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2013 Amended Tax Return

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2013 Amended Tax Return

2013 amended tax return 3. 2013 amended tax return   Dispositions of Business Property Table of Contents Introduction Useful Items - You may want to see: What Is a Disposition of Property?Like-kind exchanges. 2013 amended tax return How Do I Figure a Gain or Loss?Is My Gain or Loss Ordinary or Capital? Is My Capital Gain or Loss Short Term or Long Term? Where Do I Report Gains and Losses? Introduction If you dispose of business property, you may have a gain or loss that you report on Form 1040. 2013 amended tax return However, in some cases you may have a gain that is not taxable or a loss that is not deductible. 2013 amended tax return This chapter discusses whether you have a disposition, how to figure the gain or loss, and where to report the gain or loss. 2013 amended tax return Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 4797 Sales of Business Property Sch D (Form 1040) Capital Gains and Losses See chapter 12 for information about getting publications and forms. 2013 amended tax return What Is a Disposition of Property? A disposition of property includes the following transactions. 2013 amended tax return You sell property for cash or other property. 2013 amended tax return You exchange property for other property. 2013 amended tax return You receive money as a tenant for the cancellation of a lease. 2013 amended tax return You receive money for granting the exclusive use of a copyright throughout its life in a particular medium. 2013 amended tax return You transfer property to satisfy a debt. 2013 amended tax return You abandon property. 2013 amended tax return Your bank or other financial institution forecloses on your mortgage or repossesses your property. 2013 amended tax return Your property is damaged, destroyed, or stolen, and you receive property or money in payment. 2013 amended tax return Your property is condemned, or disposed of under the threat of condemnation, and you receive property or money in payment. 2013 amended tax return For details about damaged, destroyed, or stolen property, see Publication 547, Casualties, Disasters, and Thefts. 2013 amended tax return For details about other dispositions, see chapter 1 in Publication 544. 2013 amended tax return Nontaxable exchanges. 2013 amended tax return   Certain exchanges of property are not taxable. 2013 amended tax return This means any gain from the exchange is not recognized and you cannot deduct any loss. 2013 amended tax return Your gain or loss will not be recognized until you sell or otherwise dispose of the property you receive. 2013 amended tax return Like-kind exchanges. 2013 amended tax return   A like-kind exchange is the exchange of property for the same kind of property. 2013 amended tax return It is the most common type of nontaxable exchange. 2013 amended tax return To be a like-kind exchange, the property traded and the property received must be both of the following. 2013 amended tax return Business or investment property. 2013 amended tax return Like property. 2013 amended tax return   Report the exchange of like-kind property on Form 8824, Like-Kind Exchanges. 2013 amended tax return For more information about like-kind exchanges, see chapter 1 in Publication 544. 2013 amended tax return Installment sales. 2013 amended tax return   An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. 2013 amended tax return If you finance the buyer's purchase of your property, instead of having the buyer get a loan or mortgage from a third party, you probably have an installment sale. 2013 amended tax return   For more information about installment sales, see Publication 537, Installment Sales. 2013 amended tax return Sale of a business. 2013 amended tax return   The sale of a business usually is not a sale of one asset. 2013 amended tax return Instead, all the assets of the business are sold. 2013 amended tax return Generally, when this occurs, each asset is treated as being sold separately for determining the treatment of gain or loss. 2013 amended tax return   Both the buyer and seller involved in the sale of a business must report to the IRS the allocation of the sales price among the business assets. 2013 amended tax return Use Form 8594, Asset Acquisition Statement Under Section 1060, to provide this information. 2013 amended tax return The buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. 2013 amended tax return   For more information about the sale of a business, see chapter 2 of Publication 544. 2013 amended tax return How Do I Figure a Gain or Loss? Table 3-1. 2013 amended tax return How To Figure a Gain or Loss IF your. 2013 amended tax return . 2013 amended tax return . 2013 amended tax return THEN you have a. 2013 amended tax return . 2013 amended tax return . 2013 amended tax return Adjusted basis is more than the amount realized Loss. 2013 amended tax return Amount realized is more than the adjusted basis Gain. 2013 amended tax return Basis, adjusted basis, amount realized, fair market value, and amount recognized are defined next. 2013 amended tax return You need to know these definitions to figure your gain or loss. 2013 amended tax return Basis. 2013 amended tax return   The cost or purchase price of property is usually its basis for figuring the gain or loss from its sale or other disposition. 2013 amended tax return However, if you acquired the property by gift, inheritance, or in some way other than buying it, you must use a basis other than its cost. 2013 amended tax return For more information about basis, see Publication 551, Basis of Assets. 2013 amended tax return Adjusted basis. 2013 amended tax return   The adjusted basis of property is your original cost or other basis plus certain additions, and minus certain deductions such as depreciation and casualty losses. 2013 amended tax return In determining gain or loss, the costs of transferring property to a new owner, such as selling expenses, are added to the adjusted basis of the property. 2013 amended tax return Amount realized. 2013 amended tax return   The amount you realize from a disposition is the total of all money you receive plus the fair market value of all property or services you receive. 2013 amended tax return The amount you realize also includes any of your liabilities that were assumed by the buyer and any liabilities to which the property you transferred is subject, such as real estate taxes or a mortgage. 2013 amended tax return Fair market value. 2013 amended tax return   Fair market value is the price at which the property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. 2013 amended tax return Amount recognized. 2013 amended tax return   Your gain or loss realized from a disposition of property is usually a recognized gain or loss for tax purposes. 2013 amended tax return Recognized gains must be included in gross income. 2013 amended tax return Recognized losses are deductible from gross income. 2013 amended tax return However, a gain or loss realized from certain exchanges of property is not recognized. 2013 amended tax return See  Nontaxable exchanges, earlier. 2013 amended tax return Also, you cannot deduct a loss from the disposition of property held for personal use. 2013 amended tax return Is My Gain or Loss Ordinary or Capital? You must classify your gains and losses as either ordinary or capital gains or losses. 2013 amended tax return You must do this to figure your net capital gain or loss. 2013 amended tax return Generally, you will have a capital gain or loss if you dispose of a capital asset. 2013 amended tax return For the most part, everything you own and use for personal purposes or investment is a capital asset. 2013 amended tax return Certain property you use in your business is not a capital asset. 2013 amended tax return A gain or loss from a disposition of this property is an ordinary gain or loss. 2013 amended tax return However, if you held the property longer than 1 year, you may be able to treat the gain or loss as a capital gain or loss. 2013 amended tax return These gains and losses are called section 1231 gains and losses. 2013 amended tax return For more information about ordinary and capital gains and losses, see chapters 2 and 3 in Publication 544. 2013 amended tax return Is My Capital Gain or Loss Short Term or Long Term? If you have a capital gain or loss, you must determine whether it is long term or short term. 2013 amended tax return Whether a gain or loss is long or short term depends on how long you own the property before you dispose of it. 2013 amended tax return The time you own property before disposing of it is called the holding period. 2013 amended tax return Table 3-2. 2013 amended tax return Do I Have a Short-Term or Long-Term Gain or Loss? IF you hold the property. 2013 amended tax return . 2013 amended tax return . 2013 amended tax return THEN you have a. 2013 amended tax return . 2013 amended tax return . 2013 amended tax return 1 year or less Short-term capital gain or loss. 2013 amended tax return More than 1 year Long-term capital gain or loss. 2013 amended tax return For more information about short-term and long-term capital gains and losses, see chapter 4 of Publication 544. 2013 amended tax return Where Do I Report Gains and Losses? Report gains and losses from the following dispositions on the forms indicated. 2013 amended tax return The instructions for the forms explain how to fill them out. 2013 amended tax return Dispositions of business property and depreciable property. 2013 amended tax return   Use Form 4797. 2013 amended tax return If you have taxable gain, you may also have to use Schedule D (Form 1040). 2013 amended tax return Like-kind exchanges. 2013 amended tax return   Use Form 8824, Like-Kind Exchanges. 2013 amended tax return You may also have to use Form 4797 and Schedule D (Form 1040). 2013 amended tax return Installment sales. 2013 amended tax return   Use Form 6252, Installment Sale Income. 2013 amended tax return You may also have to use Form 4797 and Schedule D (Form 1040). 2013 amended tax return Casualties and thefts. 2013 amended tax return   Use Form 4684, Casualties and Thefts. 2013 amended tax return You may also have to use Form 4797. 2013 amended tax return Condemned property. 2013 amended tax return   Use Form 4797. 2013 amended tax return You may also have to use Schedule D (Form 1040). 2013 amended tax return Prev  Up  Next   Home   More Online Publications
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The 2013 Amended Tax Return

2013 amended tax return 1. 2013 amended tax return   Canceled Debts Table of Contents General RulesForm 1099-C Discounts and loan modifications Sales or other dispositions (such as foreclosures and repossessions) Abandonments Stockholder debt This chapter discusses the tax treatment of canceled debts. 2013 amended tax return General Rules Generally, if a debt for which you are personally liable is forgiven or discharged for less than the full amount owed, the debt is considered canceled in whatever amount it remained unpaid. 2013 amended tax return There are exceptions to this rule, discussed under Exceptions , later. 2013 amended tax return Generally, you must include the canceled debt in your income. 2013 amended tax return However, you may be able to exclude the canceled debt. 2013 amended tax return See Exclusions , later. 2013 amended tax return Example. 2013 amended tax return John owed $1,000 to Mary. 2013 amended tax return Mary agreed to accept and John paid $400 in satisfaction of the entire debt. 2013 amended tax return John has canceled debt of $600. 2013 amended tax return Example. 2013 amended tax return Margaret owed $1,000 to Henry. 2013 amended tax return Henry and Margaret agreed that Margaret would provide Henry with services (instead of money) in full satisfaction of the debt. 2013 amended tax return Margaret does not have canceled debt. 2013 amended tax return Instead, she has income from services. 2013 amended tax return A debt includes any indebtedness: For which you are liable, or Subject to which you hold property. 2013 amended tax return Debt for which you are personally liable is recourse debt. 2013 amended tax return All other debt is nonrecourse debt. 2013 amended tax return If you are not personally liable for the debt, you do not have ordinary income from the cancellation of debt unless you retain the collateral and either: The lender offers a discount for the early payment of the debt, or The lender agrees to a loan modification that results in the reduction of the principal balance of the debt. 2013 amended tax return See Discounts and loan modifications , later. 2013 amended tax return However, upon the disposition of the property securing a nonrecourse debt, the amount realized includes the entire unpaid amount of the debt, not just the FMV of the property. 2013 amended tax return As a result, you may realize a gain or loss if the outstanding debt immediately before the disposition is more or less than your adjusted basis in the property. 2013 amended tax return For more details on figuring your gain or loss, see chapter 2 of this publication or see Publication 544. 2013 amended tax return There are several exceptions and exclusions that may result in part or all of a canceled debt being nontaxable. 2013 amended tax return See Exceptions and Exclusions, later. 2013 amended tax return You must report any taxable canceled debt as ordinary income on: Form 1040 or Form 1040NR, line 21, if the debt is a nonbusiness debt; Schedule C (Form 1040), line 6 (or Schedule C-EZ (Form 1040), line 1), if the debt is related to a nonfarm sole proprietorship; Schedule E (Form 1040), line 3, if the debt is related to nonfarm rental of real property; Form 4835, line 6, if the debt is related to a farm rental activity for which you use Form 4835 to report farm rental income based on crops or livestock produced by a tenant; or Schedule F (Form 1040), line 8, if the debt is farm debt and you are a farmer. 2013 amended tax return Form 1099-C If you receive a Form 1099-C, that means an applicable entity has reported an identifiable event to the IRS regarding a debt you owe. 2013 amended tax return The identifiable event may be an actual cancellation of the debt or it may be an event the applicable entity is required, solely for purposes of reporting to the IRS, to treat as a cancellation of debt. 2013 amended tax return For information on the reasons an applicable entity files Form 1099-C, see Identifiable event codes, later. 2013 amended tax return Unless you meet one of the exceptions or exclusions discussed later, this canceled debt is ordinary income and must be reported on the appropriate form discussed above. 2013 amended tax return An applicable entity includes: A federal government agency, A financial institution, A credit union, and Any organization a significant trade or business of which is lending money. 2013 amended tax return Identifiable event codes. 2013 amended tax return    Box 6 of Form 1099-C should indicate the reason the creditor filed this form. 2013 amended tax return The codes shown in box 6 are explained below. 2013 amended tax return Also see the chart after the explanation for a quick reference guide for the codes used in Box 6. 2013 amended tax return Note. 2013 amended tax return Codes A through G and I identify specific occurrences resulting from an actual discharge of indebtedness. 2013 amended tax return However, Code H, Expiration of nonpayment testing period, does not necessarily identify an actual discharge of indebtedness. 2013 amended tax return Code A — Bankruptcy. 2013 amended tax return Code A is used to identify cancellation of debt as a result of a title 11 bankruptcy case. 2013 amended tax return See Bankruptcy , later. 2013 amended tax return Code B — Other judicial debt relief. 2013 amended tax return Code B is used to identify cancellation of debt as a result of a receivership, foreclosure, or similar federal or state court proceeding other than bankruptcy. 2013 amended tax return Code C — Statute of limitations or expiration of deficiency period. 2013 amended tax return Code C is used to identify cancellation of debt either when the statute of limitations for collecting the debt expires or when the statutory period for filing a claim or beginning a deficiency judgment proceeding expires. 2013 amended tax return In the case of the expiration of a statute of limitations, an identifiable event occurs only if and when your affirmative defense of the statute of limitations is upheld in a final judgment or decision in a judicial proceeding, and the period for appealing the judgment or decision has expired. 2013 amended tax return Code D — Foreclosure election. 2013 amended tax return Code D is used to identify cancellation of debt when the creditor elects foreclosure remedies that statutorily end or bar the creditor's right to pursue collection of the debt. 2013 amended tax return This event applies to a mortgage lender or holder who is barred from pursuing debt collection after a power of sale in the mortgage or deed of trust is exercised. 2013 amended tax return Code E — Debt relief from probate or similar proceeding. 2013 amended tax return Code E is used to identify cancellation of debt as a result of a probate court or similar legal proceeding. 2013 amended tax return Code F — By agreement. 2013 amended tax return Code F is used to identify cancellation of debt as a result of an agreement between the creditor and the debtor to cancel the debt at less than full consideration. 2013 amended tax return Code G — Decision or policy to discontinue collection. 2013 amended tax return Code G is used to identify cancellation of debt as a result of a decision or a defined policy of the creditor to discontinue collection activity and cancel the debt. 2013 amended tax return For purposes of this identifiable event, a defined policy includes both a written policy and the creditor's established business practice. 2013 amended tax return Code H — Expiration of nonpayment testing period. 2013 amended tax return Code H is used to indicate that the creditor has not received a payment on the debt during a testing period ending on December 31, 2013. 2013 amended tax return The testing period is a 36-month period increased by the number of months the creditor was prevented from engaging in collection activity by a stay in bankruptcy or similar bar under state or local law. 2013 amended tax return This identifiable event applies only for a creditor that is a financial institution or credit union (and certain of their subsidiaries), the Federal Deposit Insurance Corporation (FDIC), Resolution Trust Corporation (RTC), National Credit Union Administration (NCUA), and other Federal executive agencies. 2013 amended tax return Expiration of the nonpayment testing period does not necessarily result from an actual discharge of indebtedness. 2013 amended tax return Code I — Other actual discharge before identifiable event. 2013 amended tax return Code I is used to identify an actual cancellation of debt that occurs before any of the identifiable events described in codes A through H. 2013 amended tax return Form 1099-C Reference Guide for Box 6 Identifiable Event Codes A Bankruptcy B Other judicial debt relief C Statute of limitations or expiration of deficiency period D Foreclosure election E Debt relief from probate or similar proceeding F By agreement G Decision or policy to discontinue collection H Expiration of nonpayment testing period I Other actual discharge before identifiable event Even if you did not receive a Form 1099-C, you must report canceled debt as gross income on your tax return unless one of the exceptions or exclusions described later applies. 2013 amended tax return Amount of canceled debt. 2013 amended tax return    The amount in box 2 of Form 1099-C may represent some or all of the debt that has been canceled or treated as canceled. 2013 amended tax return The amount in box 2 will include principal and may include interest and other nonprincipal amounts (such as fees or penalties). 2013 amended tax return Unless you meet one of the exceptions or exclusions discussed later, the amount of the debt that has been canceled is ordinary income and must be reported on the appropriate form as discussed earlier. 2013 amended tax return Interest included in canceled debt. 2013 amended tax return    If any interest is included in the amount of canceled debt in box 2, it will be shown in box 3. 2013 amended tax return Whether the interest portion of the canceled debt must be included in your income depends on whether the interest would be deductible if you paid it. 2013 amended tax return See Deductible Debt under Exceptions, later. 2013 amended tax return Persons who each receive a Form 1099-C showing the full amount of debt. 2013 amended tax return    If you and another person were jointly and severally liable for a canceled debt, each of you may get a Form 1099-C showing the entire amount of the canceled debt. 2013 amended tax return However, you may not have to report that entire amount as income. 2013 amended tax return The amount, if any, you must report depends on all the facts and circumstances, including: State law, The amount of debt proceeds each person received, How much of any interest deduction from the debt was claimed by each person, How much of the basis of any co-owned property bought with the debt proceeds was allocated to each co-owner, and Whether the canceled debt qualifies for any of the exceptions or exclusions described in this publication. 2013 amended tax return See Example 3 under Insolvency, later. 2013 amended tax return Discounts and loan modifications If a lender discounts (reduces) the principal balance of a loan because you pay it off early, or agrees to a loan modification (a “workout”) that includes a reduction in the principal balance of a loan, the amount of the discount or the amount of principal reduction is canceled debt. 2013 amended tax return However, if the debt is nonrecourse and you did not retain the collateral, you do not have cancellation of the debt income. 2013 amended tax return The amount of the canceled debt must be included in income unless one of the exceptions or exclusions described later applies. 2013 amended tax return For more details, see Exceptions and Exclusions, later. 2013 amended tax return Sales or other dispositions (such as foreclosures and repossessions) Recourse debt. 2013 amended tax return   If you owned property that was subject to a recourse debt in excess of the FMV of the property, the lender's foreclosure or repossession of the property is treated as a sale or disposition of the property by you and may result in your realization of gain or loss. 2013 amended tax return The gain or loss on the disposition of the property is measured by the difference between the FMV of the property at the time of the disposition and your adjusted basis (usually your cost) in the property. 2013 amended tax return The character of the gain or loss (such as ordinary or capital) is determined by the character of the property. 2013 amended tax return If the lender forgives all or part of the amount of the debt in excess of the FMV of the property, the cancellation of the excess debt may result in ordinary income. 2013 amended tax return The ordinary income from the cancellation of debt (the excess of the canceled debt over the FMV of the property) must be included in your gross income reported on your tax return unless one of the exceptions or exclusions described later applies. 2013 amended tax return For more details, see Exceptions and Exclusions, later. 2013 amended tax return Nonrecourse debt. 2013 amended tax return   If you owned property that was subject to a nonrecourse debt in excess of the FMV of the property, the lender's foreclosure on the property does not result in ordinary income from the cancellation of debt. 2013 amended tax return The entire amount of the nonrecourse debt is treated as an amount realized on the disposition of the property. 2013 amended tax return The gain or loss on the disposition of the property is measured by the difference between the total amount realized (the entire amount of the nonrecourse debt plus the amount of cash and the FMV of any property received) and your adjusted basis in the property. 2013 amended tax return The character of the gain or loss is determined by the character of the property. 2013 amended tax return More information. 2013 amended tax return    See Publications 523, 544, and 551, and chapter 2 of this publication for more details. 2013 amended tax return Abandonments Recourse debt. 2013 amended tax return   If you abandon property that secures a debt for which you are personally liable (recourse debt) and the debt is canceled, you will realize ordinary income equal to the canceled debt. 2013 amended tax return You must report this income on your tax return unless one of the exceptions or exclusions described later applies. 2013 amended tax return For more details, see Exceptions and Exclusions, later. 2013 amended tax return This income is separate from any amount realized from the abandonment of the property. 2013 amended tax return For more details, see chapter 3. 2013 amended tax return Nonrecourse debt. 2013 amended tax return   If you abandon property that secures a debt for which you are not personally liable (nonrecourse debt), you may realize gain or loss but will not have cancellation of indebtedness income. 2013 amended tax return Stockholder debt If you are a stockholder in a corporation and the corporation cancels or forgives your debt to it, the canceled debt is a constructive distribution. 2013 amended tax return For more information, see Publication 542, Corporations. 2013 amended tax return Prev  Up  Next   Home   More Online Publications