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Amend 2012 Taxes

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Amend 2012 Taxes

Amend 2012 taxes 14. Amend 2012 taxes   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. Amend 2012 taxes  If you are a U. Amend 2012 taxes S. Amend 2012 taxes 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. Amend 2012 taxes S. Amend 2012 taxes law. Amend 2012 taxes This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the payer. Amend 2012 taxes Introduction This chapter discusses the tax consequences of selling or trading investment property. Amend 2012 taxes It explains the following. Amend 2012 taxes What a sale or trade is. Amend 2012 taxes Figuring gain or loss. Amend 2012 taxes Nontaxable trades. Amend 2012 taxes Related party transactions. Amend 2012 taxes Capital gains or losses. Amend 2012 taxes Capital assets and noncapital assets. Amend 2012 taxes Holding period. Amend 2012 taxes Rollover of gain from publicly traded securities. Amend 2012 taxes Other property transactions. Amend 2012 taxes   Certain transfers of property are not discussed here. Amend 2012 taxes They are discussed in other IRS publications. Amend 2012 taxes These include the following. Amend 2012 taxes Sales of a main home, covered in chapter 15. Amend 2012 taxes Installment sales, covered in Publication 537, Installment Sales. Amend 2012 taxes Transactions involving business property, covered in Publication 544, Sales and Other Dispositions of Assets. Amend 2012 taxes Dispositions of an interest in a passive activity, covered in Publication 925, Passive Activity and At-Risk Rules. Amend 2012 taxes    Publication 550, Investment Income and Expenses (Including Capital Gains and Losses), provides a more detailed discussion about sales and trades of investment property. Amend 2012 taxes 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. Amend 2012 taxes It also discusses investment-related expenses. Amend 2012 taxes 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. Amend 2012 taxes Generally, you should receive the statement by February 15 of the next year. Amend 2012 taxes It will show the gross proceeds from the sale. Amend 2012 taxes If you sold a covered security in 2013, your 1099-B (or substitute statement) will show your basis. Amend 2012 taxes Generally, a covered security is a security you acquired after 2010, with certain exceptions. Amend 2012 taxes See the Instructions for Form 8949. Amend 2012 taxes The IRS will also get a copy of Form 1099-B from the broker. Amend 2012 taxes Use Form 1099-B (or substitute statement received from your broker) to complete Form 8949. Amend 2012 taxes What Is a Sale or Trade? This section explains what is a sale or trade. Amend 2012 taxes It also explains certain transactions and events that are treated as sales or trades. Amend 2012 taxes A sale is generally a transfer of property for money or a mortgage, note, or other promise to pay money. Amend 2012 taxes A trade is a transfer of property for other property or services and may be taxed in the same way as a sale. Amend 2012 taxes Sale and purchase. Amend 2012 taxes   Ordinarily, a transaction is not a trade when you voluntarily sell property for cash and immediately buy similar property to replace it. Amend 2012 taxes The sale and purchase are two separate transactions. Amend 2012 taxes But see Like-kind exchanges under Nontaxable Trades, later. Amend 2012 taxes Redemption of stock. Amend 2012 taxes   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. Amend 2012 taxes Dividend versus sale or trade. Amend 2012 taxes   Whether a redemption is treated as a sale, trade, dividend, or other distribution depends on the circumstances in each case. Amend 2012 taxes Both direct and indirect ownership of stock will be considered. Amend 2012 taxes 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. Amend 2012 taxes Redemption or retirement of bonds. Amend 2012 taxes   A redemption or retirement of bonds or notes at their maturity is generally treated as a sale or trade. Amend 2012 taxes   In addition, a significant modification of a bond is treated as a trade of the original bond for a new bond. Amend 2012 taxes For details, see Regulations section 1. Amend 2012 taxes 1001-3. Amend 2012 taxes Surrender of stock. Amend 2012 taxes   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. Amend 2012 taxes The surrendering shareholder must reallocate his or her basis in the surrendered shares to the shares he or she retains. Amend 2012 taxes Worthless securities. Amend 2012 taxes    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. Amend 2012 taxes This affects whether your capital loss is long term or short term. Amend 2012 taxes See Holding Period , later. Amend 2012 taxes   Worthless securities also include securities that you abandon after March 12, 2008. Amend 2012 taxes To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. Amend 2012 taxes 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. Amend 2012 taxes    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. Amend 2012 taxes Do not deduct them in the year the stock became worthless. Amend 2012 taxes How to report loss. Amend 2012 taxes    Report worthless securities in Part I or Part II, whichever applies, of Form 8949. Amend 2012 taxes In column (a), enter “Worthless. Amend 2012 taxes ”    Report your worthless securities transactions on Form 8949 with the correct box checked for these transactions. Amend 2012 taxes See Form 8949 and the Instructions for Form 8949. Amend 2012 taxes For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Amend 2012 taxes See also Schedule D (Form 1040), Form 8949, and their separate instructions. Amend 2012 taxes Filing a claim for refund. Amend 2012 taxes   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. Amend 2012 taxes You must use Form 1040X, Amended U. Amend 2012 taxes S. Amend 2012 taxes Individual Income Tax Return, to amend your return for the year the security became worthless. Amend 2012 taxes 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. Amend 2012 taxes For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. Amend 2012 taxes 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. Amend 2012 taxes Gain. Amend 2012 taxes   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. Amend 2012 taxes Loss. Amend 2012 taxes   If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. Amend 2012 taxes Adjusted basis. Amend 2012 taxes   The adjusted basis of property is your original cost or other original basis properly adjusted (increased or decreased) for certain items. Amend 2012 taxes See chapter 13 for more information about determining the adjusted basis of property. Amend 2012 taxes Amount realized. Amend 2012 taxes   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). Amend 2012 taxes Amount realized includes the money you receive plus the fair market value of any property or services you receive. Amend 2012 taxes 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. Amend 2012 taxes 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. Amend 2012 taxes For more information, see Publication 537. Amend 2012 taxes Fair market value. Amend 2012 taxes   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. Amend 2012 taxes Example. Amend 2012 taxes 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. Amend 2012 taxes Your gain is $3,000 ($10,000 − $7,000). Amend 2012 taxes Debt paid off. Amend 2012 taxes    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. Amend 2012 taxes This is true even if neither you nor the buyer is personally liable for the debt. Amend 2012 taxes 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. Amend 2012 taxes Example. Amend 2012 taxes You sell stock that you had pledged as security for a bank loan of $8,000. Amend 2012 taxes Your basis in the stock is $6,000. Amend 2012 taxes The buyer pays off your bank loan and pays you $20,000 in cash. Amend 2012 taxes The amount realized is $28,000 ($20,000 + $8,000). Amend 2012 taxes Your gain is $22,000 ($28,000 − $6,000). Amend 2012 taxes Payment of cash. Amend 2012 taxes   If you trade property and cash for other property, the amount you realize is the fair market value of the property you receive. Amend 2012 taxes 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. Amend 2012 taxes If the result is a positive number, it is a gain. Amend 2012 taxes If the result is a negative number, it is a loss. Amend 2012 taxes No gain or loss. Amend 2012 taxes   You may have to use a basis for figuring gain that is different from the basis used for figuring loss. Amend 2012 taxes In this case, you may have neither a gain nor a loss. Amend 2012 taxes See Basis Other Than Cost in chapter 13. Amend 2012 taxes Nontaxable Trades This section discusses trades that generally do not result in a taxable gain or deductible loss. Amend 2012 taxes For more information on nontaxable trades, see chapter 1 of Publication 544. Amend 2012 taxes Like-kind exchanges. Amend 2012 taxes   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. Amend 2012 taxes To be nontaxable, a trade must meet all six of the following conditions. Amend 2012 taxes The property must be business or investment property. Amend 2012 taxes You must hold both the property you trade and the property you receive for productive use in your trade or business or for investment. Amend 2012 taxes Neither property may be property used for personal purposes, such as your home or family car. Amend 2012 taxes The property must not be held primarily for sale. Amend 2012 taxes The property you trade and the property you receive must not be property you sell to customers, such as merchandise. Amend 2012 taxes 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. Amend 2012 taxes However, see Special rules for mutual ditch, reservoir, or irrigation company stock, in chapter 4 of Publication 550 for an exception. Amend 2012 taxes Also, you can have a nontaxable trade of corporate stocks under a different rule, as discussed later. Amend 2012 taxes There must be a trade of like property. Amend 2012 taxes The trade of real estate for real estate, or personal property for similar personal property, is a trade of like property. Amend 2012 taxes The trade of an apartment house for a store building, or a panel truck for a pickup truck, is a trade of like property. Amend 2012 taxes The trade of a piece of machinery for a store building is not a trade of like property. Amend 2012 taxes Real property located in the United States and real property located outside the United States are not like property. Amend 2012 taxes Also, personal property used predominantly within the United States and personal property used predominantly outside the United States are not like property. Amend 2012 taxes 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. Amend 2012 taxes 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. Amend 2012 taxes    If you trade property with a related party in a like-kind exchange, a special rule may apply. Amend 2012 taxes See Related Party Transactions , later in this chapter. Amend 2012 taxes 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. Amend 2012 taxes Partly nontaxable exchange. Amend 2012 taxes   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. Amend 2012 taxes 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. Amend 2012 taxes You cannot deduct a loss. Amend 2012 taxes Like property and unlike property transferred. Amend 2012 taxes   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. Amend 2012 taxes The gain or loss is the difference between the adjusted basis of the unlike property and its fair market value. Amend 2012 taxes Like property and money transferred. Amend 2012 taxes   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. Amend 2012 taxes Basis of property received. Amend 2012 taxes   To figure the basis of the property received, see Nontaxable Exchanges in chapter 13. Amend 2012 taxes How to report. Amend 2012 taxes   You must report the trade of like property on Form 8824. Amend 2012 taxes 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. Amend 2012 taxes See the instructions for Line 22 in the Instructions for Form 8824. Amend 2012 taxes   For information on using Form 4797, see chapter 4 of Publication 544. Amend 2012 taxes Corporate stocks. Amend 2012 taxes   The following trades of corporate stocks generally do not result in a taxable gain or a deductible loss. Amend 2012 taxes Corporate reorganizations. Amend 2012 taxes   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. Amend 2012 taxes 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. Amend 2012 taxes Stock for stock of the same corporation. Amend 2012 taxes   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. Amend 2012 taxes This is true for a trade between two stockholders as well as a trade between a stockholder and the corporation. Amend 2012 taxes Convertible stocks and bonds. Amend 2012 taxes   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. Amend 2012 taxes Property for stock of a controlled corporation. Amend 2012 taxes   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. Amend 2012 taxes This rule applies both to individuals and to groups who transfer property to a corporation. Amend 2012 taxes It does not apply if the corporation is an investment company. Amend 2012 taxes   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. Amend 2012 taxes   If this provision applies to you, you may have to attach to your return a complete statement of all facts pertinent to the exchange. Amend 2012 taxes For details, see Regulations section 1. Amend 2012 taxes 351-3. Amend 2012 taxes Additional information. Amend 2012 taxes   For more information on trades of stock, see Nontaxable Trades in chapter 4 of Publication 550. Amend 2012 taxes Insurance policies and annuities. Amend 2012 taxes   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. Amend 2012 taxes   You also may not have to recognize gain or loss on an exchange of a portion of an annuity contract for another annuity contract. Amend 2012 taxes 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. Amend 2012 taxes Revenue Ruling 2003-76 is available at www. Amend 2012 taxes irs. Amend 2012 taxes gov/irb/2003-33_IRB/ar11. Amend 2012 taxes html. Amend 2012 taxes Revenue Procedure 2008-24 is available at www. Amend 2012 taxes irs. Amend 2012 taxes gov/irb/2008-13_IRB/ar13. Amend 2012 taxes html. Amend 2012 taxes 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. Amend 2012 taxes Revenue Procedure 2011-38 is available at www. Amend 2012 taxes irs. Amend 2012 taxes gov/irb/2011-30_IRB/ar09. Amend 2012 taxes html. Amend 2012 taxes   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. Amend 2012 taxes 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. Amend 2012 taxes 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. Amend 2012 taxes   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. Amend 2012 taxes Demutualization of life insurance companies. Amend 2012 taxes   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. Amend 2012 taxes See Demutualization of Life Insurance Companies in Publication 550. Amend 2012 taxes U. Amend 2012 taxes S. Amend 2012 taxes Treasury notes or bonds. Amend 2012 taxes   You can trade certain issues of U. Amend 2012 taxes S. Amend 2012 taxes Treasury obligations for other issues designated by the Secretary of the Treasury, with no gain or loss recognized on the trade. Amend 2012 taxes See Savings bonds traded in chapter 1 of Publication 550 for more information. Amend 2012 taxes 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. Amend 2012 taxes This nonrecognition rule does not apply in the following situations. Amend 2012 taxes The recipient spouse or former spouse is a nonresident alien. Amend 2012 taxes Property is transferred in trust and liability exceeds basis. Amend 2012 taxes 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. Amend 2012 taxes For other situations, see Transfers Between Spouses in chapter 4 of Publication 550. Amend 2012 taxes 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. Amend 2012 taxes The recipient's basis in the property will be the same as the adjusted basis of the giver immediately before the transfer. Amend 2012 taxes 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. Amend 2012 taxes This rule applies for purposes of determining loss as well as gain. Amend 2012 taxes Any gain recognized on a transfer in trust increases the basis. Amend 2012 taxes 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. Amend 2012 taxes Related Party Transactions Special rules apply to the sale or trade of property between related parties. Amend 2012 taxes Gain on sale or trade of depreciable property. Amend 2012 taxes   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. Amend 2012 taxes See chapter 3 of Publication 544 for more information. Amend 2012 taxes Like-kind exchanges. Amend 2012 taxes   Generally, if you trade business or investment property for other business or investment property of a like kind, no gain or loss is recognized. Amend 2012 taxes See Like-kind exchanges , earlier, under Nontaxable Trades. Amend 2012 taxes   This rule also applies to trades of property between related parties, defined next under Losses on sales or trades of property. Amend 2012 taxes 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. Amend 2012 taxes See Related Party Transactions in chapter 4 of Publication 550 for exceptions. Amend 2012 taxes Losses on sales or trades of property. Amend 2012 taxes   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. Amend 2012 taxes Members of your family. Amend 2012 taxes This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. Amend 2012 taxes ), and lineal descendants (children, grandchildren, etc. Amend 2012 taxes ). Amend 2012 taxes A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. Amend 2012 taxes A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. Amend 2012 taxes (See Constructive ownership of stock , later. Amend 2012 taxes ) 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. Amend 2012 taxes   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. Amend 2012 taxes A grantor and fiduciary, or the fiduciary and beneficiary, of any trust. Amend 2012 taxes Fiduciaries of two different trusts, or the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. Amend 2012 taxes 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. Amend 2012 taxes 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. Amend 2012 taxes Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. Amend 2012 taxes 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. Amend 2012 taxes An executor and a beneficiary of an estate (except in the case of a sale or trade to satisfy a pecuniary bequest). Amend 2012 taxes Two corporations that are members of the same controlled group. Amend 2012 taxes (Under certain conditions, however, these losses are not disallowed but must be deferred. Amend 2012 taxes ) Two partnerships if the same persons own, directly or indirectly, more than 50% of the capital interests or the profit interests in both partnerships. Amend 2012 taxes Multiple property sales or trades. Amend 2012 taxes   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. Amend 2012 taxes The gain on each item may be taxable. Amend 2012 taxes However, you cannot deduct the loss on any item. Amend 2012 taxes Also, you cannot reduce gains from the sales of any of these items by losses on the sales of any of the other items. Amend 2012 taxes Indirect transactions. Amend 2012 taxes   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. Amend 2012 taxes This does not apply to a trade between related parties through an exchange that is purely coincidental and is not prearranged. Amend 2012 taxes Constructive ownership of stock. Amend 2012 taxes   In determining whether a person directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. Amend 2012 taxes Rule 1. Amend 2012 taxes   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. Amend 2012 taxes Rule 2. Amend 2012 taxes   An individual is considered to own the stock directly or indirectly owned by or for his or her family. Amend 2012 taxes Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. Amend 2012 taxes Rule 3. Amend 2012 taxes   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. Amend 2012 taxes Rule 4. Amend 2012 taxes   When applying rule 1, 2, or 3, stock constructively owned by a person under rule 1 is treated as actually owned by that person. Amend 2012 taxes 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. Amend 2012 taxes Property received from a related party. Amend 2012 taxes    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. Amend 2012 taxes This rule applies only if you are the original transferee and you acquired the property by purchase or exchange. Amend 2012 taxes 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. Amend 2012 taxes   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. Amend 2012 taxes Example 1. Amend 2012 taxes Your brother sells you stock for $7,600. Amend 2012 taxes His cost basis is $10,000. Amend 2012 taxes Your brother cannot deduct the loss of $2,400. Amend 2012 taxes Later, you sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900. Amend 2012 taxes Your reportable gain is $500 (the $2,900 gain minus the $2,400 loss not allowed to your brother). Amend 2012 taxes Example 2. Amend 2012 taxes 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). Amend 2012 taxes You cannot deduct the loss that was not allowed to your brother. Amend 2012 taxes Capital Gains and Losses This section discusses the tax treatment of gains and losses from different types of investment transactions. Amend 2012 taxes Character of gain or loss. Amend 2012 taxes   You need to classify your gains and losses as either ordinary or capital gains or losses. Amend 2012 taxes You then need to classify your capital gains and losses as either short term or long term. Amend 2012 taxes If you have long-term gains and losses, you must identify your 28% rate gains and losses. Amend 2012 taxes If you have a net capital gain, you must also identify any unrecaptured section 1250 gain. Amend 2012 taxes   The correct classification and identification helps you figure the limit on capital losses and the correct tax on capital gains. Amend 2012 taxes Reporting capital gains and losses is explained in chapter 16. Amend 2012 taxes 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. Amend 2012 taxes Generally, a sale or trade of a capital asset (defined next) results in a capital gain or loss. Amend 2012 taxes A sale or trade of a noncapital asset generally results in ordinary gain or loss. Amend 2012 taxes 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. Amend 2012 taxes 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. Amend 2012 taxes Capital Assets and Noncapital Assets For the most part, everything you own and use for personal purposes, pleasure, or investment is a capital asset. Amend 2012 taxes 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. Amend 2012 taxes Any property you own is a capital asset, except the following noncapital assets. Amend 2012 taxes Property held mainly for sale to customers or property that will physically become a part of the merchandise for sale to customers. Amend 2012 taxes For an exception, see Capital Asset Treatment for Self-Created Musical Works , later. Amend 2012 taxes Depreciable property used in your trade or business, even if fully depreciated. Amend 2012 taxes Real property used in your trade or business. Amend 2012 taxes 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. Amend 2012 taxes For an exception to this rule, see Capital Asset Treatment for Self-Created Musical Works , later. Amend 2012 taxes 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). Amend 2012 taxes U. Amend 2012 taxes S. Amend 2012 taxes 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. Amend 2012 taxes Certain commodities derivative financial instruments held by commodities derivatives dealers. Amend 2012 taxes 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. Amend 2012 taxes Supplies of a type you regularly use or consume in the ordinary course of your trade or business. Amend 2012 taxes Investment Property Investment property is a capital asset. Amend 2012 taxes Any gain or loss from its sale or trade is generally a capital gain or loss. Amend 2012 taxes Gold, silver, stamps, coins, gems, etc. Amend 2012 taxes   These are capital assets except when they are held for sale by a dealer. Amend 2012 taxes Any gain or loss you have from their sale or trade generally is a capital gain or loss. Amend 2012 taxes Stocks, stock rights, and bonds. Amend 2012 taxes   All of these (including stock received as a dividend) are capital assets except when held for sale by a securities dealer. Amend 2012 taxes 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. Amend 2012 taxes 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. Amend 2012 taxes However, you cannot deduct a loss from selling personal use property. Amend 2012 taxes 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. Amend 2012 taxes You must make a separate election for each musical composition (or copyright in a musical work) sold or exchanged during the tax year. Amend 2012 taxes 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. Amend 2012 taxes 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. Amend 2012 taxes For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Amend 2012 taxes See also Schedule D (Form 1040), Form 8949, and their separate instructions. Amend 2012 taxes You can revoke the election if you have IRS approval. Amend 2012 taxes To get IRS approval, you must submit a request for a letter ruling under the appropriate IRS revenue procedure. Amend 2012 taxes See, for example, Rev. Amend 2012 taxes Proc. Amend 2012 taxes 2013-1, corrected by Announcement 2013–9, and amplified and modified by Rev. Amend 2012 taxes Proc. Amend 2012 taxes 2013–32, available at www. Amend 2012 taxes irs. Amend 2012 taxes gov/irb/2013-01_IRB/ar06. Amend 2012 taxes html. Amend 2012 taxes 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. Amend 2012 taxes 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. Amend 2012 taxes Short-term government obligations. Amend 2012 taxes   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. Amend 2012 taxes This treatment applies to obligations with a fixed maturity date not more than 1 year from the date of issue. Amend 2012 taxes Acquisition discount is the stated redemption price at maturity minus your basis in the obligation. Amend 2012 taxes   However, do not treat these gains as income to the extent you previously included the discount in income. Amend 2012 taxes See Discount on Short-Term Obligations in chapter 1 of Publication 550. Amend 2012 taxes Short-term nongovernment obligations. Amend 2012 taxes   Treat gains on short-term nongovernment obligations as ordinary income up to your ratable share of original issue discount (OID). Amend 2012 taxes This treatment applies to obligations with a fixed maturity date of not more than 1 year from the date of issue. Amend 2012 taxes   However, to the extent you previously included the discount in income, you do not have to include it in income again. Amend 2012 taxes See Discount on Short-Term Obligations in chapter 1 of Publication 550. Amend 2012 taxes Tax-exempt state and local government bonds. Amend 2012 taxes   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. Amend 2012 taxes To figure your gain or loss on the sale or trade of these bonds, reduce the amount realized by your part of OID. Amend 2012 taxes   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. Amend 2012 taxes For more information on the basis of these bonds, see Discounted Debt Instruments in chapter 4 of Publication 550. Amend 2012 taxes   Any gain from market discount is usually taxable on disposition or redemption of tax-exempt bonds. Amend 2012 taxes If you bought the bonds before May 1, 1993, the gain from market discount is capital gain. Amend 2012 taxes If you bought the bonds after April 30, 1993, the gain is ordinary income. Amend 2012 taxes   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. Amend 2012 taxes For more information, see Market Discount Bonds in chapter 1 of Publication 550. Amend 2012 taxes    A loss on the sale or other disposition of a tax-exempt state or local government bond is deductible as a capital loss. Amend 2012 taxes Redeemed before maturity. Amend 2012 taxes   If a state or local bond issued before June 9, 1980, is redeemed before it matures, the OID is not taxable to you. Amend 2012 taxes   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. Amend 2012 taxes However, you must report the unearned part of OID as a capital gain. Amend 2012 taxes Example. Amend 2012 taxes On July 2, 2002, the date of issue, you bought a 20-year, 6% municipal bond for $800. Amend 2012 taxes The face amount of the bond was $1,000. Amend 2012 taxes The $200 discount was OID. Amend 2012 taxes At the time the bond was issued, the issuer had no intention of redeeming it before it matured. Amend 2012 taxes The bond was callable at its face amount beginning 10 years after the issue date. Amend 2012 taxes 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. Amend 2012 taxes The OID earned during the time you held the bond, $73, is not taxable. Amend 2012 taxes The $60 accrued annual interest also is not taxable. Amend 2012 taxes However, you must report the unearned part of OID ($127) as a capital gain. Amend 2012 taxes Long-term debt instruments issued after 1954 and before May 28, 1969 (or before July 2, 1982, if a government instrument). Amend 2012 taxes   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. Amend 2012 taxes The rest of the gain is capital gain. Amend 2012 taxes 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. Amend 2012 taxes 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. Amend 2012 taxes Long-term debt instruments issued after May 27, 1969 (or after July 1, 1982, if a government instrument). Amend 2012 taxes   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. Amend 2012 taxes Your basis in that debt instrument is increased by the amount of OID that you have included in your gross income. Amend 2012 taxes See Original Issue Discount (OID) in chapter 7 for information about OID that you must report on your tax return. Amend 2012 taxes   If you sell or trade the debt instrument before maturity, your gain is a capital gain. Amend 2012 taxes 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. Amend 2012 taxes In this case, the rest of the gain is capital gain. Amend 2012 taxes Market discount bonds. Amend 2012 taxes   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. Amend 2012 taxes 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. Amend 2012 taxes The rest of the gain is capital gain. Amend 2012 taxes See Market Discount Bonds in chapter 1 of Publication 550. Amend 2012 taxes   A different rule applies to market discount bonds issued before July 19, 1984, and purchased by you before May 1, 1993. Amend 2012 taxes See Market discount bonds under Discounted Debt Instruments in chapter 4 of Publication 550. Amend 2012 taxes Retirement of debt instrument. Amend 2012 taxes   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. Amend 2012 taxes Notes of individuals. Amend 2012 taxes   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. Amend 2012 taxes An exception to this treatment applies if the obligation is a loan between individuals and all the following requirements are met. Amend 2012 taxes The lender is not in the business of lending money. Amend 2012 taxes The amount of the loan, plus the amount of any outstanding prior loans, is $10,000 or less. Amend 2012 taxes Avoiding federal tax is not one of the principal purposes of the loan. Amend 2012 taxes   If the exception applies, or the obligation was issued before March 2, 1984, you do not include the OID in your income currently. Amend 2012 taxes 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. Amend 2012 taxes The rest of the gain, if any, is capital gain. Amend 2012 taxes Any loss on the sale or redemption is capital loss. Amend 2012 taxes 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. Amend 2012 taxes Ordinary loss. Amend 2012 taxes Casualty loss. Amend 2012 taxes Nonbusiness bad debt (short-term capital loss). Amend 2012 taxes  For more information, see Deposit in Insolvent or Bankrupt Financial Institution, in chapter 4 of Publication 550. Amend 2012 taxes 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. Amend 2012 taxes 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. Amend 2012 taxes Report the loss on Form 4797, line 10. Amend 2012 taxes Any gain on section 1244 stock is a capital gain if the stock is a capital asset in your hands. Amend 2012 taxes Report the gain on Form 8949. Amend 2012 taxes See Losses on Section 1244 (Small Business) Stock in chapter 4 of Publication 550. Amend 2012 taxes For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Amend 2012 taxes See also Schedule D (Form 1040), Form 8949, and their separate instructions. Amend 2012 taxes Holding Period If you sold or traded investment property, you must determine your holding period for the property. Amend 2012 taxes Your holding period determines whether any capital gain or loss was a short-term or long-term capital gain or loss. Amend 2012 taxes Long-term or short-term. Amend 2012 taxes   If you hold investment property more than 1 year, any capital gain or loss is a long-term capital gain or loss. Amend 2012 taxes If you hold the property 1 year or less, any capital gain or loss is a short-term capital gain or loss. Amend 2012 taxes   To determine how long you held the investment property, begin counting on the date after the day you acquired the property. Amend 2012 taxes The day you disposed of the property is part of your holding period. Amend 2012 taxes Example. Amend 2012 taxes 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. Amend 2012 taxes 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. Amend 2012 taxes Securities traded on established market. Amend 2012 taxes   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. Amend 2012 taxes    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. Amend 2012 taxes Example. Amend 2012 taxes You are a cash method, calendar year taxpayer. Amend 2012 taxes You sold stock at a gain on December 30, 2013. Amend 2012 taxes 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. Amend 2012 taxes You received payment of the sales price on that same day. Amend 2012 taxes Report your gain on your 2013 return, even though you received the payment in 2014. Amend 2012 taxes The gain is long term or short term depending on whether you held the stock more than 1 year. Amend 2012 taxes Your holding period ended on December 30. Amend 2012 taxes If you had sold the stock at a loss, you would also report it on your 2013 return. Amend 2012 taxes U. Amend 2012 taxes S. Amend 2012 taxes Treasury notes and bonds. Amend 2012 taxes   The holding period of U. Amend 2012 taxes S. Amend 2012 taxes 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. Amend 2012 taxes The holding period of U. Amend 2012 taxes S. Amend 2012 taxes Treasury notes and bonds sold through an offering on a subscription basis at a specified yield starts the day after the subscription is submitted. Amend 2012 taxes Automatic investment service. Amend 2012 taxes   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. Amend 2012 taxes Your holding period starts on the day after the bank's purchase date. Amend 2012 taxes If a share was bought over more than one purchase date, your holding period for that share is a split holding period. Amend 2012 taxes 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. Amend 2012 taxes Nontaxable trades. Amend 2012 taxes   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. Amend 2012 taxes Property received as a gift. Amend 2012 taxes   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. Amend 2012 taxes   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. Amend 2012 taxes Inherited property. Amend 2012 taxes   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. Amend 2012 taxes This is true regardless of how long you actually held the property. Amend 2012 taxes However, if you inherited property from someone who died in 2010, see the information below. Amend 2012 taxes Inherited property from someone who died in 2010. Amend 2012 taxes   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. Amend 2012 taxes Real property bought. Amend 2012 taxes   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. Amend 2012 taxes However, taking delivery or possession of real property under an option agreement is not enough to start the holding period. Amend 2012 taxes The holding period cannot start until there is an actual contract of sale. Amend 2012 taxes The holding period of the seller cannot end before that time. Amend 2012 taxes Real property repossessed. Amend 2012 taxes   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. Amend 2012 taxes Your holding period does not include the time between the original sale and the repossession. Amend 2012 taxes That is, it does not include the period during which the first buyer held the property. Amend 2012 taxes Stock dividends. Amend 2012 taxes   The holding period for stock you received as a taxable stock dividend begins on the date of distribution. Amend 2012 taxes   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. Amend 2012 taxes This rule also applies to stock acquired in a “spin-off,” which is a distribution of stock or securities in a controlled corporation. Amend 2012 taxes Nontaxable stock rights. Amend 2012 taxes   Your holding period for nontaxable stock rights begins on the same day as the holding period of the underlying stock. Amend 2012 taxes The holding period for stock acquired through the exercise of stock rights begins on the date the right was exercised. Amend 2012 taxes Nonbusiness Bad Debts If someone owes you money that you cannot collect, you have a bad debt. Amend 2012 taxes You may be able to deduct the amount owed to you when you figure your tax for the year the debt becomes worthless. Amend 2012 taxes 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. Amend 2012 taxes To be deductible, nonbusiness bad debts must be totally worthless. Amend 2012 taxes You cannot deduct a partly worthless nonbusiness debt. Amend 2012 taxes Genuine debt required. Amend 2012 taxes   A debt must be genuine for you to deduct a loss. Amend 2012 taxes 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. Amend 2012 taxes Basis in bad debt required. Amend 2012 taxes    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. Amend 2012 taxes For example, you cannot claim a bad debt deduction for court-ordered child support not paid to you by your former spouse. Amend 2012 taxes 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. Amend 2012 taxes When deductible. Amend 2012 taxes   You can take a bad debt deduction only in the year the debt becomes worthless. Amend 2012 taxes You do not have to wait until a debt is due to determine whether it is worthless. Amend 2012 taxes A debt becomes worthless when there is no longer any chance that the amount owed will be paid. Amend 2012 taxes   It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. Amend 2012 taxes You must only show that you have taken reasonable steps to collect the debt. Amend 2012 taxes Bankruptcy of your debtor is generally good evidence of the worthlessness of at least a part of an unsecured and unpreferred debt. Amend 2012 taxes How to report bad debts. Amend 2012 taxes    Deduct nonbusiness bad debts as short-term capital losses on Form 8949. Amend 2012 taxes    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. Amend 2012 taxes    For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Amend 2012 taxes See also Schedule D (Form 1040), Form 8949, and their separate instructions. Amend 2012 taxes   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. Amend 2012 taxes 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. Amend 2012 taxes Filing a claim for refund. Amend 2012 taxes    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. Amend 2012 taxes To do this, use Form 1040X to amend your return for the year the debt became worthless. Amend 2012 taxes 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. Amend 2012 taxes For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. Amend 2012 taxes Additional information. Amend 2012 taxes   For more information, see Nonbusiness Bad Debts in Publication 550. Amend 2012 taxes For information on business bad debts, see chapter 10 of Publication 535, Business Expenses. Amend 2012 taxes Wash Sales You cannot deduct losses from sales or trades of stock or securities in a wash sale. Amend 2012 taxes 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. Amend 2012 taxes 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). Amend 2012 taxes The result is your basis in the new stock or securities. Amend 2012 taxes This adjustment postpones the loss deduction until the disposition of the new stock or securities. Amend 2012 taxes Your holding period for the new stock or securities includes the holding period of the stock or securities sold. Amend 2012 taxes For more information, see Wash Sales, in chapter 4 of Publication 550. Amend 2012 taxes 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. Amend 2012 taxes 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. Amend 2012 taxes You postpone the gain by adjusting the basis of the replacement property as described in Basis of replacement property , later. Amend 2012 taxes This postpones your gain until the year you dispose of the replacement property. Amend 2012 taxes You qualify to make this choice if you meet all the following tests. Amend 2012 taxes You sell publicly traded securities at a gain. Amend 2012 taxes Publicly traded securities are securities traded on an established securities market. Amend 2012 taxes Your gain from the sale is a capital gain. Amend 2012 taxes During the 60-day period beginning on the date of the sale, you buy replacement property. Amend 2012 taxes This replacement property must be either common stock of, or a partnership interest in a specialized small business investment company (SSBIC). Amend 2012 taxes 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. Amend 2012 taxes Amount of gain recognized. Amend 2012 taxes   If you make the choice described in this section, you must recognize gain only up to the following amount. Amend 2012 taxes 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). Amend 2012 taxes  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. Amend 2012 taxes If this amount is equal to or more than the amount of your gain, you must recognize the full amount of your gain. Amend 2012 taxes Limit on gain postponed. Amend 2012 taxes   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. Amend 2012 taxes Basis of replacement property. Amend 2012 taxes   You must subtract the amount of postponed gain from the basis of your replacement property. Amend 2012 taxes How to report and postpone gain. Amend 2012 taxes    See How to report and postpone gain under Rollover of Gain From Publicly Traded Securities in chapter 4 of Publication 550 for details. Amend 2012 taxes Prev  Up  Next   Home   More Online Publications
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Amend 2012 taxes 4. Amend 2012 taxes   Retirement Savings Contributions Credit (Saver's Credit) Table of Contents What's New Introduction Full-time student. Amend 2012 taxes Adjusted gross income. Amend 2012 taxes Distributions received by spouse. Amend 2012 taxes Testing period. Amend 2012 taxes What's New Modified AGI limit for retirement savings contributions credit increased. Amend 2012 taxes  For 2013, you may be able to claim the retirement savings contributions credit if your modified AGI is not more than: $59,000 if your filing status is married filing jointly, $44,250 if your filing status is head of household, or $29,500 if your filing status is single, married filing separately, or qualifying widow(er). Amend 2012 taxes Introduction You may be able to take a tax credit if you make eligible contributions (defined later) to a qualified retirement plan, an eligible deferred compensation plan, or an individual retirement arrangement (IRA). Amend 2012 taxes You may be able to take a credit of up to $1,000 (up to $2,000 if filing jointly). Amend 2012 taxes This credit could reduce the federal income tax you pay dollar for dollar. Amend 2012 taxes    Can you claim the credit?   If you make eligible contributions to a qualified retirement plan, an eligible deferred compensation plan, or an IRA, you can claim the credit if all of the following apply. Amend 2012 taxes You were born before January 2, 1996. Amend 2012 taxes You are not a full-time student (explained next). Amend 2012 taxes No one else, such as your parent(s), claims an exemption for you on their tax return. Amend 2012 taxes Your adjusted gross income (defined below) is not more than: $59,000 if your filing status is married filing jointly, $44,250 if your filing status is head of household, or $29,500 if your filing status is single, married filing separately, or qualifying widow(er). Amend 2012 taxes Full-time student. Amend 2012 taxes   You are a full-time student if, during some part of each of 5 calendar months (not necessarily consecutive) during the calendar year, you are either: A full-time student at a school that has a regular teaching staff, course of study, and regularly enrolled body of students in attendance, or A student taking a full-time, on-farm training course given by either a school that has a regular teaching staff, course of study, and regularly enrolled body of students in attendance, or a state, county, or local government. Amend 2012 taxes You are a full-time student if you are enrolled for the number of hours or courses the school considers to be full time. Amend 2012 taxes Adjusted gross income. Amend 2012 taxes   This is generally the amount on line 38 of your 2013 Form 1040; line 22 of your 2013 Form 1040A; or line 37 of your 2013 Form 1040NR. Amend 2012 taxes However, you must add to that amount any exclusion or deduction claimed for the year for: Foreign earned income, Foreign housing costs, Income for bona fide residents of American Samoa, and Income from Puerto Rico. Amend 2012 taxes Eligible contributions. Amend 2012 taxes   These include: Contributions to a traditional or Roth IRA, Salary reduction contributions (elective deferrals, including amounts designated as after-tax Roth contributions) to: A 401(k) plan (including a SIMPLE 401(k)), A section 403(b) annuity, An eligible deferred compensation plan of a state or local government (a governmental 457 plan), A SIMPLE IRA plan, or A salary reduction SEP, and Contributions to a section 501(c)(18) plan. Amend 2012 taxes They also include voluntary after-tax employee contributions to a tax-qualified retirement plan or section 403(b) annuity. Amend 2012 taxes For purposes of the credit, an employee contribution will be voluntary as long as it is not required as a condition of employment. Amend 2012 taxes Reducing eligible contributions. Amend 2012 taxes   Reduce your eligible contributions (but not below zero) by the total distributions you received during the testing period (defined later) from any IRA, plan, or annuity included above under Eligible contributions. Amend 2012 taxes Also reduce your eligible contributions by any distribution from a Roth IRA that is not rolled over, even if the distribution is not taxable. Amend 2012 taxes   Do not reduce your eligible contributions by any of the following. Amend 2012 taxes The portion of any distribution which is not includible in income because it is a trustee-to-trustee transfer or a rollover distribution. Amend 2012 taxes Distributions that are taxable as the result of an in-plan rollover to your designated Roth account. Amend 2012 taxes Any distribution that is a return of a contribution to an IRA (including a Roth IRA) made during the year for which you claim the credit if: The distribution is made before the due date (including extensions) of your tax return for that year, You do not take a deduction for the contribution, and The distribution includes any income attributable to the contribution. Amend 2012 taxes Loans from a qualified employer plan treated as a distribution. Amend 2012 taxes Distributions of excess contributions or deferrals (and income attributable to excess contributions and deferrals). Amend 2012 taxes Distributions of dividends paid on stock held by an employee stock ownership plan under section 404(k). Amend 2012 taxes Distributions from an eligible retirement plan that are converted or rolled over to a Roth IRA. Amend 2012 taxes Distributions from a military retirement plan. Amend 2012 taxes Distributions from an inherited IRA by a nonspousal beneficiary. Amend 2012 taxes Distributions received by spouse. Amend 2012 taxes   Any distributions your spouse receives are treated as received by you if you file a joint return with your spouse both for the year of the distribution and for the year for which you claim the credit. Amend 2012 taxes Testing period. Amend 2012 taxes   The testing period consists of the year for which you claim the credit, the period after the end of that year and before the due date (including extensions) for filing your return for that year, and the 2 tax years before that year. Amend 2012 taxes Example. Amend 2012 taxes You and your spouse filed joint returns in 2011 and 2012, and plan to do so in 2013 and 2014. Amend 2012 taxes You received a taxable distribution from a qualified plan in 2011 and a taxable distribution from an eligible deferred compensation plan in 2012. Amend 2012 taxes Your spouse received taxable distributions from a Roth IRA in 2013 and tax-free distributions from a Roth IRA in 2014 before April 15. Amend 2012 taxes You made eligible contributions to an IRA in 2013 and you otherwise qualify for this credit. Amend 2012 taxes You must reduce the amount of your qualifying contributions in 2013 by the total of the distributions you received in 2011, 2012, 2013, and 2014. Amend 2012 taxes Maximum eligible contributions. Amend 2012 taxes   After your contributions are reduced, the maximum annual contribution on which you can base the credit is $2,000 per person. Amend 2012 taxes Effect on other credits. Amend 2012 taxes   The amount of this credit will not change the amount of your refundable tax credits. Amend 2012 taxes A refundable tax credit, such as the earned income credit or the refundable amount of your child tax credit, is an amount that you would receive as a refund even if you did not otherwise owe any taxes. Amend 2012 taxes Maximum credit. Amend 2012 taxes   This is a nonrefundable credit. Amend 2012 taxes The amount of the credit in any year cannot be more than the amount of tax that you would otherwise pay (not counting any refundable credits) in any year. Amend 2012 taxes If your tax liability is reduced to zero because of other nonrefundable credits, such as the credit for child and dependent care expenses, then you will not be entitled to this credit. Amend 2012 taxes How to figure and report the credit. Amend 2012 taxes   The amount of the credit you can get is based on the contributions you make and your credit rate. Amend 2012 taxes Your credit rate can be as low as 10% or as high as 50%. Amend 2012 taxes Your credit rate depends on your income and your filing status. Amend 2012 taxes See Form 8880 to determine your credit rate. Amend 2012 taxes   The maximum contribution taken into account is $2,000 per person. Amend 2012 taxes On a joint return, up to $2,000 is taken into account for each spouse. Amend 2012 taxes   Figure the credit on Form 8880. Amend 2012 taxes Report the credit on line 50 of your Form 1040; line 32 of your Form 1040A; or line 47 of your Form 1040NR and attach Form 8880 to your return. Amend 2012 taxes Prev  Up  Next   Home   More Online Publications