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Amended Tax Return Instructions

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Amended Tax Return Instructions

Amended tax return instructions Tax Changes for Businesses Table of Contents 2001 ChangesNew 5-Year Carryback Rule for Net Operating Losses (NOLs) Electronic Form 1099 Tax Incentives for New York Liberty Zone Other 2001 Changes 2002 ChangesNonaccrual-Experience Method Issuance of Qualified Zone Academy Bonds Depletion Work Opportunity Credit Expanded in New York Liberty Zone Credit For Pension Plan Startup Costs Welfare-to-Work Credit Extended Work Opportunity Credit Extended Electric and Clean-Fuel Vehicles Renewable Electricity Production Credit Later ChangesSpecial Depreciation Allowance Extension of Placed in Service Date Special Liberty Zone Depreciation Allowance for New and Used Property Depreciation of Property Used on Indian Reservations Indian Employment Credit Extended 2001 Changes New 5-Year Carryback Rule for Net Operating Losses (NOLs) If you have an NOL from a tax year ending during 2001 or 2002, you must generally carry back the entire amount of the NOL to the 5 tax years before the NOL year (the carryback period). Amended tax return instructions However, you can still choose to use the previous carryback period. Amended tax return instructions You also can choose not to carry back an NOL and only carry it forward. Amended tax return instructions Individuals, estates, and trusts can file Form 1045, Application for Tentative Refund. Amended tax return instructions Corporations can file Form 1139, Corporation Application for Tentative Refund. Amended tax return instructions The instructions for these forms will be revised to reflect the new law. Amended tax return instructions Electronic Form 1099 For tax years ending after March 9, 2002, most Forms 1099 can be furnished electronically if the recipient consents, according to IRS regulations, to receive it that way. Amended tax return instructions Tax Incentives for New York Liberty Zone New tax benefits are provided for the parts of New York City damaged in the terrorist attacks on September 11, 2001. Amended tax return instructions These benefits apply to the newly created New York Liberty Zone, which is the area located on or south of Canal Street, East Broadway (east of its intersection with Canal Street), or Grand Street (east of its intersection with East Broadway), in the Borough of Manhattan. Amended tax return instructions Tax benefits for the New York Liberty Zone include the following. Amended tax return instructions A special depreciation allowance equal to 30% of the adjusted basis of qualified Liberty Zone property. Amended tax return instructions It is allowed for the year the property is placed in service. Amended tax return instructions No alternative minimum tax depreciation adjustment for qualified Liberty Zone property. Amended tax return instructions Classification of Liberty Zone leasehold improvement property as 5-year property. Amended tax return instructions Authorization of the issuance of tax-exempt New York Liberty bonds to finance the acquisition, construction, reconstruction, and renovation of nonresidential real property, residential rental property, and public utility property in the Liberty Zone. Amended tax return instructions An increased section 179 deduction for certain Liberty Zone property. Amended tax return instructions Extension of the replacement period from 2 years to 5 years for certain property involuntarily converted as a result of the terrorist attacks on September 11, 2001, but only if substantially all of the use of the replacement property is in New York City. Amended tax return instructions For more information about involuntary conversions, see Postponement of Gain in Publication 547, Casualties, Disasters, and Thefts. Amended tax return instructions In addition, for 2002 and 2003, the work opportunity credit is expanded by creating a new targeted group, consisting generally of employees who work in the Liberty Zone or, in certain cases, in New York City outside the Liberty Zone. Amended tax return instructions For more information, see Work Opportunity Credit Expanded in New York Liberty Zone under 2002 Changes, later. Amended tax return instructions For more information about the 30% special depreciation allowance, Liberty Zone leasehold improvement property, or increased section 179 deduction, see New York Liberty Zone Benefits, in chapter 5. Amended tax return instructions In addition, the tax benefits for the Liberty Zone will be covered in a new edition of Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities, available later in 2002. Amended tax return instructions Other 2001 Changes Other changes are discussed in the following chapters. Amended tax return instructions Chapter 4 Car Expenses Chapter 5 Depreciation 2002 Changes Nonaccrual-Experience Method Under current law, if you perform services and use an accrual method of accounting, you do not accrue income which, based on experience, you expect to be uncollectible. Amended tax return instructions Beginning in 2002, this rule only applies if you perform services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, and consulting, or your average annual gross receipts for the 3 prior tax years does not exceed $5,000,000. Amended tax return instructions As under current law, the nonaccrual-experience method will not apply to amounts on which you charge interest or a late payment penalty. Amended tax return instructions For more information, see Nonaccrual-Experience Method in chapter 11 of Publication 535, Business Expenses. Amended tax return instructions Issuance of Qualified Zone Academy Bonds State and local governments issue qualified zone academy bonds to raise funds for the use of qualified zone academies. Amended tax return instructions The amount of bonds that may be issued was limited to $400 million each year for 1998, 1999, 2000, and 2001. Amended tax return instructions This provision has been extended to provide for an additional $400 million of bonds to be issued each year for 2002 and 2003. Amended tax return instructions For more information about qualified zone academy bonds, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. Amended tax return instructions Depletion The suspension of the taxable income limit on percentage depletion from the marginal production of oil and natural gas that was scheduled to expire for tax years beginning after 2001 has been extended to tax years beginning before 2004. Amended tax return instructions For more information on marginal production, see section 613A(c) of the Internal Revenue Code. Amended tax return instructions Work Opportunity Credit Expanded in New York Liberty Zone The work opportunity credit is expanded to include a new targeted group consisting generally of employees who perform substantially all their services: In the New York Liberty Zone (defined earlier under Tax Incentives for New York Liberty Zone, under 2001 Changes), or Elsewhere in New York City for a business that relocated from the Liberty Zone due to the destruction or damage of its place of business by the September 11, 2001, terrorist attack. Amended tax return instructions The credit is available to employers for wages paid to new employees and existing employees for work performed during 2002 or 2003. Amended tax return instructions Certain limits apply. Amended tax return instructions For more information about the work opportunity credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. Amended tax return instructions Credit For Pension Plan Startup Costs The credit for pension plan startup costs is now allowed for plans that become effective after December 31, 2001. Amended tax return instructions Previously, the credit was only allowed for plans established after December 31, 2001. Amended tax return instructions For more information on the credit, see Important Changes for 2002 in Publication 560, Retirement Plans for Small Business. Amended tax return instructions Welfare-to-Work Credit Extended The welfare-to-work credit that was scheduled to expire for wages paid to individuals who began working for you after 2001 has been extended to include wages paid to qualified individuals who begin work for you in 2002 or 2003. Amended tax return instructions For more information on the welfare-to-work credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. Amended tax return instructions Work Opportunity Credit Extended The work opportunity credit that was scheduled to expire for wages paid to individuals who began working for you after 2001 has been extended to include wages paid to qualified individuals who begin work for you in 2002 or 2003. Amended tax return instructions For more information about the work opportunity credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. Amended tax return instructions Electric and Clean-Fuel Vehicles The maximum clean-fuel vehicle deduction and qualified electric vehicle credit were scheduled to be 25% lower for 2002 and both were scheduled to be phased out completely by 2005. Amended tax return instructions The full deduction and credit are now allowed for qualified property placed in service in 2002 and 2003. Amended tax return instructions The phaseout of the deduction and the credit will begin in 2004, and no deduction or credit will be allowed for property placed in service after 2006. Amended tax return instructions For more information about electric and clean-fuel vehicles, see chapter 12 in Publication 535, Business Expenses. Amended tax return instructions Renewable Electricity Production Credit The renewable electricity production credit is extended to include electricity produced by facilities placed in service after 2001 and before 2004. Amended tax return instructions Later Changes Special Depreciation Allowance You can claim the special depreciation allowance (an additional 30% depreciation deduction) for new property that you acquire before September 11, 2004, and place in service for your business generally before January 1, 2005, if you meet the other requirements for qualified property covered in chapter 5. Amended tax return instructions Accordingly, you will generally no longer be able to claim the special depreciation allowance for the qualified property if you acquire it after September 10, 2004, or place it in service for your business after December 31, 2004. Amended tax return instructions However, you will be able to claim the special Liberty Zone depreciation allowance (an additional 30% depreciation deduction) for most qualified property if you place it in service in the Liberty Zone after December 31, 2004, and generally before January 1, 2007, provided you meet the other requirements for qualified Liberty Zone property covered in chapter 5. Amended tax return instructions Extension of Placed in Service Date To qualify for the special depreciation allowance, your property must meet certain tests, including the placed in service date test, as well as the other requirements covered in chapter 5 of this publication. Amended tax return instructions To meet the placed in service date test, your property must generally be placed in service for use in your trade or business or for the production of income after September 10, 2001, and before January 1, 2005. Amended tax return instructions However, certain property placed in service before January 1, 2006, may meet this test. Amended tax return instructions Transportation property and property with a recovery period of 10 years or longer meet the test if one of the following applies. Amended tax return instructions The property has an estimated production period of more than 2 years. Amended tax return instructions The property has an estimated production period of more than 1 year and it costs more than $1 million. Amended tax return instructions Transportation property is any tangible personal property used in the trade or business of transporting persons or property. Amended tax return instructions For property that qualifies for the special depreciation allowance solely because of the one-year extension of the placed in service date, only the part of the basis attributable to manufacture, construction, or production before September 11, 2004, is eligible for the special depreciation allowance. Amended tax return instructions Special Liberty Zone Depreciation Allowance for New and Used Property You can claim the special Liberty Zone depreciation allowance (an additional 30% depreciation deduction) for used property that you acquire after September 10, 2001, if the property meets the requirements listed under Qualified Liberty Zone Property in chapter 5 of this publication. Amended tax return instructions You will be able to claim the allowance for both new and used property that you acquire after September 10, 2004, provided the property meets the other requirements for qualified Liberty Zone property. Amended tax return instructions Depreciation of Property Used on Indian Reservations The special depreciation rules that apply to qualified property used on an Indian reservation were scheduled to expire for property placed in service after 2003. Amended tax return instructions These special rules have been extended to include property placed in service in 2004. Amended tax return instructions For more information about these rules, see Publication 946, How To Depreciate Property. Amended tax return instructions Indian Employment Credit Extended The Indian employment credit that was scheduled to expire for tax years beginning after 2003 has been extended to include a tax year beginning in 2004. Amended tax return instructions For more information about this credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. Amended tax return instructions Prev  Up  Next   Home   More Online Publications
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The Amended Tax Return Instructions

Amended tax return instructions 3. Amended tax return instructions   Exclusions From Gross Income Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Resident AliensForeign Earned Income and Housing Amount Nonresident AliensInterest Income Dividend Income Services Performed for Foreign Employer Gambling Winnings From Dog or Horse Racing Gain From the Sale of Your Main Home Scholarships and Fellowship GrantsExpenses that do not qualify. Amended tax return instructions Introduction Resident and nonresident aliens are allowed exclusions from gross income if they meet certain conditions. Amended tax return instructions An exclusion from gross income is generally income you receive that is not included in your U. Amended tax return instructions S. Amended tax return instructions income and is not subject to U. Amended tax return instructions S. Amended tax return instructions tax. Amended tax return instructions This chapter covers some of the more common exclusions allowed to resident and nonresident aliens. Amended tax return instructions Topics - This chapter discusses: Nontaxable interest, Nontaxable dividends, Certain compensation paid by a foreign employer, Gain from sale of home, and Scholarships and fellowship grants. Amended tax return instructions Useful Items - You may want to see: Publication 54 Tax Guide for U. Amended tax return instructions S. Amended tax return instructions Citizens and Resident Aliens Abroad 523 Selling Your Home See chapter 12 for information about getting these publications. Amended tax return instructions Resident Aliens Resident aliens may be able to exclude the following items from their gross income. Amended tax return instructions Foreign Earned Income and Housing Amount If you are physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months, you may qualify for the foreign earned income exclusion. Amended tax return instructions The exclusion is $97,600 in 2013. Amended tax return instructions In addition, you may be able to exclude or deduct certain foreign housing amounts. Amended tax return instructions You may also qualify if you are a bona fide resident of a foreign country and you are a citizen or national of a country with which the United States has an income tax treaty. Amended tax return instructions For more information, see Publication 54. Amended tax return instructions Foreign country. Amended tax return instructions    A foreign country is any territory under the sovereignty of a government other than that of the United States. Amended tax return instructions   The term “foreign country” includes the country's territorial waters and airspace, but not international waters and the airspace above them. Amended tax return instructions It also includes the seabed and subsoil of those submarine areas adjacent to the country's territorial waters over which it has exclusive rights under international law to explore and exploit the natural resources. Amended tax return instructions   The term “foreign country” does not include U. Amended tax return instructions S. Amended tax return instructions possessions or territories. Amended tax return instructions It does not include the Antarctic region. Amended tax return instructions Nonresident Aliens Nonresident aliens can exclude the following items from their gross income. Amended tax return instructions Interest Income Interest income that is not connected with a U. Amended tax return instructions S. Amended tax return instructions trade or business is excluded from income if it is from: Deposits (including certificates of deposit) with persons in the banking business, Deposits or withdrawable accounts with mutual savings banks, cooperative banks, credit unions, domestic building and loan associations, and other savings institutions chartered and supervised as savings and loan or similar associations under federal or state law (if the interest paid or credited can be deducted by the association), and Amounts held by an insurance company under an agreement to pay interest on them. Amended tax return instructions State and local government obligations. Amended tax return instructions   Interest on obligations of a state or political subdivision, the District of Columbia, or a U. Amended tax return instructions S. Amended tax return instructions possession, generally is not included in income. Amended tax return instructions However, interest on certain private activity bonds, arbitrage bonds, and certain bonds not in registered form is included in income. Amended tax return instructions Portfolio interest. Amended tax return instructions   Interest and original issue discount that qualifies as portfolio interest is not subject to NRA withholding. Amended tax return instructions To qualify as portfolio interest, the interest must be paid on obligations issued after July 18, 1984, and otherwise subject to NRA withholding. Amended tax return instructions Note. Amended tax return instructions For obligations issued after March 18, 2012, portfolio interest does not include interest paid on debt that is not in registered form. Amended tax return instructions Before March 19, 2012, portfolio interest included interest on certain registered and nonregistered (bearer) bonds if the obligations meet the requirements described below. Amended tax return instructions Obligations in registered form. Amended tax return instructions   Portfolio interest includes interest paid on an obligation that is in registered form, and for which you have received documentation that the beneficial owner of the obligation is not a United States person. Amended tax return instructions   Generally, an obligation is in registered form if: (i) the obligation is registered as to both principal and any stated interest with the issuer (or its agent) and any transfer of the obligation may be effected only by surrender of the old obligation and reissuance to the new holder; (ii) the right to principal and stated interest with respect to the obligation may be transferred only through a book entry system maintained by the issuer or its agent; or (iii) the obligation is registered as to both principal and stated interest with the issuer or its agent and can be transferred both by surrender and reissuance and through a book entry system. Amended tax return instructions   An obligation that would otherwise be considered to be in registered form is not considered to be in registered form as of a particular time if it can be converted at any time in the future into an obligation that is not in registered form. Amended tax return instructions For more information on whether obligations are considered to be in registered form, see Portfolio interest in Publication 515. Amended tax return instructions Obligations not in registered form. Amended tax return instructions    For obligations issued before March 19, 2012, interest on an obligation that is not in registered form (bearer obligation) is portfolio interest if the obligation is foreign-targeted. Amended tax return instructions A bearer obligation is foreign-targeted if: There are arrangements to ensure that the obligation will be sold, or resold in connection with the original issue, only to a person who is not a United States person, Interest on the obligation is payable only outside the United States and its possessions, and The face of the obligation contains a statement that any United States person who holds the obligation will be subject to limits under the United States income tax laws. Amended tax return instructions   Documentation is not required for interest on bearer obligations to qualify as portfolio interest. Amended tax return instructions In some cases, however, you may need documentation for purposes of Form 1099 reporting and backup withholding. Amended tax return instructions Interest that does not qualify as portfolio interest. Amended tax return instructions   Payments to certain persons and payments of contingent interest do not qualify as portfolio interest. Amended tax return instructions You must withhold at the statutory rate on such payments unless some other exception, such as a treaty provision, applies. Amended tax return instructions Contingent interest. Amended tax return instructions   Portfolio interest does not include contingent interest. Amended tax return instructions Contingent interest is either of the following: Interest that is determined by reference to: Any receipts, sales, or other cash flow of the debtor or related person, Income or profits of the debtor or related person, Any change in value of any property of the debtor or a related person, or Any dividend, partnership distributions, or similar payments made by the debtor or a related person. Amended tax return instructions For exceptions, see Internal Revenue Code section 871(h)(4)(C). Amended tax return instructions Any other type of contingent interest that is identified by the Secretary of the Treasury in regulations. Amended tax return instructions Related persons. Amended tax return instructions   Related persons include the following. Amended tax return instructions Members of a family, including only brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. Amended tax return instructions ), and lineal descendants (children, grandchildren, etc. Amended tax return instructions ). Amended tax return instructions Any person who is a party to any arrangement undertaken for the purpose of avoiding the contingent interest rules. Amended tax return instructions Certain corporations, partnerships, and other entities. Amended tax return instructions For details, see Nondeductible Loss in chapter 2 of Publication 544. Amended tax return instructions Exception for existing debt. Amended tax return instructions   Contingent interest does not include interest paid or accrued on any debt with a fixed term that was issued: On or before April 7, 1993, or After April 7, 1993, pursuant to a written binding contract in effect on that date and at all times thereafter before that debt was issued. Amended tax return instructions Dividend Income The following dividend income is exempt from the 30% tax. Amended tax return instructions Certain dividends paid by foreign corporations. Amended tax return instructions   There is no 30% tax on U. Amended tax return instructions S. Amended tax return instructions source dividends you receive from a foreign corporation. Amended tax return instructions See Second exception under Dividends in chapter 2 for how to figure the amount of U. Amended tax return instructions S. Amended tax return instructions source dividends. Amended tax return instructions Certain interest-related dividends. Amended tax return instructions   There is no 30% tax on interest-related dividends from sources within the United States that you receive from a mutual fund or other regulated investment company in 2013. Amended tax return instructions The mutual fund will designate in writing which dividends are interest-related dividends. Amended tax return instructions Certain short-term capital gain dividends. Amended tax return instructions   There may not be any 30% tax on certain short-term capital gain dividends from sources within the United States that you receive from a mutual fund or other regulated investment company. Amended tax return instructions The mutual fund will designate in writing which dividends are short-term capital gain dividends. Amended tax return instructions This tax relief will not apply to you if you are present in the United States for 183 days or more during your tax year. Amended tax return instructions Services Performed for Foreign Employer If you were paid by a foreign employer, your U. Amended tax return instructions S. Amended tax return instructions source income may be exempt from U. Amended tax return instructions S. Amended tax return instructions tax, but only if you meet one of the situations discussed next. Amended tax return instructions Employees of foreign persons, organizations, or offices. Amended tax return instructions   Income for personal services performed in the United States as a nonresident alien is not considered to be from U. Amended tax return instructions S. Amended tax return instructions sources and is tax exempt if you meet all three of the following conditions. Amended tax return instructions You perform personal services as an employee of or under a contract with a nonresident alien individual, foreign partnership, or foreign corporation, not engaged in a trade or business in the United States; or you work for an office or place of business maintained in a foreign country or possession of the United States by a U. Amended tax return instructions S. Amended tax return instructions corporation, a U. Amended tax return instructions S. Amended tax return instructions partnership, or a U. Amended tax return instructions S. Amended tax return instructions citizen or resident. Amended tax return instructions You perform these services while you are a nonresident alien temporarily present in the United States for a period or periods of not more than a total of 90 days during the tax year. Amended tax return instructions Your pay for these services is not more than $3,000. Amended tax return instructions If you do not meet all three conditions, your income from personal services performed in the United States is U. Amended tax return instructions S. Amended tax return instructions source income and is taxed according to the rules in chapter 4. Amended tax return instructions   If your pay for these services is more than $3,000, the entire amount is income from a trade or business within the United States. Amended tax return instructions To find if your pay is more than $3,000, do not include any amounts you get from your employer for advances or reimbursements of business travel expenses, if you were required to and did account to your employer for those expenses. Amended tax return instructions If the advances or reimbursements are more than your expenses, include the excess in your pay for these services. Amended tax return instructions   A day means a calendar day during any part of which you are physically present in the United States. Amended tax return instructions Example 1. Amended tax return instructions During 2013, Henry Smythe, a nonresident alien from a nontreaty country, worked for an overseas office of a U. Amended tax return instructions S. Amended tax return instructions partnership. Amended tax return instructions Henry, who uses the calendar year as his tax year, was temporarily present in the United States for 60 days during 2013 performing personal services for the overseas office of the partnership. Amended tax return instructions That office paid him a total gross salary of $2,800 for those services. Amended tax return instructions During 2013, he was not engaged in a trade or business in the United States. Amended tax return instructions The salary is not considered U. Amended tax return instructions S. Amended tax return instructions source income and is exempt from U. Amended tax return instructions S. Amended tax return instructions tax. Amended tax return instructions Example 2. Amended tax return instructions The facts are the same as in Example 1, except that Henry's total gross salary for the services performed in the United States during 2013 was $4,500. Amended tax return instructions He received $2,875 in 2013, and $1,625 in 2014. Amended tax return instructions During 2013, he was engaged in a trade or business in the United States because the compensation for his personal services in the United States was more than $3,000. Amended tax return instructions Henry's salary is U. Amended tax return instructions S. Amended tax return instructions source income and is taxed under the rules in chapter 4. Amended tax return instructions Crew members. Amended tax return instructions   Compensation for services performed by a nonresident alien in connection with the individual's temporary presence in the United States as a regular crew member of a foreign vessel (for example, a boat or ship) engaged in transportation between the United States and a foreign country or U. Amended tax return instructions S. Amended tax return instructions possession is not U. Amended tax return instructions S. Amended tax return instructions source income and is exempt from U. Amended tax return instructions S. Amended tax return instructions tax. Amended tax return instructions This exemption does not apply to compensation for services performed on foreign aircraft. Amended tax return instructions Students and exchange visitors. Amended tax return instructions   Nonresident alien students and exchange visitors present in the United States under “F,” “J,” or “Q” visas can exclude from gross income pay received from a foreign employer. Amended tax return instructions   This group includes bona fide students, scholars, trainees, teachers, professors, research assistants, specialists, or leaders in a field of specialized knowledge or skill, or persons of similar description. Amended tax return instructions It also includes the alien's spouse and minor children if they come with the alien or come later to join the alien. Amended tax return instructions   A nonresident alien temporarily present in the United States under a “J” visa includes an alien individual entering the United States as an exchange visitor under the Mutual Educational and Cultural Exchange Act of 1961. Amended tax return instructions Foreign employer. Amended tax return instructions   A foreign employer is: A nonresident alien individual, foreign partnership, or foreign corporation, or An office or place of business maintained in a foreign country or in a U. Amended tax return instructions S. Amended tax return instructions possession by a U. Amended tax return instructions S. Amended tax return instructions corporation, a U. Amended tax return instructions S. Amended tax return instructions partnership, or an individual who is a U. Amended tax return instructions S. Amended tax return instructions citizen or resident. Amended tax return instructions   The term “foreign employer” does not include a foreign government. Amended tax return instructions Pay from a foreign government that is exempt from U. Amended tax return instructions S. Amended tax return instructions income tax is discussed in chapter 10. Amended tax return instructions Income from certain annuities. Amended tax return instructions   Do not include in income any annuity received under a qualified annuity plan or from a qualified trust exempt from U. Amended tax return instructions S. Amended tax return instructions income tax if you meet both of the following conditions. Amended tax return instructions You receive the annuity only because: You performed personal services outside the United States while you were a nonresident alien, or You performed personal services inside the United States while you were a nonresident alien and you met the three conditions, described earlier, under Employees of foreign persons, organizations, or offices . Amended tax return instructions At the time the first amount is paid as an annuity under the plan (or by the trust), 90% or more of the employees for whom contributions or benefits are provided under the annuity plan (or under the plan of which the trust is a part) are U. Amended tax return instructions S. Amended tax return instructions citizens or residents. Amended tax return instructions   If the annuity qualifies under condition (1) but not condition (2) above, you do not have to include the amount in income if: You are a resident of a country that gives a substantially equal exclusion to U. Amended tax return instructions S. Amended tax return instructions citizens and residents, or You are a resident of a beneficiary developing country under Title V of the Trade Act of 1974. Amended tax return instructions   If you are not sure whether the annuity is from a qualified annuity plan or qualified trust, ask the person who made the payment. Amended tax return instructions Income affected by treaties. Amended tax return instructions   Income of any kind that is exempt from U. Amended tax return instructions S. Amended tax return instructions tax under a treaty to which the United States is a party is excluded from your gross income. Amended tax return instructions Income on which the tax is only limited by treaty, however, is included in gross income. Amended tax return instructions See chapter 9. Amended tax return instructions Gambling Winnings From Dog or Horse Racing You can exclude from your gross income winnings from legal wagers initiated outside the United States in a parimutuel pool with respect to a live horse or dog race in the United States. Amended tax return instructions Gain From the Sale of Your Main Home If you sold your main home, you may be able to exclude up to $250,000 of the gain on the sale of your home. Amended tax return instructions If you are married and file a joint return, you may be able to exclude up to $500,000. Amended tax return instructions For information on the requirements for this exclusion, see Publication 523. Amended tax return instructions This exclusion does not apply to nonresident aliens who are subject to the expatriation tax rules discussed in chapter 4. Amended tax return instructions Scholarships and Fellowship Grants If you are a candidate for a degree, you may be able to exclude from your income part or all of the amounts you receive as a qualified scholarship. Amended tax return instructions The rules discussed here apply to both resident and nonresident aliens. Amended tax return instructions If a nonresident alien receives a grant that is not from U. Amended tax return instructions S. Amended tax return instructions sources, it is not subject to U. Amended tax return instructions S. Amended tax return instructions tax. Amended tax return instructions See Scholarships, Grants, Prizes, and Awards in chapter 2 to determine whether your grant is from U. Amended tax return instructions S. Amended tax return instructions sources. Amended tax return instructions A scholarship or fellowship is excludable from income only if: You are a candidate for a degree at an eligible educational institution, and You use the scholarship or fellowship to pay qualified education expenses. Amended tax return instructions Candidate for a degree. Amended tax return instructions   You are a candidate for a degree if you: Attend a primary or secondary school or are pursuing a degree at a college or university, or Attend an accredited educational institution that is authorized to provide: A program that is acceptable for full credit toward a bachelor's or higher degree, or A program of training to prepare students for gainful employment in a recognized occupation. Amended tax return instructions Eligible educational institution. Amended tax return instructions   An eligible educational institution is one that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities. Amended tax return instructions Qualified education expenses. Amended tax return instructions   These are expenses for: Tuition and fees required to enroll at or attend an eligible educational institution, and Course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. Amended tax return instructions These items must be required of all students in your course of instruction. Amended tax return instructions However, in order for these to be qualified education expenses, the terms of the scholarship or fellowship cannot require that it be used for other purposes, such as room and board, or specify that it cannot be used for tuition or course-related expenses. Amended tax return instructions Expenses that do not qualify. Amended tax return instructions   Qualified education expenses do not include the cost of: Room and board, Travel, Research, Clerical help, or Equipment and other expenses that are not required for enrollment in or attendance at an eligible educational institution. Amended tax return instructions This is true even if the fee must be paid to the institution as a condition of enrollment or attendance. Amended tax return instructions Scholarship or fellowship amounts used to pay these costs are taxable. Amended tax return instructions Amounts used to pay expenses that do not qualify. Amended tax return instructions   A scholarship amount used to pay any expense that does not qualify is taxable, even if the expense is a fee that must be paid to the institution as a condition of enrollment or attendance. Amended tax return instructions Payment for services. Amended tax return instructions   You cannot exclude from income the portion of any scholarship, fellowship, or tuition reduction that represents payment for past, present, or future teaching, research, or other services. Amended tax return instructions This is true even if all candidates for a degree are required to perform the services as a condition for receiving the degree. Amended tax return instructions Example. Amended tax return instructions On January 7, Maria Gomez is notified of a scholarship of $2,500 for the spring semester. Amended tax return instructions As a condition for receiving the scholarship, Maria must serve as a part-time teaching assistant. Amended tax return instructions Of the $2,500 scholarship, $1,000 represents payment for her services. Amended tax return instructions Assuming that Maria meets all other conditions, she can exclude no more than $1,500 from income as a qualified scholarship. Amended tax return instructions Prev  Up  Next   Home   More Online Publications