 2012 irs 1040ez form   Any gain from market discount is usually taxable on disposition or redemption of tax-exempt bonds. 2012 irs 1040ez form If you bought the bonds before May 1, 1993, the gain from market discount is capital gain. 2012 irs 1040ez form If you bought the bonds after April 30, 1993, the gain is ordinary income. 2012 irs 1040ez form   You figure the market discount by subtracting the price you paid for the bond from the sum of the original issue price of the bond and the amount of accumulated OID from the date of issue that represented interest to any earlier holders. 2012 irs 1040ez form For more information, see Market Discount Bonds in chapter 1 of Publication 550. 2012 irs 1040ez form    A loss on the sale or other disposition of a tax-exempt state or local government bond is deductible as a capital loss. 2012 irs 1040ez form Redeemed before maturity. 2012 irs 1040ez form   If a state or local bond issued before June 9, 1980, is redeemed before it matures, the OID is not taxable to you. 2012 irs 1040ez form   If a state or local bond issued after June 8, 1980, is redeemed before it matures, the part of OID earned while you hold the bond is not taxable to you. 2012 irs 1040ez form However, you must report the unearned part of OID as a capital gain. 2012 irs 1040ez form Example. 2012 irs 1040ez form On July 2, 2002, the date of issue, you bought a 20-year, 6% municipal bond for $800. 2012 irs 1040ez form The face amount of the bond was $1,000. 2012 irs 1040ez form The $200 discount was OID. 2012 irs 1040ez form At the time the bond was issued, the issuer had no intention of redeeming it before it matured. 2012 irs 1040ez form The bond was callable at its face amount beginning 10 years after the issue date. 2012 irs 1040ez form The issuer redeemed the bond at the end of 11 years (July 2, 2013) for its face amount of $1,000 plus accrued annual interest of $60. 2012 irs 1040ez form The OID earned during the time you held the bond, $73, is not taxable. 2012 irs 1040ez form The $60 accrued annual interest also is not taxable. 2012 irs 1040ez form However, you must report the unearned part of OID ($127) as a capital gain. 2012 irs 1040ez form Long-term debt instruments issued after 1954 and before May 28, 1969 (or before July 2, 1982, if a government instrument). 2012 irs 1040ez form   If you sell, trade, or redeem for a gain one of these debt instruments, the part of your gain that is not more than your ratable share of the OID at the time of the sale or redemption is ordinary income. 2012 irs 1040ez form The rest of the gain is capital gain. 2012 irs 1040ez form If, however, there was an intention to call the debt instrument before maturity, all of your gain that is not more than the entire OID is treated as ordinary income at the time of the sale. 2012 irs 1040ez form This treatment of taxable gain also applies to corporate instruments issued after May 27, 1969, under a written commitment that was binding on May 27, 1969, and at all times thereafter. 2012 irs 1040ez form Long-term debt instruments issued after May 27, 1969 (or after July 1, 1982, if a government instrument). 2012 irs 1040ez form   If you hold one of these debt instruments, you must include a part of OID in your gross income each year you own the instrument. 2012 irs 1040ez form Your basis in that debt instrument is increased by the amount of OID that you have included in your gross income. 2012 irs 1040ez form See Original Issue Discount (OID) in chapter 7 for information about OID that you must report on your tax return. 2012 irs 1040ez form   If you sell or trade the debt instrument before maturity, your gain is a capital gain. 2012 irs 1040ez form However, if at the time the instrument was originally issued there was an intention to call it before its maturity, your gain generally is ordinary income to the extent of the entire OID reduced by any amounts of OID previously includible in your income. 2012 irs 1040ez form In this case, the rest of the gain is capital gain. 2012 irs 1040ez form Market discount bonds. 2012 irs 1040ez form   If the debt instrument has market discount and you chose to include the discount in income as it accrued, increase your basis in the debt instrument by the accrued discount to figure capital gain or loss on its disposition. 2012 irs 1040ez form If you did not choose to include the discount in income as it accrued, you must report gain as ordinary interest income up to the instrument's accrued market discount. 2012 irs 1040ez form The rest of the gain is capital gain. 2012 irs 1040ez form See Market Discount Bonds in chapter 1 of Publication 550. 2012 irs 1040ez form   A different rule applies to market discount bonds issued before July 19, 1984, and purchased by you before May 1, 1993. 2012 irs 1040ez form See Market discount bonds under Discounted Debt Instruments in chapter 4 of Publication 550. 2012 irs 1040ez form Retirement of debt instrument. 2012 irs 1040ez form   Any amount you receive on the retirement of a debt instrument is treated in the same way as if you had sold or traded that instrument. 2012 irs 1040ez form Notes of individuals. 2012 irs 1040ez form   If you hold an obligation of an individual issued with OID after March 1, 1984, you generally must include the OID in your income currently, and your gain or loss on its sale or retirement is generally capital gain or loss. 2012 irs 1040ez form An exception to this treatment applies if the obligation is a loan between individuals and all the following requirements are met. 2012 irs 1040ez form The lender is not in the business of lending money. 2012 irs 1040ez form The amount of the loan, plus the amount of any outstanding prior loans, is $10,000 or less. 2012 irs 1040ez form Avoiding federal tax is not one of the principal purposes of the loan. 2012 irs 1040ez form   If the exception applies, or the obligation was issued before March 2, 1984, you do not include the OID in your income currently. 2012 irs 1040ez form When you sell or redeem the obligation, the part of your gain that is not more than your accrued share of OID at that time is ordinary income. 2012 irs 1040ez form The rest of the gain, if any, is capital gain. 2012 irs 1040ez form Any loss on the sale or redemption is capital loss. 2012 irs 1040ez form Deposit in Insolvent or Bankrupt Financial Institution If you lose money you have on deposit in a bank, credit union, or other financial institution that becomes insolvent or bankrupt, you may be able to deduct your loss in one of three ways. 2012 irs 1040ez form Ordinary loss. 2012 irs 1040ez form Casualty loss. 2012 irs 1040ez form Nonbusiness bad debt (short-term capital loss). 2012 irs 1040ez form  For more information, see Deposit in Insolvent or Bankrupt Financial Institution, in chapter 4 of Publication 550. 2012 irs 1040ez form Sale of Annuity The part of any gain on the sale of an annuity contract before its maturity date that is based on interest accumulated on the contract is ordinary income. 2012 irs 1040ez form Losses on Section 1244 (Small Business) Stock You can deduct as an ordinary loss, rather than as a capital loss, your loss on the sale, trade, or worthlessness of section 1244 stock. 2012 irs 1040ez form Report the loss on Form 4797, line 10. 2012 irs 1040ez form Any gain on section 1244 stock is a capital gain if the stock is a capital asset in your hands. 2012 irs 1040ez form Report the gain on Form 8949. 2012 irs 1040ez form See Losses on Section 1244 (Small Business) Stock in chapter 4 of Publication 550. 2012 irs 1040ez form For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. 2012 irs 1040ez form See also Schedule D (Form 1040), Form 8949, and their separate instructions. 2012 irs 1040ez form Holding Period If you sold or traded investment property, you must determine your holding period for the property. 2012 irs 1040ez form Your holding period determines whether any capital gain or loss was a short-term or long-term capital gain or loss. 2012 irs 1040ez form Long-term or short-term. 2012 irs 1040ez form   If you hold investment property more than 1 year, any capital gain or loss is a long-term capital gain or loss. 2012 irs 1040ez form If you hold the property 1 year or less, any capital gain or loss is a short-term capital gain or loss. 2012 irs 1040ez form   To determine how long you held the investment property, begin counting on the date after the day you acquired the property. 2012 irs 1040ez form The day you disposed of the property is part of your holding period. 2012 irs 1040ez form Example. 2012 irs 1040ez form If you bought investment property on February 6, 2012, and sold it on February 6, 2013, your holding period is not more than 1 year and you have a short-term capital gain or loss. 2012 irs 1040ez form If you sold it on February 7, 2013, your holding period is more than 1 year and you will have a long-term capital gain or loss. 2012 irs 1040ez form Securities traded on established market. 2012 irs 1040ez form   For securities traded on an established securities market, your holding period begins the day after the trade date you bought the securities, and ends on the trade date you sold them. 2012 irs 1040ez form    Do not confuse the trade date with the settlement date, which is the date by which the stock must be delivered and payment must be made. 2012 irs 1040ez form Example. 2012 irs 1040ez form You are a cash method, calendar year taxpayer. 2012 irs 1040ez form You sold stock at a gain on December 30, 2013. 2012 irs 1040ez form According to the rules of the stock exchange, the sale was closed by delivery of the stock 4 trading days after the sale, on January 6, 2014. 2012 irs 1040ez form You received payment of the sales price on that same day. 2012 irs 1040ez form Report your gain on your 2013 return, even though you received the payment in 2014. 2012 irs 1040ez form The gain is long term or short term depending on whether you held the stock more than 1 year. 2012 irs 1040ez form Your holding period ended on December 30. 2012 irs 1040ez form If you had sold the stock at a loss, you would also report it on your 2013 return. 2012 irs 1040ez form U. 2012 irs 1040ez form S. 2012 irs 1040ez form Treasury notes and bonds. 2012 irs 1040ez form   The holding period of U. 2012 irs 1040ez form S. 2012 irs 1040ez form Treasury notes and bonds sold at auction on the basis of yield starts the day after the Secretary of the Treasury, through news releases, gives notification of acceptance to successful bidders. 2012 irs 1040ez form The holding period of U. 2012 irs 1040ez form S. 2012 irs 1040ez form Treasury notes and bonds sold through an offering on a subscription basis at a specified yield starts the day after the subscription is submitted. 2012 irs 1040ez form Automatic investment service. 2012 irs 1040ez form   In determining your holding period for shares bought by the bank or other agent, full shares are considered bought first and any fractional shares are considered bought last. 2012 irs 1040ez form Your holding period starts on the day after the bank's purchase date. 2012 irs 1040ez form If a share was bought over more than one purchase date, your holding period for that share is a split holding period. 2012 irs 1040ez form A part of the share is considered to have been bought on each date that stock was bought by the bank with the proceeds of available funds. 2012 irs 1040ez form Nontaxable trades. 2012 irs 1040ez form   If you acquire investment property in a trade for other investment property and your basis for the new property is determined, in whole or in part, by your basis in the old property, your holding period for the new property begins on the day following the date you acquired the old property. 2012 irs 1040ez form Property received as a gift. 2012 irs 1040ez form   If you receive a gift of property and your basis is determined by the donor's adjusted basis, your holding period is considered to have started on the same day the donor's holding period started. 2012 irs 1040ez form   If your basis is determined by the fair market value of the property, your holding period starts on the day after the date of the gift. 2012 irs 1040ez form Inherited property. 2012 irs 1040ez form   Generally, if you inherited investment property, your capital gain or loss on any later disposition of that property is long-term capital gain or loss. 2012 irs 1040ez form This is true regardless of how long you actually held the property. 2012 irs 1040ez form However, if you inherited property from someone who died in 2010, see the information below. 2012 irs 1040ez form Inherited property from someone who died in 2010. 2012 irs 1040ez form   If you inherit investment property from a decedent who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your holding period. 2012 irs 1040ez form Real property bought. 2012 irs 1040ez form   To figure how long you have held real property bought under an unconditional contract, begin counting on the day after you received title to it or on the day after you took possession of it and assumed the burdens and privileges of ownership, whichever happened first. 2012 irs 1040ez form However, taking delivery or possession of real property under an option agreement is not enough to start the holding period. 2012 irs 1040ez form The holding period cannot start until there is an actual contract of sale. 2012 irs 1040ez form The holding period of the seller cannot end before that time. 2012 irs 1040ez form Real property repossessed. 2012 irs 1040ez form   If you sell real property but keep a security interest in it, and then later repossess the property under the terms of the sales contract, your holding period for a later sale includes the period you held the property before the original sale and the period after the repossession. 2012 irs 1040ez form Your holding period does not include the time between the original sale and the repossession. 2012 irs 1040ez form That is, it does not include the period during which the first buyer held the property. 2012 irs 1040ez form Stock dividends. 2012 irs 1040ez form   The holding period for stock you received as a taxable stock dividend begins on the date of distribution. 2012 irs 1040ez form   The holding period for new stock you received as a nontaxable stock dividend begins on the same day as the holding period of the old stock. 2012 irs 1040ez form This rule also applies to stock acquired in a “spin-off,” which is a distribution of stock or securities in a controlled corporation. 2012 irs 1040ez form Nontaxable stock rights. 2012 irs 1040ez form   Your holding period for nontaxable stock rights begins on the same day as the holding period of the underlying stock. 2012 irs 1040ez form The holding period for stock acquired through the exercise of stock rights begins on the date the right was exercised. 2012 irs 1040ez form Nonbusiness Bad Debts If someone owes you money that you cannot collect, you have a bad debt. 2012 irs 1040ez form You may be able to deduct the amount owed to you when you figure your tax for the year the debt becomes worthless. 2012 irs 1040ez form Generally, nonbusiness bad debts are bad debts that did not come from operating your trade or business, and are deductible as short-term capital losses. 2012 irs 1040ez form To be deductible, nonbusiness bad debts must be totally worthless. 2012 irs 1040ez form You cannot deduct a partly worthless nonbusiness debt. 2012 irs 1040ez form Genuine debt required. 2012 irs 1040ez form   A debt must be genuine for you to deduct a loss. 2012 irs 1040ez form A debt is genuine if it arises from a debtor-creditor relationship based on a valid and enforceable obligation to repay a fixed or determinable sum of money. 2012 irs 1040ez form Basis in bad debt required. 2012 irs 1040ez form    To deduct a bad debt, you must have a basis in it—that is, you must have already included the amount in your income or loaned out your cash. 2012 irs 1040ez form For example, you cannot claim a bad debt deduction for court-ordered child support not paid to you by your former spouse. 2012 irs 1040ez form If you are a cash method taxpayer (as most individuals are), you generally cannot take a bad debt deduction for unpaid salaries, wages, rents, fees, interest, dividends, and similar items. 2012 irs 1040ez form When deductible. 2012 irs 1040ez form   You can take a bad debt deduction only in the year the debt becomes worthless. 2012 irs 1040ez form You do not have to wait until a debt is due to determine whether it is worthless. 2012 irs 1040ez form A debt becomes worthless when there is no longer any chance that the amount owed will be paid. 2012 irs 1040ez form   It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. 2012 irs 1040ez form You must only show that you have taken reasonable steps to collect the debt. 2012 irs 1040ez form Bankruptcy of your debtor is generally good evidence of the worthlessness of at least a part of an unsecured and unpreferred debt. 2012 irs 1040ez form How to report bad debts. 2012 irs 1040ez form    Deduct nonbusiness bad debts as short-term capital losses on Form 8949. 2012 irs 1040ez form    Make sure you report your bad debt(s) (and any other short-term transactions for which you did not receive a Form 1099-B) on Form 8949, Part I, with box C checked. 2012 irs 1040ez form    For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. 2012 irs 1040ez form See also Schedule D (Form 1040), Form 8949, and their separate instructions. 2012 irs 1040ez form   For each bad debt, attach a statement to your return that contains: A description of the debt, including the amount, and the date it became due, The name of the debtor, and any business or family relationship between you and the debtor, The efforts you made to collect the debt, and Why you decided the debt was worthless. 2012 irs 1040ez form For example, you could show that the borrower has declared bankruptcy, or that legal action to collect would probably not result in payment of any part of the debt. 2012 irs 1040ez form Filing a claim for refund. 2012 irs 1040ez form    If you do not deduct a bad debt on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the bad debt. 2012 irs 1040ez form To do this, use Form 1040X to amend your return for the year the debt became worthless. 2012 irs 1040ez form You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. 2012 irs 1040ez form For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. 2012 irs 1040ez form Additional information. 2012 irs 1040ez form   For more information, see Nonbusiness Bad Debts in Publication 550. 2012 irs 1040ez form For information on business bad debts, see chapter 10 of Publication 535, Business Expenses. 2012 irs 1040ez form Wash Sales You cannot deduct losses from sales or trades of stock or securities in a wash sale. 2012 irs 1040ez form A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you: Buy substantially identical stock or securities, Acquire substantially identical stock or securities in a fully taxable trade, Acquire a contract or option to buy substantially identical stock or securities, or Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA. 2012 irs 1040ez form If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities (except in (4) above). 2012 irs 1040ez form The result is your basis in the new stock or securities. 2012 irs 1040ez form This adjustment postpones the loss deduction until the disposition of the new stock or securities. 2012 irs 1040ez form Your holding period for the new stock or securities includes the holding period of the stock or securities sold. 2012 irs 1040ez form For more information, see Wash Sales, in chapter 4 of Publication 550. 2012 irs 1040ez form Rollover of Gain From Publicly Traded Securities You may qualify for a tax-free rollover of certain gains from the sale of publicly traded securities. 2012 irs 1040ez form This means that if you buy certain replacement property and make the choice described in this section, you postpone part or all of your gain. 2012 irs 1040ez form You postpone the gain by adjusting the basis of the replacement property as described in Basis of replacement property , later. 2012 irs 1040ez form This postpones your gain until the year you dispose of the replacement property. 2012 irs 1040ez form You qualify to make this choice if you meet all the following tests. 2012 irs 1040ez form You sell publicly traded securities at a gain. 2012 irs 1040ez form Publicly traded securities are securities traded on an established securities market. 2012 irs 1040ez form Your gain from the sale is a capital gain. 2012 irs 1040ez form During the 60-day period beginning on the date of the sale, you buy replacement property. 2012 irs 1040ez form This replacement property must be either common stock of, or a partnership interest in a specialized small business investment company (SSBIC). 2012 irs 1040ez form This is any partnership or corporation licensed by the Small Business Administration under section 301(d) of the Small Business Investment Act of 1958, as in effect on May 13, 1993. 2012 irs 1040ez form Amount of gain recognized. 2012 irs 1040ez form   If you make the choice described in this section, you must recognize gain only up to the following amount. 2012 irs 1040ez form The amount realized on the sale, minus The cost of any common stock or partnership interest in an SSBIC that you bought during the 60-day period beginning on the date of sale (and did not previously take into account on an earlier sale of publicly traded securities). 2012 irs 1040ez form  If this amount is less than the amount of your gain, you can postpone the rest of your gain, subject to the limit described next. 2012 irs 1040ez form If this amount is equal to or more than the amount of your gain, you must recognize the full amount of your gain. 2012 irs 1040ez form Limit on gain postponed. 2012 irs 1040ez form   The amount of gain you can postpone each year is limited to the smaller of: $50,000 ($25,000 if you are married and file a separate return), or $500,000 ($250,000 if you are married and file a separate return), minus the amount of gain you postponed for all earlier years. 2012 irs 1040ez form Basis of replacement property. 2012 irs 1040ez form   You must subtract the amount of postponed gain from the basis of your replacement property. 2012 irs 1040ez form How to report and postpone gain. 2012 irs 1040ez form    See How to report and postpone gain under Rollover of Gain From Publicly Traded Securities in chapter 4 of Publication 550 for details. 2012 irs 1040ez form Prev  Up  Next   Home   More Online Publications