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Can Ie File 2012 Taxes Now

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Can Ie File 2012 Taxes Now

Can ie file 2012 taxes now 17. Can ie file 2012 taxes now   Individual Retirement Arrangements (IRAs) Table of Contents What's New Reminders Introduction Useful Items - You may want to see: Traditional IRAsWho Can Open a Traditional IRA? When and How Can a Traditional IRA Be Opened? How Much Can Be Contributed? When Can Contributions Be Made? How Much Can You Deduct? Nondeductible Contributions Inherited IRAs Can You Move Retirement Plan Assets? When Can You Withdraw or Use IRA Assets? When Must You Withdraw IRA Assets? (Required Minimum Distributions) Are Distributions Taxable? What Acts Result in Penalties or Additional Taxes? Roth IRAsWhat Is a Roth IRA? When Can a Roth IRA Be Opened? Can You Contribute to a Roth IRA? Can You Move Amounts Into a Roth IRA? Are Distributions Taxable? What's New Traditional IRA contribution and deduction limit. Can ie file 2012 taxes now  The contribution limit to your traditional IRA for 2013 will be increased to the smaller of the following amounts: $5,500, or Your taxable compensation for the year. Can ie file 2012 taxes now If you were age 50 or older before 2014, the most that can be contributed to your traditional IRA for 2013 will be the smaller of the following amounts: $6,500, or Your taxable compensation for the year. Can ie file 2012 taxes now For more information, see How Much Can Be Contributed? later. Can ie file 2012 taxes now Roth IRA contribution limit. Can ie file 2012 taxes now  If contributions on your behalf are made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $5,500, or Your taxable compensation for the year. Can ie file 2012 taxes now If you were age 50 or older before 2014 and contributions on your behalf were made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $6,500, or Your taxable compensation for the year. Can ie file 2012 taxes now However, if your modified adjusted gross income (AGI) is above a certain amount, your contribution limit may be reduced. Can ie file 2012 taxes now For more information, see How Much Can Be Contributed? under Can You Contribute to a Roth IRA? later. Can ie file 2012 taxes now Modified AGI limit for traditional IRA contributions increased. Can ie file 2012 taxes now  For 2013, if you were covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $95,000 but less than $115,000 for a married couple filing a joint return or a qualifying widow(er), More than $59,000 but less than $69,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. Can ie file 2012 taxes now If you either lived with your spouse or file a joint return, and your spouse was covered by a retirement plan at work, but you were not, your deduction is phased out if your modified AGI is more than $178,000 but less than $188,000. Can ie file 2012 taxes now If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. Can ie file 2012 taxes now See How Much Can You Deduct , later. Can ie file 2012 taxes now Modified AGI limit for Roth IRA contributions increased. Can ie file 2012 taxes now  For 2013, your Roth IRA contribution limit is reduced (phased out) in the following situations. Can ie file 2012 taxes now Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $178,000. Can ie file 2012 taxes now You cannot make a Roth IRA contribution if your modified AGI is $188,000 or more. Can ie file 2012 taxes now Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2013 and your modified AGI is at least $112,000. Can ie file 2012 taxes now You cannot make a Roth IRA contribution if your modified AGI is $127,000 or more. Can ie file 2012 taxes now Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. Can ie file 2012 taxes now You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more. Can ie file 2012 taxes now See Can You Contribute to a Roth IRA , later. Can ie file 2012 taxes now Net Investment Income Tax. Can ie file 2012 taxes now   For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan including IRAs (for example; 401(a), 403(a), 403(b), 408, 408A, or 457(b) plans). Can ie file 2012 taxes now However, these distributions are taken into account when determining the modified adjusted gross income threshold. Can ie file 2012 taxes now Distributions from a nonqualified retirement plan are included in net investment income. Can ie file 2012 taxes now See Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts, and its instructions for more information. Can ie file 2012 taxes now Name change. Can ie file 2012 taxes now  All spousal IRAs have been renamed Kay Bailey Hutchison Spousal IRAs. Can ie file 2012 taxes now There are no changes to the rules regarding these IRAs. Can ie file 2012 taxes now See Kay Bailey Hutchison Spousal IRA Limit , later, for more information. Can ie file 2012 taxes now Reminders 2014 limits. Can ie file 2012 taxes now   You can find information about the 2014 contribution and AGI limits in Publication 590. Can ie file 2012 taxes now Contributions to both traditional and Roth IRAs. Can ie file 2012 taxes now   For information on your combined contribution limit if you contribute to both traditional and Roth IRAs, see Roth IRAs and traditional IRAs under How Much Can Be Contributed? in Roth IRAs, later. Can ie file 2012 taxes now Statement of required minimum distribution. Can ie file 2012 taxes now  If a minimum distribution from your IRA is required, the trustee, custodian, or issuer that held the IRA at the end of the preceding year must either report the amount of the required minimum distribution to you, or offer to calculate it for you. Can ie file 2012 taxes now The report or offer must include the date by which the amount must be distributed. Can ie file 2012 taxes now The report is due January 31 of the year in which the minimum distribution is required. Can ie file 2012 taxes now It can be provided with the year-end fair market value statement that you normally get each year. Can ie file 2012 taxes now No report is required for IRAs of owners who have died. Can ie file 2012 taxes now IRA interest. Can ie file 2012 taxes now  Although interest earned from your IRA is generally not taxed in the year earned, it is not tax-exempt interest. Can ie file 2012 taxes now Tax on your traditional IRA is generally deferred until you take a distribution. Can ie file 2012 taxes now Do not report this interest on your tax return as tax-exempt interest. Can ie file 2012 taxes now Form 8606. Can ie file 2012 taxes now   To designate contributions as nondeductible, you must file Form 8606, Nondeductible IRAs. Can ie file 2012 taxes now The term “50 or older” is used several times in this chapter. Can ie file 2012 taxes now It refers to an IRA owner who is age 50 or older by the end of the tax year. Can ie file 2012 taxes now Introduction An individual retirement arrangement (IRA) is a personal savings plan that gives you tax advantages for setting aside money for your retirement. Can ie file 2012 taxes now This chapter discusses the following topics. Can ie file 2012 taxes now The rules for a traditional IRA (any IRA that is not a Roth or SIMPLE IRA). Can ie file 2012 taxes now The Roth IRA, which features nondeductible contributions and tax-free distributions. Can ie file 2012 taxes now Simplified Employee Pensions (SEPs) and Savings Incentive Match Plans for Employees (SIMPLEs) are not discussed in this chapter. Can ie file 2012 taxes now For more information on these plans and employees' SEP IRAs and SIMPLE IRAs that are part of these plans, see Publications 560 and 590. Can ie file 2012 taxes now For information about contributions, deductions, withdrawals, transfers, rollovers, and other transactions, see Publication 590. Can ie file 2012 taxes now Useful Items - You may want to see: Publication 560 Retirement Plans for Small Business 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) 5329 Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts 8606 Nondeductible IRAs Traditional IRAs In this chapter, the original IRA (sometimes called an ordinary or regular IRA) is referred to as a “traditional IRA. Can ie file 2012 taxes now ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. Can ie file 2012 taxes now Two advantages of a traditional IRA are: You may be able to deduct some or all of your contributions to it, depending on your circumstances, and Generally, amounts in your IRA, including earnings and gains, are not taxed until they are distributed. Can ie file 2012 taxes now Who Can Open a Traditional IRA? You can open and make contributions to a traditional IRA if: You (or, if you file a joint return, your spouse) received taxable compensation during the year, and You were not age 70½ by the end of the year. Can ie file 2012 taxes now What is compensation?   Generally, compensation is what you earn from working. Can ie file 2012 taxes now Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services. Can ie file 2012 taxes now The IRS treats as compensation any amount properly shown in box 1 (Wages, tips, other compensation) of Form W-2, Wage and Tax Statement, provided that amount is reduced by any amount properly shown in box 11 (Nonqualified plans). Can ie file 2012 taxes now   Scholarship and fellowship payments are compensation for this purpose only if shown in box 1 of Form W-2. Can ie file 2012 taxes now   Compensation also includes commissions and taxable alimony and separate maintenance payments. Can ie file 2012 taxes now Self-employment income. Can ie file 2012 taxes now   If you are self-employed (a sole proprietor or a partner), compensation is the net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by the total of: The deduction for contributions made on your behalf to retirement plans, and The deductible part of your self-employment tax. Can ie file 2012 taxes now   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. Can ie file 2012 taxes now Nontaxable combat pay. Can ie file 2012 taxes now   For IRA purposes, if you were a member of the U. Can ie file 2012 taxes now S. Can ie file 2012 taxes now Armed Forces, your compensation includes any nontaxable combat pay you receive. Can ie file 2012 taxes now What is not compensation?   Compensation does not include any of the following items. Can ie file 2012 taxes now Earnings and profits from property, such as rental income, interest income, and dividend income. Can ie file 2012 taxes now Pension or annuity income. Can ie file 2012 taxes now Deferred compensation received (compensation payments postponed from a past year). Can ie file 2012 taxes now Income from a partnership for which you do not provide services that are a material income-producing factor. Can ie file 2012 taxes now Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. Can ie file 2012 taxes now Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. Can ie file 2012 taxes now When and How Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. Can ie file 2012 taxes now However, the time for making contributions for any year is limited. Can ie file 2012 taxes now See When Can Contributions Be Made , later. Can ie file 2012 taxes now You can open different kinds of IRAs with a variety of organizations. Can ie file 2012 taxes now You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. Can ie file 2012 taxes now You can also open an IRA through your stockbroker. Can ie file 2012 taxes now Any IRA must meet Internal Revenue Code requirements. Can ie file 2012 taxes now Kinds of traditional IRAs. Can ie file 2012 taxes now   Your traditional IRA can be an individual retirement account or annuity. Can ie file 2012 taxes now It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. Can ie file 2012 taxes now How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. Can ie file 2012 taxes now These limits and other rules are explained below. Can ie file 2012 taxes now Community property laws. Can ie file 2012 taxes now   Except as discussed later under Kay Bailey Hutchison Spousal IRA limit , each spouse figures his or her limit separately, using his or her own compensation. Can ie file 2012 taxes now This is the rule even in states with community property laws. Can ie file 2012 taxes now Brokers' commissions. Can ie file 2012 taxes now   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. Can ie file 2012 taxes now Trustees' fees. Can ie file 2012 taxes now   Trustees' administrative fees are not subject to the contribution limit. Can ie file 2012 taxes now Qualified reservist repayments. Can ie file 2012 taxes now   If you are (or were) a member of a reserve component and you were ordered or called to active duty after September 11, 2001, you may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions you received. Can ie file 2012 taxes now You can make these repayment contributions even if they would cause your total contributions to the IRA to be more than the general limit on contributions. Can ie file 2012 taxes now To be eligible to make these repayment contributions, you must have received a qualified reservist distribution from an IRA or from a section 401(k) or 403(b) plan or similar arrangement. Can ie file 2012 taxes now   For more information, see Qualified reservist repayments under How Much Can Be Contributed? in chapter 1 of Publication 590. Can ie file 2012 taxes now Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. Can ie file 2012 taxes now (See Roth IRAs, later. Can ie file 2012 taxes now ) General limit. Can ie file 2012 taxes now   For 2013, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts. Can ie file 2012 taxes now $5,500 ($6,500 if you are 50 or older). Can ie file 2012 taxes now Your taxable compensation (defined earlier) for the year. Can ie file 2012 taxes now This is the most that can be contributed regardless of whether the contributions are to one or more traditional IRAs or whether all or part of the contributions are nondeductible. Can ie file 2012 taxes now (See Nondeductible Contributions , later. Can ie file 2012 taxes now ) Qualified reservist repayments do not affect this limit. Can ie file 2012 taxes now Example 1. Can ie file 2012 taxes now Betty, who is 34 years old and single, earned $24,000 in 2013. Can ie file 2012 taxes now Her IRA contributions for 2013 are limited to $5,500. Can ie file 2012 taxes now Example 2. Can ie file 2012 taxes now John, an unmarried college student working part time, earned $3,500 in 2013. Can ie file 2012 taxes now His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. Can ie file 2012 taxes now Kay Bailey Hutchison Spousal IRA limit. Can ie file 2012 taxes now   For 2013, if you file a joint return and your taxable compensation is less than that of your spouse, the most that can be contributed for the year to your IRA is the smaller of the following amounts. Can ie file 2012 taxes now $5,500 ($6,500 if you are 50 or older). Can ie file 2012 taxes now The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts. Can ie file 2012 taxes now Your spouse's IRA contribution for the year to a traditional IRA. Can ie file 2012 taxes now Any contribution for the year to a Roth IRA on behalf of your spouse. Can ie file 2012 taxes now This means that the total combined contributions that can be made for the year to your IRA and your spouse's IRA can be as much as $11,000 ($12,000 if only one of you is 50 or older, or $13,000 if both of you are 50 or older). Can ie file 2012 taxes now When Can Contributions Be Made? As soon as you open your traditional IRA, contributions can be made to it through your chosen sponsor (trustee or other administrator). Can ie file 2012 taxes now Contributions must be in the form of money (cash, check, or money order). Can ie file 2012 taxes now Property cannot be contributed. Can ie file 2012 taxes now Contributions must be made by due date. Can ie file 2012 taxes now   Contributions can be made to your traditional IRA for a year at any time during the year or by the due date for filing your return for that year, not including extensions. Can ie file 2012 taxes now Age 70½ rule. Can ie file 2012 taxes now   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. Can ie file 2012 taxes now   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. Can ie file 2012 taxes now If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. Can ie file 2012 taxes now Designating year for which contribution is made. Can ie file 2012 taxes now   If an amount is contributed to your traditional IRA between January 1 and April 15, you should tell the sponsor which year (the current year or the previous year) the contribution is for. Can ie file 2012 taxes now If you do not tell the sponsor which year it is for, the sponsor can assume, and report to the IRS, that the contribution is for the current year (the year the sponsor received it). Can ie file 2012 taxes now Filing before a contribution is made. Can ie file 2012 taxes now   You can file your return claiming a traditional IRA contribution before the contribution is actually made. Can ie file 2012 taxes now Generally, the contribution must be made by the due date of your return, not including extensions. Can ie file 2012 taxes now Contributions not required. Can ie file 2012 taxes now   You do not have to contribute to your traditional IRA for every tax year, even if you can. Can ie file 2012 taxes now How Much Can You Deduct? Generally, you can deduct the lesser of: The contributions to your traditional IRA for the year, or The general limit (or the Kay Bailey Hutchison Spousal IRA limit, if it applies). Can ie file 2012 taxes now However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. Can ie file 2012 taxes now See Limit If Covered by Employer Plan , later. Can ie file 2012 taxes now You may be able to claim a credit for contributions to your traditional IRA. Can ie file 2012 taxes now For more information, see chapter 37. Can ie file 2012 taxes now Trustees' fees. Can ie file 2012 taxes now   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. Can ie file 2012 taxes now However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). Can ie file 2012 taxes now See chapter 28. Can ie file 2012 taxes now Brokers' commissions. Can ie file 2012 taxes now   Brokers' commissions are part of your IRA contribution and, as such, are deductible subject to the limits. Can ie file 2012 taxes now Full deduction. Can ie file 2012 taxes now   If neither you nor your spouse was covered for any part of the year by an employer retirement plan, you can take a deduction for total contributions to one or more traditional IRAs of up to the lesser of: $5,500 ($6,500 if you are age 50 or older in 2013). Can ie file 2012 taxes now 100% of your compensation. Can ie file 2012 taxes now This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. Can ie file 2012 taxes now Kay Bailey Hutchison Spousal IRA. Can ie file 2012 taxes now   In the case of a married couple with unequal compensation who file a joint return, the deduction for contributions to the traditional IRA of the spouse with less compensation is limited to the lesser of the following amounts. Can ie file 2012 taxes now $5,500 ($6,500 if the spouse with the lower compensation is age 50 or older in 2013). Can ie file 2012 taxes now The total compensation includible in the gross income of both spouses for the year reduced by the following three amounts. Can ie file 2012 taxes now The IRA deduction for the year of the spouse with the greater compensation. Can ie file 2012 taxes now Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. Can ie file 2012 taxes now Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. Can ie file 2012 taxes now This limit is reduced by any contributions to a 501(c)(18) plan on behalf of the spouse with the lesser compensation. Can ie file 2012 taxes now Note. Can ie file 2012 taxes now If you were divorced or legally separated (and did not remarry) before the end of the year, you cannot deduct any contributions to your spouse's IRA. Can ie file 2012 taxes now After a divorce or legal separation, you can deduct only contributions to your own IRA. Can ie file 2012 taxes now Your deductions are subject to the rules for single individuals. Can ie file 2012 taxes now Covered by an employer retirement plan. Can ie file 2012 taxes now   If you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, your deduction may be further limited. Can ie file 2012 taxes now This is discussed later under Limit If Covered by Employer Plan . Can ie file 2012 taxes now Limits on the amount you can deduct do not affect the amount that can be contributed. Can ie file 2012 taxes now See Nondeductible Contributions , later. Can ie file 2012 taxes now Are You Covered by an Employer Plan? The Form W-2 you receive from your employer has a box used to indicate whether you were covered for the year. Can ie file 2012 taxes now The “Retirement plan” box should be checked if you were covered. Can ie file 2012 taxes now Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered by an Employer Plan , later. Can ie file 2012 taxes now If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. Can ie file 2012 taxes now Federal judges. Can ie file 2012 taxes now   For purposes of the IRA deduction, federal judges are covered by an employer retirement plan. Can ie file 2012 taxes now For Which Year(s) Are You Covered by an Employer Plan? Special rules apply to determine the tax years for which you are covered by an employer plan. Can ie file 2012 taxes now These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. Can ie file 2012 taxes now Tax year. Can ie file 2012 taxes now   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. Can ie file 2012 taxes now For almost all people, the tax year is the calendar year. Can ie file 2012 taxes now Defined contribution plan. Can ie file 2012 taxes now   Generally, you are covered by a defined contribution plan for a tax year if amounts are contributed or allocated to your account for the plan year that ends with or within that tax year. Can ie file 2012 taxes now   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. Can ie file 2012 taxes now Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. Can ie file 2012 taxes now Defined benefit plan. Can ie file 2012 taxes now   If you are eligible to participate in your employer's defined benefit plan for the plan year that ends within your tax year, you are covered by the plan. Can ie file 2012 taxes now This rule applies even if you: Declined to participate in the plan, Did not make a required contribution, or Did not perform the minimum service required to accrue a benefit for the year. Can ie file 2012 taxes now   A defined benefit plan is any plan that is not a defined contribution plan. Can ie file 2012 taxes now Defined benefit plans include pension plans and annuity plans. Can ie file 2012 taxes now No vested interest. Can ie file 2012 taxes now   If you accrue a benefit for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the accrual. Can ie file 2012 taxes now Situations in Which You Are Not Covered by an Employer Plan Unless you are covered under another employer plan, you are not covered by an employer plan if you are in one of the situations described below. Can ie file 2012 taxes now Social security or railroad retirement. Can ie file 2012 taxes now   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. Can ie file 2012 taxes now Benefits from a previous employer's plan. Can ie file 2012 taxes now   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. Can ie file 2012 taxes now Reservists. Can ie file 2012 taxes now   If the only reason you participate in a plan is because you are a member of a reserve unit of the armed forces, you may not be covered by the plan. Can ie file 2012 taxes now You are not covered by the plan if both of the following conditions are met. Can ie file 2012 taxes now The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. Can ie file 2012 taxes now You did not serve more than 90 days on active duty during the year (not counting duty for training). Can ie file 2012 taxes now Volunteer firefighters. Can ie file 2012 taxes now   If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. Can ie file 2012 taxes now You are not covered by the plan if both of the following conditions are met. Can ie file 2012 taxes now The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. Can ie file 2012 taxes now Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. Can ie file 2012 taxes now Limit If Covered by Employer Plan If either you or your spouse was covered by an employer retirement plan, you may be entitled to only a partial (reduced) deduction or no deduction at all, depending on your income and your filing status. Can ie file 2012 taxes now Your deduction begins to decrease (phase out) when your income rises above a certain amount and is eliminated altogether when it reaches a higher amount. Can ie file 2012 taxes now These amounts vary depending on your filing status. Can ie file 2012 taxes now To determine if your deduction is subject to phaseout, you must determine your modified adjusted gross income (AGI) and your filing status. Can ie file 2012 taxes now See Filing status and Modified adjusted gross income (AGI) , later. Can ie file 2012 taxes now Then use Table 17-1 or 17-2 to determine if the phaseout applies. Can ie file 2012 taxes now Social security recipients. Can ie file 2012 taxes now   Instead of using Table 17-1 or Table 17-2, use the worksheets in Appendix B of Publication 590 if, for the year, all of the following apply. Can ie file 2012 taxes now You received social security benefits. Can ie file 2012 taxes now You received taxable compensation. Can ie file 2012 taxes now Contributions were made to your traditional IRA. Can ie file 2012 taxes now You or your spouse was covered by an employer retirement plan. Can ie file 2012 taxes now Use those worksheets to figure your IRA deduction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits. Can ie file 2012 taxes now Deduction phaseout. Can ie file 2012 taxes now   If you were covered by an employer retirement plan and you did not receive any social security retirement benefits, your IRA deduction may be reduced or eliminated depending on your filing status and modified AGI as shown in Table 17-1. Can ie file 2012 taxes now Table 17-1. Can ie file 2012 taxes now Effect of Modified AGI1 on Deduction if You Are Covered by Retirement Plan at Work If you are covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. Can ie file 2012 taxes now IF your filing status is. Can ie file 2012 taxes now . Can ie file 2012 taxes now . Can ie file 2012 taxes now   AND your modified AGI is. Can ie file 2012 taxes now . Can ie file 2012 taxes now . Can ie file 2012 taxes now   THEN you can take. Can ie file 2012 taxes now . Can ie file 2012 taxes now . Can ie file 2012 taxes now single   or  head of household   $59,000 or less   a full deduction. Can ie file 2012 taxes now   more than $59,000 but less than $69,000   a partial deduction. Can ie file 2012 taxes now   $69,000 or more   no deduction. Can ie file 2012 taxes now married filing jointly   or  qualifying widow(er)   $95,000 or less   a full deduction. Can ie file 2012 taxes now   more than $95,000 but less than $115,000   a partial deduction. Can ie file 2012 taxes now   $115,000 or more   no deduction. Can ie file 2012 taxes now married filing separately2   less than $10,000   a partial deduction. Can ie file 2012 taxes now   $10,000 or more   no deduction. Can ie file 2012 taxes now 1Modified AGI (adjusted gross income). Can ie file 2012 taxes now See Modified adjusted gross income (AGI) . Can ie file 2012 taxes now 2If you did not live with your spouse at any time during the year, your filing status is considered Single for this purpose (therefore, your IRA deduction is determined under the “Single” column). Can ie file 2012 taxes now If your spouse is covered. Can ie file 2012 taxes now   If you are not covered by an employer retirement plan, but your spouse is, and you did not receive any social security benefits, your IRA deduction may be reduced or eliminated entirely depending on your filing status and modified AGI as shown in Table 17-2. Can ie file 2012 taxes now Filing status. Can ie file 2012 taxes now   Your filing status depends primarily on your marital status. Can ie file 2012 taxes now For this purpose, you need to know if your filing status is single or head of household, married filing jointly or qualifying widow(er), or married filing separately. Can ie file 2012 taxes now If you need more information on filing status, see chapter 2. Can ie file 2012 taxes now Lived apart from spouse. Can ie file 2012 taxes now   If you did not live with your spouse at any time during the year and you file a separate return, your filing status, for this purpose, is single. Can ie file 2012 taxes now Table 17-2. Can ie file 2012 taxes now Effect of Modified AGI1 on Deduction if You Are NOT Covered by Retirement Plan at Work If you are not covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. Can ie file 2012 taxes now IF your filing status is. Can ie file 2012 taxes now . Can ie file 2012 taxes now . Can ie file 2012 taxes now   AND your modified AGI is. Can ie file 2012 taxes now . Can ie file 2012 taxes now . Can ie file 2012 taxes now   THEN you can take. Can ie file 2012 taxes now . Can ie file 2012 taxes now . Can ie file 2012 taxes now single, head of household, or qualifying widow(er)   any amount   a full deduction. Can ie file 2012 taxes now married filing jointly or separately with a spouse who is not covered by a plan at work   any amount   a full deduction. Can ie file 2012 taxes now married filing jointly with a spouse who is covered by a plan at work   $178,000 or less   a full deduction. Can ie file 2012 taxes now   more than $178,000 but less than $188,000   a partial deduction. Can ie file 2012 taxes now   $188,000 or more   no deduction. Can ie file 2012 taxes now married filing separately with a spouse who is covered by a plan at work2   less than $10,000   a partial deduction. Can ie file 2012 taxes now   $10,000 or more   no deduction. Can ie file 2012 taxes now 1Modified AGI (adjusted gross income). Can ie file 2012 taxes now See Modified adjusted gross income (AGI) . Can ie file 2012 taxes now 2You are entitled to the full deduction if you did not live with your spouse at any time during the year. Can ie file 2012 taxes now Modified adjusted gross income (AGI). Can ie file 2012 taxes now   How you figure your modified AGI depends on whether you are filing Form 1040 or Form 1040A. Can ie file 2012 taxes now If you made contributions to your IRA for 2013 and received a distribution from your IRA in 2013, see Publication 590. Can ie file 2012 taxes now You may be able to use Worksheet 17-1 to figure your modified AGI. Can ie file 2012 taxes now    Do not assume that your modified AGI is the same as your compensation. Can ie file 2012 taxes now Your modified AGI may include income in addition to your compensation (discussed earlier), such as interest, dividends, and income from IRA distributions. Can ie file 2012 taxes now Form 1040. Can ie file 2012 taxes now   If you file Form 1040, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following eight amounts. Can ie file 2012 taxes now IRA deduction. Can ie file 2012 taxes now Student loan interest deduction. Can ie file 2012 taxes now Tuition and fees deduction. Can ie file 2012 taxes now Domestic production activities deduction. Can ie file 2012 taxes now Foreign earned income exclusion. Can ie file 2012 taxes now Foreign housing exclusion or deduction. Can ie file 2012 taxes now Exclusion of qualified savings bond interest shown on Form 8815, Exclusion of Interest From Series EE and I U. Can ie file 2012 taxes now S. Can ie file 2012 taxes now Savings Bonds Issued After 1989. Can ie file 2012 taxes now Exclusion of employer-provided adoption benefits shown on Form 8839, Qualified Adoption Expenses. Can ie file 2012 taxes now This is your modified AGI. Can ie file 2012 taxes now Form 1040A. Can ie file 2012 taxes now   If you file Form 1040A, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Can ie file 2012 taxes now IRA deduction. Can ie file 2012 taxes now Student loan interest deduction. Can ie file 2012 taxes now Tuition and fees deduction. Can ie file 2012 taxes now Exclusion of qualified savings bond interest shown on Form 8815. Can ie file 2012 taxes now This is your modified AGI. Can ie file 2012 taxes now Both contributions for 2013 and distributions in 2013. Can ie file 2012 taxes now   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. Can ie file 2012 taxes now You received distributions in 2013 from one or more traditional IRAs. Can ie file 2012 taxes now You made contributions to a traditional IRA for 2013. Can ie file 2012 taxes now Some of those contributions may be nondeductible contributions. Can ie file 2012 taxes now If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. Can ie file 2012 taxes now To do this, you can use Worksheet 1-5, Figuring the Taxable Part of Your IRA Distribution, in Publication 590. Can ie file 2012 taxes now   If at least one of the above does not apply, figure your modified AGI using Worksheet 17-1, later. Can ie file 2012 taxes now    How to figure your reduced IRA deduction. Can ie file 2012 taxes now   You can figure your reduced IRA deduction for either Form 1040 or Form 1040A by using the worksheets in chapter 1 of Publication 590. Can ie file 2012 taxes now Also, the instructions for Form 1040 and Form 1040A include similar worksheets that you may be able to use instead. Can ie file 2012 taxes now Worksheet 17-1. Can ie file 2012 taxes now Figuring Your Modified AGI Use this worksheet to figure your modified adjusted gross income for traditional IRA purposes. Can ie file 2012 taxes now 1. Can ie file 2012 taxes now Enter your adjusted gross income (AGI) from Form 1040, line 38, or Form 1040A, line 22, figured without taking into account the amount from Form 1040, line 32, or Form 1040A, line 17 1. Can ie file 2012 taxes now   2. Can ie file 2012 taxes now Enter any student loan interest deduction from Form 1040, line 33, or Form 1040A, line 18 2. Can ie file 2012 taxes now   3. Can ie file 2012 taxes now Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. Can ie file 2012 taxes now   4. Can ie file 2012 taxes now Enter any domestic production activities deduction from Form 1040, line 35 4. Can ie file 2012 taxes now   5. Can ie file 2012 taxes now Enter any foreign earned income and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. Can ie file 2012 taxes now   6. Can ie file 2012 taxes now Enter any foreign housing deduction from Form 2555, line 50 6. Can ie file 2012 taxes now   7. Can ie file 2012 taxes now Enter any excludable savings bond interest from Form 8815, line 14 7. Can ie file 2012 taxes now   8. Can ie file 2012 taxes now Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. Can ie file 2012 taxes now   9. Can ie file 2012 taxes now Add lines 1 through 8. Can ie file 2012 taxes now This is your Modified AGI for traditional IRA purposes 9. Can ie file 2012 taxes now   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. Can ie file 2012 taxes now If you file Form 1040A, enter your IRA deduction on line 17. Can ie file 2012 taxes now You cannot deduct IRA contributions on Form 1040EZ. Can ie file 2012 taxes now Nondeductible Contributions Although your deduction for IRA contributions may be reduced or eliminated, contributions can be made to your IRA up to the general limit or, if it applies, the Kay Bailey Hutchison Spousal IRA limit. Can ie file 2012 taxes now The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Can ie file 2012 taxes now Example. Can ie file 2012 taxes now Mike is 28 years old and single. Can ie file 2012 taxes now In 2013, he was covered by a retirement plan at work. Can ie file 2012 taxes now His salary was $57,312. Can ie file 2012 taxes now His modified AGI was $70,000. Can ie file 2012 taxes now Mike made a $5,500 IRA contribution for 2013. Can ie file 2012 taxes now Because he was covered by a retirement plan and his modified AGI was over $69,000, he cannot deduct his $5,500 IRA contribution. Can ie file 2012 taxes now He must designate this contribution as a nondeductible contribution by reporting it on Form 8606, as explained next. Can ie file 2012 taxes now Form 8606. Can ie file 2012 taxes now   To designate contributions as nondeductible, you must file Form 8606. Can ie file 2012 taxes now   You do not have to designate a contribution as nondeductible until you file your tax return. Can ie file 2012 taxes now When you file, you can even designate otherwise deductible contributions as nondeductible. Can ie file 2012 taxes now   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. Can ie file 2012 taxes now A Form 8606 is not used for the year that you make a rollover from a qualified retirement plan to a traditional IRA and the rollover includes nontaxable amounts. Can ie file 2012 taxes now In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. Can ie file 2012 taxes now See Form 8606 under Distributions Fully or Partly Taxable, later. Can ie file 2012 taxes now Failure to report nondeductible contributions. Can ie file 2012 taxes now   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated as deductible contributions when withdrawn. Can ie file 2012 taxes now All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. Can ie file 2012 taxes now Penalty for overstatement. Can ie file 2012 taxes now   If you overstate the amount of nondeductible contributions on your Form 8606 for any tax year, you must pay a penalty of $100 for each overstatement, unless it was due to reasonable cause. Can ie file 2012 taxes now Penalty for failure to file Form 8606. Can ie file 2012 taxes now   You will have to pay a $50 penalty if you do not file a required Form 8606, unless you can prove that the failure was due to reasonable cause. Can ie file 2012 taxes now    Tax on earnings on nondeductible contributions. Can ie file 2012 taxes now   As long as contributions are within the contribution limits, none of the earnings or gains on contributions (deductible or nondeductible) will be taxed until they are distributed. Can ie file 2012 taxes now See When Can You Withdraw or Use IRA Assets , later. Can ie file 2012 taxes now Cost basis. Can ie file 2012 taxes now   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. Can ie file 2012 taxes now Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. Can ie file 2012 taxes now Inherited IRAs If you inherit a traditional IRA, you are called a beneficiary. Can ie file 2012 taxes now A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. Can ie file 2012 taxes now Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. Can ie file 2012 taxes now Inherited from spouse. Can ie file 2012 taxes now   If you inherit a traditional IRA from your spouse, you generally have the following three choices. Can ie file 2012 taxes now You can: Treat it as your own IRA by designating yourself as the account owner. Can ie file 2012 taxes now Treat it as your own by rolling it over into your IRA, or to the extent it is taxable, into a: Qualified employer plan, Qualified employee annuity plan (section 403(a) plan), Tax-sheltered annuity plan (section 403(b) plan), or Deferred compensation plan of a state or local government (section 457 plan). Can ie file 2012 taxes now Treat yourself as the beneficiary rather than treating the IRA as your own. Can ie file 2012 taxes now Treating it as your own. Can ie file 2012 taxes now   You will be considered to have chosen to treat the IRA as your own if: Contributions (including rollover contributions) are made to the inherited IRA, or You do not take the required minimum distribution for a year as a beneficiary of the IRA. Can ie file 2012 taxes now You will only be considered to have chosen to treat the IRA as your own if: You are the sole beneficiary of the IRA, and You have an unlimited right to withdraw amounts from it. Can ie file 2012 taxes now   However, if you receive a distribution from your deceased spouse's IRA, you can roll that distribution over into your own IRA within the 60-day time limit, as long as the distribution is not a required distribution, even if you are not the sole beneficiary of your deceased spouse's IRA. Can ie file 2012 taxes now Inherited from someone other than spouse. Can ie file 2012 taxes now   If you inherit a traditional IRA from anyone other than your deceased spouse, you cannot treat the inherited IRA as your own. Can ie file 2012 taxes now This means that you cannot make any contributions to the IRA. Can ie file 2012 taxes now It also means you cannot roll over any amounts into or out of the inherited IRA. Can ie file 2012 taxes now However, you can make a trustee-to-trustee transfer as long as the IRA into which amounts are being moved is set up and maintained in the name of the deceased IRA owner for the benefit of you as beneficiary. Can ie file 2012 taxes now For more information, see the discussion of inherited IRAs under Rollover From One IRA Into Another, later. Can ie file 2012 taxes now Can You Move Retirement Plan Assets? You can transfer, tax free, assets (money or property) from other retirement plans (including traditional IRAs) to a traditional IRA. Can ie file 2012 taxes now You can make the following kinds of transfers. Can ie file 2012 taxes now Transfers from one trustee to another. Can ie file 2012 taxes now Rollovers. Can ie file 2012 taxes now Transfers incident to a divorce. Can ie file 2012 taxes now Transfers to Roth IRAs. Can ie file 2012 taxes now   Under certain conditions, you can move assets from a traditional IRA or from a designated Roth account to a Roth IRA. Can ie file 2012 taxes now You can also move assets from a qualified retirement plan to a Roth IRA. Can ie file 2012 taxes now See Can You Move Amounts Into a Roth IRA? under Roth IRAs, later. Can ie file 2012 taxes now Trustee-to-Trustee Transfer A transfer of funds in your traditional IRA from one trustee directly to another, either at your request or at the trustee's request, is not a rollover. Can ie file 2012 taxes now Because there is no distribution to you, the transfer is tax free. Can ie file 2012 taxes now Because it is not a rollover, it is not affected by the 1-year waiting period required between rollovers, discussed later under Rollover From One IRA Into Another . Can ie file 2012 taxes now For information about direct transfers to IRAs from retirement plans other than IRAs, see Can You Move Retirement Plan Assets? in chapter 1 and Can You Move Amounts Into a Roth IRA? in chapter 2 of Publication 590. Can ie file 2012 taxes now Rollovers Generally, a rollover is a tax-free distribution to you of cash or other assets from one retirement plan that you contribute (roll over) to another retirement plan. Can ie file 2012 taxes now The contribution to the second retirement plan is called a “rollover contribution. Can ie file 2012 taxes now ” Note. Can ie file 2012 taxes now An amount rolled over tax free from one retirement plan to another is generally includible in income when it is distributed from the second plan. Can ie file 2012 taxes now Kinds of rollovers to a traditional IRA. Can ie file 2012 taxes now   You can roll over amounts from the following plans into a traditional IRA: A traditional IRA, An employer's qualified retirement plan for its employees, A deferred compensation plan of a state or local government (section 457 plan), or A tax-sheltered annuity plan (section 403(b) plan). Can ie file 2012 taxes now Treatment of rollovers. Can ie file 2012 taxes now   You cannot deduct a rollover contribution, but you must report the rollover distribution on your tax return as discussed later under Reporting rollovers from IRAs and under Reporting rollovers from employer plans . Can ie file 2012 taxes now Kinds of rollovers from a traditional IRA. Can ie file 2012 taxes now   You may be able to roll over, tax free, a distribution from your traditional IRA into a qualified plan. Can ie file 2012 taxes now These plans include the federal Thrift Savings Fund (for federal employees), deferred compensation plans of state or local governments (section 457 plans), and tax-sheltered annuity plans (section 403(b) plans). Can ie file 2012 taxes now The part of the distribution that you can roll over is the part that would otherwise be taxable (includible in your income). Can ie file 2012 taxes now Qualified plans may, but are not required to, accept such rollovers. Can ie file 2012 taxes now Time limit for making a rollover contribution. Can ie file 2012 taxes now   You generally must make the rollover contribution by the 60th day after the day you receive the distribution from your traditional IRA or your employer's plan. Can ie file 2012 taxes now The IRS may waive the 60-day requirement where the failure to do so would be against equity or good conscience, such as in the event of a casualty, disaster, or other event beyond your reasonable control. Can ie file 2012 taxes now For more information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Can ie file 2012 taxes now Extension of rollover period. Can ie file 2012 taxes now   If an amount distributed to you from a traditional IRA or a qualified employer retirement plan is a frozen deposit at any time during the 60-day period allowed for a rollover, special rules extend the rollover period. Can ie file 2012 taxes now For more information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Can ie file 2012 taxes now More information. Can ie file 2012 taxes now   For more information on rollovers, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Can ie file 2012 taxes now Rollover From One IRA Into Another You can withdraw, tax free, all or part of the assets from one traditional IRA if you reinvest them within 60 days in the same or another traditional IRA. Can ie file 2012 taxes now Because this is a rollover, you cannot deduct the amount that you reinvest in an IRA. Can ie file 2012 taxes now Waiting period between rollovers. Can ie file 2012 taxes now   Generally, if you make a tax-free rollover of any part of a distribution from a traditional IRA, you cannot, within a 1-year period, make a tax-free rollover of any later distribution from that same IRA. Can ie file 2012 taxes now You also cannot make a tax-free rollover of any amount distributed, within the same 1-year period, from the IRA into which you made the tax-free rollover. Can ie file 2012 taxes now   The 1-year period begins on the date you receive the IRA distribution, not on the date you roll it over into an IRA. Can ie file 2012 taxes now Example. Can ie file 2012 taxes now You have two traditional IRAs, IRA-1 and IRA-2. Can ie file 2012 taxes now You make a tax-free rollover of a distribution from IRA-1 into a new traditional IRA (IRA-3). Can ie file 2012 taxes now You cannot, within 1 year of the distribution from IRA-1, make a tax-free rollover of any distribution from either IRA-1 or IRA-3 into another traditional IRA. Can ie file 2012 taxes now However, the rollover from IRA-1 into IRA-3 does not prevent you from making a tax-free rollover from IRA-2 into any other traditional IRA. Can ie file 2012 taxes now This is because you have not, within the last year, rolled over, tax free, any distribution from IRA-2 or made a tax-free rollover into IRA-2. Can ie file 2012 taxes now Exception. Can ie file 2012 taxes now   For an exception for distributions from failed financial institutions, see Rollover From One IRA Into Another under Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Can ie file 2012 taxes now Partial rollovers. Can ie file 2012 taxes now   If you withdraw assets from a traditional IRA, you can roll over part of the withdrawal tax free and keep the rest of it. Can ie file 2012 taxes now The amount you keep will generally be taxable (except for the part that is a return of nondeductible contributions). Can ie file 2012 taxes now The amount you keep may be subject to the 10% additional tax on early distributions, discussed later under What Acts Result in Penalties or Additional Taxes? . Can ie file 2012 taxes now Required distributions. Can ie file 2012 taxes now   Amounts that must be distributed during a particular year under the required distribution rules (discussed later) are not eligible for rollover treatment. Can ie file 2012 taxes now Inherited IRAs. Can ie file 2012 taxes now   If you inherit a traditional IRA from your spouse, you generally can roll it over, or you can choose to make the inherited IRA your own. Can ie file 2012 taxes now See Treating it as your own , earlier. Can ie file 2012 taxes now Not inherited from spouse. Can ie file 2012 taxes now   If you inherit a traditional IRA from someone other than your spouse, you cannot roll it over or allow it to receive a rollover contribution. Can ie file 2012 taxes now You must withdraw the IRA assets within a certain period. Can ie file 2012 taxes now For more information, see When Must You Withdraw Assets? in chapter 1 of Publication 590. Can ie file 2012 taxes now Reporting rollovers from IRAs. Can ie file 2012 taxes now   Report any rollover from one traditional IRA to the same or another traditional IRA on lines 15a and 15b, Form 1040, or lines 11a and 11b, Form 1040A, as follows. Can ie file 2012 taxes now   Enter the total amount of the distribution on Form 1040, line 15a, or Form 1040A, line 11a. Can ie file 2012 taxes now If the total amount on Form 1040, line 15a, or Form 1040A, line 11a, was rolled over, enter zero on Form 1040, line 15b, or Form 1040A, line 11b. Can ie file 2012 taxes now If the total distribution was not rolled over, enter the taxable portion of the part that was not rolled over on Form 1040, line 15b, or Form 1040A, line 11b. Can ie file 2012 taxes now Put “Rollover” next to Form 1040, line 15b, or Form 1040A, line 11b. Can ie file 2012 taxes now See your tax return instructions. Can ie file 2012 taxes now   If you rolled over the distribution into a qualified plan (other than an IRA) or you make the rollover in 2014, attach a statement explaining what you did. Can ie file 2012 taxes now Rollover From Employer's Plan Into an IRA You can roll over into a traditional IRA all or part of an eligible rollover distribution you receive from your (or your deceased spouse's): Employer's qualified pension, profit-sharing, or stock bonus plan; Annuity plan; Tax-sheltered annuity plan (section 403(b) plan); or Governmental deferred compensation plan (section 457 plan). Can ie file 2012 taxes now A qualified plan is one that meets the requirements of the Internal Revenue Code. Can ie file 2012 taxes now Eligible rollover distribution. Can ie file 2012 taxes now   Generally, an eligible rollover distribution is any distribution of all or part of the balance to your credit in a qualified retirement plan except the following. Can ie file 2012 taxes now A required minimum distribution (explained later under When Must You Withdraw IRA Assets? (Required Minimum Distributions) ). Can ie file 2012 taxes now A hardship distribution. Can ie file 2012 taxes now Any of a series of substantially equal periodic distributions paid at least once a year over: Your lifetime or life expectancy, The lifetimes or life expectancies of you and your beneficiary, or A period of 10 years or more. Can ie file 2012 taxes now Corrective distributions of excess contributions or excess deferrals, and any income allocable to the excess, or of excess annual additions and any allocable gains. Can ie file 2012 taxes now A loan treated as a distribution because it does not satisfy certain requirements either when made or later (such as upon default), unless the participant's accrued benefits are reduced (offset) to repay the loan. Can ie file 2012 taxes now Dividends on employer securities. Can ie file 2012 taxes now The cost of life insurance coverage. Can ie file 2012 taxes now Any nontaxable amounts that you roll over into your traditional IRA become part of your basis (cost) in your IRAs. Can ie file 2012 taxes now To recover your basis when you take distributions from your IRA, you must complete Form 8606 for the year of the distribution. Can ie file 2012 taxes now See Form 8606 under Distributions Fully or Partly Taxable, later. Can ie file 2012 taxes now Rollover by nonspouse beneficiary. Can ie file 2012 taxes now   A direct transfer from a deceased employee's qualified pension, profit-sharing, or stock bonus plan; annuity plan; tax-sheltered annuity (section 403(b)) plan; or governmental deferred compensation (section 457) plan to an IRA set up to receive the distribution on your behalf can be treated as an eligible rollover distribution if you are the designated beneficiary of the plan and not the employee's spouse. Can ie file 2012 taxes now The IRA is treated as an inherited IRA. Can ie file 2012 taxes now For more information about inherited IRAs, see Inherited IRAs , earlier. Can ie file 2012 taxes now Reporting rollovers from employer plans. Can ie file 2012 taxes now    Enter the total distribution (before income tax or other deductions were withheld) on Form 1040, line 16a, or Form 1040A, line 12a. Can ie file 2012 taxes now This amount should be shown in box 1 of Form 1099-R. Can ie file 2012 taxes now From this amount, subtract any contributions (usually shown in box 5 of Form 1099-R) that were taxable to you when made. Can ie file 2012 taxes now From that result, subtract the amount that was rolled over either directly or within 60 days of receiving the distribution. Can ie file 2012 taxes now Enter the remaining amount, even if zero, on Form 1040, line 16b, or Form 1040A, line 12b. Can ie file 2012 taxes now Also, enter "Rollover" next to Form 1040, line 16b, or Form 1040A, line 12b. Can ie file 2012 taxes now Transfers Incident to Divorce If an interest in a traditional IRA is transferred from your spouse or former spouse to you by a divorce or separate maintenance decree or a written document related to such a decree, the interest in the IRA, starting from the date of the transfer, is treated as your IRA. Can ie file 2012 taxes now The transfer is tax free. Can ie file 2012 taxes now For detailed information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Can ie file 2012 taxes now Converting From Any Traditional IRA to a Roth IRA Allowable conversions. Can ie file 2012 taxes now   You can withdraw all or part of the assets from a traditional IRA and reinvest them (within 60 days) in a Roth IRA. Can ie file 2012 taxes now The amount that you withdraw and timely contribute (convert) to the Roth IRA is called a conversion contribution. Can ie file 2012 taxes now If properly (and timely) rolled over, the 10% additional tax on early distributions will not apply. Can ie file 2012 taxes now However, a part or all of the conversion contribution from your traditional IRA is included in your gross income. Can ie file 2012 taxes now Required distributions. Can ie file 2012 taxes now   You cannot convert amounts that must be distributed from your traditional IRA for a particular year (including the calendar year in which you reach age 70½) under the required distribution rules (discussed later). Can ie file 2012 taxes now Income. Can ie file 2012 taxes now   You must include in your gross income distributions from a traditional IRA that you would have had to include in income if you had not converted them into a Roth IRA. Can ie file 2012 taxes now These amounts are normally included in income on your return for the year that you converted them from a traditional IRA to a Roth IRA. Can ie file 2012 taxes now   You do not include in gross income any part of a distribution from a traditional IRA that is a return of your basis, as discussed later. Can ie file 2012 taxes now   You must file Form 8606 to report 2013 conversions from traditional, SEP, or SIMPLE IRAs to a Roth IRA in 2013 (unless you recharacterized the entire amount) and to figure the amount to include in income. Can ie file 2012 taxes now   If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. Can ie file 2012 taxes now See chapter 4. Can ie file 2012 taxes now Recharacterizations You may be able to treat a contribution made to one type of IRA as having been made to a different type of IRA. Can ie file 2012 taxes now This is called recharacterizing the contribution. Can ie file 2012 taxes now See Can You Move Retirement Plan Assets? in chapter 1 of Publication 590 for more detailed information. Can ie file 2012 taxes now How to recharacterize a contribution. Can ie file 2012 taxes now   To recharacterize a contribution, you generally must have the contribution transferred from the first IRA (the one to which it was made) to the second IRA in a trustee-to-trustee transfer. Can ie file 2012 taxes now If the transfer is made by the due date (including extensions) for your tax return for the year during which the contribution was made, you can elect to treat the contribution as having been originally made to the second IRA instead of to the first IRA. Can ie file 2012 taxes now If you recharacterize your contribution, you must do all three of the following. Can ie file 2012 taxes now Include in the transfer any net income allocable to the contribution. Can ie file 2012 taxes now If there was a loss, the net income you must transfer may be a negative amount. Can ie file 2012 taxes now Report the recharacterization on your tax return for the year during which the contribution was made. Can ie file 2012 taxes now Treat the contribution as having been made to the second IRA on the date that it was actually made to the first IRA. Can ie file 2012 taxes now No deduction allowed. Can ie file 2012 taxes now   You cannot deduct the contribution to the first IRA. Can ie file 2012 taxes now Any net income you transfer with the recharacterized contribution is treated as earned in the second IRA. Can ie file 2012 taxes now Required notifications. Can ie file 2012 taxes now   To recharacterize a contribution, you must notify both the trustee of the first IRA (the one to which the contribution was actually made) and the trustee of the second IRA (the one to which the contribution is being moved) that you have elected to treat the contribution as having been made to the second IRA rather than the first. Can ie file 2012 taxes now You must make the notifications by the date of the transfer. Can ie file 2012 taxes now Only one notification is required if both IRAs are maintained by the same trustee. Can ie file 2012 taxes now The notification(s) must include all of the following information. Can ie file 2012 taxes now The type and amount of the contribution to the first IRA that is to be recharacterized. Can ie file 2012 taxes now The date on which the contribution was made to the first IRA and the year for which it was made. Can ie file 2012 taxes now A direction to the trustee of the first IRA to transfer in a trustee-to-trustee transfer the amount of the contribution and any net income (or loss) allocable to the contribution to the trustee of the second IRA. Can ie file 2012 taxes now The name of the trustee of the first IRA and the name of the trustee of the second IRA. Can ie file 2012 taxes now Any additional information needed to make the transfer. Can ie file 2012 taxes now Reporting a recharacterization. Can ie file 2012 taxes now   If you elect to recharacterize a contribution to one IRA as a contribution to another IRA, you must report the recharacterization on your tax return as directed by Form 8606 and its instructions. Can ie file 2012 taxes now You must treat the contribution as having been made to the second IRA. Can ie file 2012 taxes now When Can You Withdraw or Use IRA Assets? There are rules limiting use of your IRA assets and distributions from it. Can ie file 2012 taxes now Violation of the rules generally results in additional taxes in the year of violation. Can ie file 2012 taxes now See What Acts Result in Penalties or Additional Taxes , later. Can ie file 2012 taxes now Contributions returned before the due date of return. Can ie file 2012 taxes now   If you made IRA contributions in 2013, you can withdraw them tax free by the due date of your return. Can ie file 2012 taxes now If you have an extension of time to file your return, you can withdraw them tax free by the extended due date. Can ie file 2012 taxes now You can do this if, for each contribution you withdraw, both of the following conditions apply. Can ie file 2012 taxes now You did not take a deduction for the contribution. Can ie file 2012 taxes now You withdraw any interest or other income earned on the contribution. Can ie file 2012 taxes now You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. Can ie file 2012 taxes now If there was a loss, the net income earned on the contribution may be a negative amount. Can ie file 2012 taxes now Note. Can ie file 2012 taxes now To calculate the amount you must withdraw, see Worksheet 1-4 under When Can You Withdraw or Use Assets? in chapter 1 of Publication 590. Can ie file 2012 taxes now Earnings includible in income. Can ie file 2012 taxes now   You must include in income any earnings on the contributions you withdraw. Can ie file 2012 taxes now Include the earnings in income for the year in which you made the contributions, not in the year in which you withdraw them. Can ie file 2012 taxes now Generally, except for any part of a withdrawal that is a return of nondeductible contributions (basis), any withdrawal of your contributions after the due date (or extended due date) of your return will be treated as a taxable distribution. Can ie file 2012 taxes now Excess contributions can also be recovered tax free as discussed under What Acts Result in Penalties or Additional Taxes?, later. Can ie file 2012 taxes now    Early distributions tax. Can ie file 2012 taxes now   The 10% additional tax on distributions made before you reach age 59½ does not apply to these tax-free withdrawals of your contributions. Can ie file 2012 taxes now However, the distribution of interest or other income must be reported on Form 5329 and, unless the distribution qualifies as an exception to the age 59½ rule, it will be subject to this tax. Can ie file 2012 taxes now When Must You Withdraw IRA Assets? (Required Minimum Distributions) You cannot keep funds in a traditional IRA indefinitely. Can ie file 2012 taxes now Eventually they must be distributed. Can ie file 2012 taxes now If there are no distributions, or if the distributions are not large enough, you may have to pay a 50% excise tax on the amount not distributed as required. Can ie file 2012 taxes now See Excess Accumulations (Insufficient Distributions) , later. Can ie file 2012 taxes now The requirements for distributing IRA funds differ depending on whether you are the IRA owner or the beneficiary of a decedent's IRA. Can ie file 2012 taxes now Required minimum distribution. Can ie file 2012 taxes now   The amount that must be distributed each year is referred to as the required minimum distribution. Can ie file 2012 taxes now Required distributions not eligible for rollover. Can ie file 2012 taxes now   Amounts that must be distributed (required minimum distributions) during a particular year are not eligible for rollover treatment. Can ie file 2012 taxes now IRA owners. Can ie file 2012 taxes now   If you are the owner of a traditional IRA, you must generally start receiving distributions from your IRA by April 1 of the year following the year in which you reach age 70½. Can ie file 2012 taxes now April 1 of the year following the year in which you reach age 70½ is referred to as the required beginning date. Can ie file 2012 taxes now Distributions by the required beginning date. Can ie file 2012 taxes now   You must receive at least a minimum amount for each year starting with the year you reach age 70½ (your 70½ year). Can ie file 2012 taxes now If you do not (or did not) receive that minimum amount in your 70½ year, then you must receive distributions for your 70½ year by April 1 of the next year. Can ie file 2012 taxes now   If an IRA owner dies after reaching age 70½, but before April 1 of the next year, no minimum distribution is required because death occurred before the required beginning date. Can ie file 2012 taxes now Even if you begin receiving distributions before you attain age 70½, you must begin calculating and receiving required minimum distributions by your required beginning date. Can ie file 2012 taxes now Distributions after the required beginning date. Can ie file 2012 taxes now   The required minimum distribution for any year after the year you turn 70½ must be made by December 31 of that later year. Can ie file 2012 taxes now    Beneficiaries. Can ie file 2012 taxes now   If you are the beneficiary of a decedent's traditional IRA, the requirements for distributions from that IRA generally depend on whether the IRA owner died before or after the required beginning date for distributions. Can ie file 2012 taxes now More information. Can ie file 2012 taxes now   For more information, including how to figure your minimum required distribution each year and how to figure your required distribution if you are a beneficiary of a decedent's IRA, see When Must You Withdraw Assets? in chapter 1 of Publication 590. Can ie file 2012 taxes now Are Distributions Taxable? In general, distributions from a traditional IRA are taxable in the year you receive them. Can ie file 2012 taxes now Exceptions. Can ie file 2012 taxes now   Exceptions to distributions from traditional IRAs being taxable in the year you receive them are: Rollovers, Qualified charitable distributions (QCD), discussed later, Tax-free withdrawals of contributions, discussed earlier, and The return of nondeductible contributions, discussed later under Distributions Fully or Partly Taxable . Can ie file 2012 taxes now    Although a conversion of a traditional IRA is considered a rollover for Roth IRA purposes, it is not an exception to the rule that distributions from a traditional IRA are taxable in the year you receive them. Can ie file 2012 taxes now Conversion distributions are includible in your gross income subject to this rule and the special rules for conversions explained in Converting From Any Traditional IRA Into a Roth IRA under Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Can ie file 2012 taxes now Qualified charitable distributions (QCD). Can ie file 2012 taxes now   A QCD is generally a nontaxable distribution made directly by the trustee of your IRA to an organization eligible to receive tax-deductible contributions. Can ie file 2012 taxes now Special rules apply if you made a qualified charitable distribution in January 2013 that you elected to treat as made in 2012. Can ie file 2012 taxes now See Qualified Charitable Distributions in Publication 590 for more information. Can ie file 2012 taxes now Ordinary income. Can ie file 2012 taxes now   Distributions from traditional IRAs that you include in income are taxed as ordinary income. Can ie file 2012 taxes now No special treatment. Can ie file 2012 taxes now   In figuring your tax, you cannot use the 10-year tax option or capital gain treatment that applies to lump-sum distributions from qualified retirement plans. Can ie file 2012 taxes now Distributions Fully or Partly Taxable Distributions from your traditional IRA may be fully or partly taxable, depending on whether your IRA includes any nondeductible contributions. Can ie file 2012 taxes now Fully taxable. Can ie file 2012 taxes now   If only deductible contributions were made to your traditional IRA (or IRAs, if you have more than one), you have no basis in your IRA. Can ie file 2012 taxes now Because you have no basis in your IRA, any distributions are fully taxable when received. Can ie file 2012 taxes now See Reporting taxable distributions on your return , later. Can ie file 2012 taxes now Partly taxable. Can ie file 2012 taxes now    If you made nondeductible contributions or rolled over any after-tax amounts to any of your traditional IRAs, you have a cost basis (investment in the contract) equal to the amount of those contributions. Can ie file 2012 taxes now These nondeductible contributions are not taxed when they are distributed to you. Can ie file 2012 taxes now They are a return of your investment in your IRA. Can ie file 2012 taxes now   Only the part of the distribution that represents nondeductible contributions and rolled over after-tax amounts (your cost basis) is tax free. Can ie file 2012 taxes now If nondeductible contributions have been made or after-tax amounts have been rolled over to your IRA, distributions consist partly of nondeductible contributions (basis) and partly of deductible contributions, earnings, and gains (if there are any). Can ie file 2012 taxes now Until all of your basis has been distributed, each distribution is partly nontaxable and partly taxable. Can ie file 2012 taxes now Form 8606. Can ie file 2012 taxes now   You must complete Form 8606 and attach it to your return if you receive a distribution from a traditional IRA and have ever made nondeductible contributions or rolled over after-tax amounts to any of your traditional IRAs. Can ie file 2012 taxes now Using the form, you will figure the nontaxable distributions for 2013 and your total IRA basis for 2013 and earlier years. Can ie file 2012 taxes now Note. Can ie file 2012 taxes now If you are required to file Form 8606, but you are not required to file an income tax return, you still must file Form 8606. Can ie file 2012 taxes now Send it to the IRS at the time and place you would otherwise file an income tax return. Can ie file 2012 taxes now Distributions reported on Form 1099-R. Can ie file 2012 taxes now   If you receive a distribution from your traditional IRA, you will receive Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Can ie file 2012 taxes now , or a similar statement. Can ie file 2012 taxes now IRA distributions are shown in boxes 1 and 2a of Form 1099-R. Can ie file 2012 taxes now A number or letter code in box 7 tells you what type of distribution you received from your IRA. Can ie file 2012 taxes now Withholding. Can ie file 2012 taxes now   Federal income tax is withheld from distributions from traditional IRAs unless you choose not to have tax withheld. Can ie file 2012 taxes now See chapter 4. Can ie file 2012 taxes now IRA distributions delivered outside the United States. Can ie file 2012 taxes now   In general, if you are a U. Can ie file 2012 taxes now S. Can ie file 2012 taxes now citizen or resident alien and your home address is outside the United States or its possessions, you cannot choose exemption from withholding on distributions from your traditional IRA. Can ie file 2012 taxes now Reporting taxable distributions on your return. Can ie file 2012 taxes now    Report fully taxable distributions, including early distributions on Form 1040, line 15b, or Form 1040A, line 11b (no entry is required on Form 1040, line 15a, or Form 1040A, line 11a). Can ie file 2012 taxes now If only part of the distribution is taxable, enter the total amount on Form 1040, line 15a, or Form 1040A, line 11a, and the taxable part on Form 1040, line 15b, or Form 1040A, line 11b. Can ie file 2012 taxes now You cannot report distributions on Form 1040EZ. Can ie file 2012 taxes now What Acts Result in Penalties or Additional Taxes? The tax advantages of using traditional IRAs for retirement savings can be offset by additional taxes and penalties if you do not follow the rules. Can ie file 2012 taxes now There are additions to the regular tax for using your IRA funds in prohibited transactions. Can ie file 2012 taxes now There are also additional taxes for the following activities. Can ie file 2012 taxes now Investing in collectibles. Can ie file 2012 taxes now Making excess contributions. Can ie file 2012 taxes now Taking early distributions. Can ie file 2012 taxes now Allowing excess amounts to accumulate (failing to take required distributions). Can ie file 2012 taxes now There are penalties for overstating the amount of nondeductible contributions and for failure to file a Form 8606, if required. Can ie file 2012 taxes now Prohibited Transactions Generally, a prohibited transaction is any improper use of your traditional IRA by you, your beneficiary, or any disqualified person. Can ie file 2012 taxes now Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendent, and any spouse of a lineal descendent). Can ie file 2012 taxes now The following are examples of prohibited transactions with a traditional IRA. Can ie file 2012 taxes now Borrowing money from it. Can ie file 2012 taxes now Selling property to it. Can ie file 2012 taxes now Receiving unreasonable compensation for managing it. Can ie file 2012 taxes now Using it as security for a loan. Can ie file 2012 taxes now Buying property for personal use (present or future) with IRA funds. Can ie file 2012 taxes now Effect on an IRA account. Can ie file 2012 taxes now   Generally, if you or your beneficiary engages in a prohibited transaction in connection with your traditional IRA account at any time during the year, the account stops being an IRA as of the first day of that year. Can ie file 2012 taxes now Effect on you or your beneficiary. Can ie file 2012 taxes now   If your account stops being an IRA because you or your beneficiary engaged in a prohibited transaction, the account is treated as distributing all its assets to you at their fair market values on the first day of the year. Can ie file 2012 taxes now If the total of those values is more than your basis in the IRA, you will have a taxable gain that is includible in your income. Can ie file 2012 taxes now For information on figuring your gain and reporting it in income, see Are Distributions Taxable , earlier. Can ie file 2012 taxes now The distribution may be subject to additional taxes or penalties. Can ie file 2012 taxes now Taxes on prohibited transactions. Can ie file 2012 taxes now   If someone other than the owner or beneficiary of a traditional IRA engages in a prohibited transaction, that person may be liable for certain taxes. Can ie file 2012 taxes now In general, there is a 15% tax on the amount of the prohibited transaction and a 100% additional tax if the transaction is not corrected. Can ie file 2012 taxes now More information. Can ie file 2012 taxes now   For more information on prohibited transactions, see What Acts Result in Penalties or Additional Taxes? in chapter 1 of Publication 590. Can ie file 2012 taxes now Investment in Collectibles If your traditional IRA invests in collectibles, the amount invested is considered distributed to you in the year invested. Can ie file 2012 taxes now You may have to pay the 10% additional tax on early distributions, discussed later. Can ie file 2012 taxes now Collectibles. Can ie file 2012 taxes now   These include: Artworks, Rugs, Antiques, Metals, Gems, Stamps, Coins, Alcoholic beverages, and Certain other tangible personal property. Can ie file 2012 taxes now Exception. Can ie file 2012 taxes now    Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U. Can ie file 2012 taxes now S. Can ie file 2012 taxes now gold coins, or one-ounce silver coins minted by the Treasury Department. Can ie file 2012 taxes now It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion. Can ie file 2012 taxes now Excess Contributions Generally, an excess contribution is the amount contributed to your traditional IRA(s) for the year that is more than the smaller of: The maximum deductible amount for the year. Can ie file 2012 taxes now For 2013, this is $5,500 ($6,500 if you are 50 or older), or Your taxable compensation for the year. Can ie file 2012 taxes now Tax on excess contributions. Can ie file 2012 taxes now   In general, if the excess contributions for a year are not withdrawn by the date your return for the year is due (including extensions), you are subject to a 6% tax. Can ie file 2012 taxes now You must pay the 6% tax each year on excess amounts that remain in your traditional IRA at the end of your tax year. Can ie file 2012 taxes now The tax cannot be more than 6% of the combined value of all your IRAs as of the end of your tax year. Can ie file 2012 taxes now Excess contributions withdrawn by due date of return. Can ie file 2012 taxes now   You will not have to pay the 6% tax if you withdraw an excess contribution made during a tax year and you also withdraw interest or other income earned on the excess contribution. Can ie file 2012 taxes now You must complete your withdrawal by the date your tax return for that year is due, including extensions. Can ie file 2012 taxes now How to treat withdrawn contributions. Can ie file 2012 taxes now   Do not include in your gross income an excess contribution that you withdraw from your traditional IRA before your tax return is due if both the following conditions are met. Can ie file 2012 taxes now No deduction was allowed for the excess contribution. Can ie file 2012 taxes now You withdraw the interest or other income earned on the excess contribution. Can ie file 2012 taxes now You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. Can ie file 2012 taxes now If there was a loss, the net income you must withdraw may be a negative amount. Can ie file 2012 taxes now How to treat withdrawn interest or other income. Can ie file 2012 taxes now   You must include in your gross income the interest or other income that was earned on the excess contribution. Can ie file 2012 taxes now Report it on your return for the year in which the excess contribution was made. Can ie file 2012 taxes now Your withdrawal of interest or other income may be subject to an additional 10% tax on early distributions, discus
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The Can Ie File 2012 Taxes Now

Can ie file 2012 taxes now 2. Can ie file 2012 taxes now   Ordinary or Capital Gain or Loss Table of Contents IntroductionSection 1231 transactions. Can ie file 2012 taxes now Topics - This chapter discusses: Useful Items - You may want to see: Capital Assets Noncapital AssetsCommodities derivative dealer. Can ie file 2012 taxes now Sales and Exchanges Between Related PersonsGain Is Ordinary Income Nondeductible Loss Other DispositionsSale of a Business Dispositions of Intangible Property Subdivision of Land Timber Precious Metals and Stones, Stamps, and Coins Coal and Iron Ore Conversion Transactions Introduction You must classify your gains and losses as either ordinary or capital (and your capital gains or losses as either short-term or long-term). Can ie file 2012 taxes now You must do this to figure your net capital gain or loss. Can ie file 2012 taxes now For individuals, a net capital gain may be taxed at a different tax rate than ordinary income. Can ie file 2012 taxes now See Capital Gains Tax Rates in chapter 4. Can ie file 2012 taxes now Your deduction for a net capital loss may be limited. Can ie file 2012 taxes now See Treatment of Capital Losses in chapter 4. Can ie file 2012 taxes now Capital gain or loss. Can ie file 2012 taxes now   Generally, you will have a capital gain or loss if you sell or exchange a capital asset. Can ie file 2012 taxes now You also may have a capital gain if your section 1231 transactions result in a net gain. Can ie file 2012 taxes now Section 1231 transactions. Can ie file 2012 taxes now   Section 1231 transactions are sales and exchanges of property held longer than 1 year and either used in a trade or business or held for the production of rents or royalties. Can ie file 2012 taxes now They also include certain involuntary conversions of business or investment property, including capital assets. Can ie file 2012 taxes now See Section 1231 Gains and Losses in chapter 3 for more information. Can ie file 2012 taxes now Topics - This chapter discusses: Capital assets Noncapital assets Sales and exchanges between  related persons Other dispositions Useful Items - You may want to see: Publication 550 Investment Income and Expenses Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 4797 Sales of Business Property 8594 Asset Acquisition Statement Under Section 1060 8949 Sales and Other Dispositions of Capital Assets See chapter 5 for information about getting publications and forms. Can ie file 2012 taxes now Capital Assets Almost everything you own and use for personal purposes, pleasure, or investment is a capital asset. Can ie file 2012 taxes now For exceptions, see Noncapital Assets, later. Can ie file 2012 taxes now The following items are examples of capital assets. Can ie file 2012 taxes now Stocks and bonds. Can ie file 2012 taxes now A home owned and occupied by you and your family. Can ie file 2012 taxes now Timber grown on your home property or investment property, even if you make casual sales of the timber. Can ie file 2012 taxes now Household furnishings. Can ie file 2012 taxes now A car used for pleasure or commuting. Can ie file 2012 taxes now Coin or stamp collections. Can ie file 2012 taxes now Gems and jewelry. Can ie file 2012 taxes now Gold, silver, and other metals. Can ie file 2012 taxes now Personal-use property. Can ie file 2012 taxes now   Generally, property held for personal use is a capital asset. Can ie file 2012 taxes now Gain from a sale or exchange of that property is a capital gain. Can ie file 2012 taxes now Loss from the sale or exchange of that property is not deductible. Can ie file 2012 taxes now You can deduct a loss relating to personal-use property only if it results from a casualty or theft. Can ie file 2012 taxes now Investment property. Can ie file 2012 taxes now   Investment property (such as stocks and bonds) is a capital asset, and a gain or loss from its sale or exchange is a capital gain or loss. Can ie file 2012 taxes now This treatment does not apply to property used to produce rental income. Can ie file 2012 taxes now See Business assets, later, under Noncapital Assets. Can ie file 2012 taxes now Release of restriction on land. Can ie file 2012 taxes now   Amounts you receive for the release of a restrictive covenant in a deed to land are treated as proceeds from the sale of a capital asset. Can ie file 2012 taxes now Noncapital Assets A noncapital asset is property that is not a capital asset. Can ie file 2012 taxes now The following kinds of property are not capital assets. Can ie file 2012 taxes now Stock in trade, inventory, and other property you hold mainly for sale to customers in your trade or business. Can ie file 2012 taxes now Inventories are discussed in Publication 538, Accounting Periods and Methods. Can ie file 2012 taxes now But, see the Tip below. Can ie file 2012 taxes now Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of any properties described in (1), above. Can ie file 2012 taxes now Depreciable property used in your trade or business or as rental property (including section 197 intangibles defined later), even if the property is fully depreciated (or amortized). Can ie file 2012 taxes now Sales of this type of property are discussed in chapter 3. Can ie file 2012 taxes now Real property used in your trade or business or as rental property, even if the property is fully depreciated. Can ie file 2012 taxes now A copyright; a literary, musical, or artistic composition; a letter; a memorandum; or similar property (such as drafts of speeches, recordings, transcripts, manuscripts, drawings, or photographs): Created by your personal efforts, Prepared or produced for you (in the case of a letter, memorandum, or similar property), or Received from a person who created the property or for whom the property was prepared 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. Can ie file 2012 taxes now But, see the Tip below. Can ie file 2012 taxes now U. Can ie file 2012 taxes now S. Can ie file 2012 taxes now Government publications you got from the government for free or for less than the normal sales price or that you acquired under circumstances entitling you to the basis of someone who got the publications for free or for less than the normal sales price. Can ie file 2012 taxes now Any commodities derivative financial instrument (discussed later) held by a commodities derivatives dealer unless it meets both of the following requirements. Can ie file 2012 taxes now It is established to the satisfaction of the IRS that the instrument has no connection to the activities of the dealer as a dealer. Can ie file 2012 taxes now The instrument is clearly identified in the dealer's records as meeting (a) by the end of the day on which it was acquired, originated, or entered into. Can ie file 2012 taxes now Any hedging transaction (defined later) that is clearly identified as a hedging transaction by the end of the day on which it was acquired, originated, or entered into. Can ie file 2012 taxes now Supplies of a type you regularly use or consume in the ordinary course of your trade or business. Can ie file 2012 taxes now You can elect to treat as capital assets certain self-created musical compositions or copyrights you sold or exchanged. Can ie file 2012 taxes now See chapter 4 of Publication 550 for details. Can ie file 2012 taxes now Property held mainly for sale to customers. Can ie file 2012 taxes now   Stock in trade, inventory, and other property you hold mainly for sale to customers in your trade or business are not capital assets. Can ie file 2012 taxes now Inventories are discussed in Publication 538. Can ie file 2012 taxes now Business assets. Can ie file 2012 taxes now   Real property and depreciable property used in your trade or business or as rental property (including section 197 intangibles defined later under Dispositions of Intangible Property) are not capital assets. Can ie file 2012 taxes now The sale or disposition of business property is discussed in chapter 3. Can ie file 2012 taxes now Letters and memoranda. Can ie file 2012 taxes now   Letters, memoranda, and similar property (such as drafts of speeches, recordings, transcripts, manuscripts, drawings, or photographs) are not treated as capital assets (as discussed earlier) if your personal efforts created them or if they were prepared or produced for you. Can ie file 2012 taxes now Nor is this property a capital asset if your basis in it is determined by reference to the person who created it or the person for whom it was prepared. Can ie file 2012 taxes now For this purpose, letters and memoranda addressed to you are considered prepared for you. Can ie file 2012 taxes now If letters or memoranda are prepared by persons under your administrative control, they are considered prepared for you whether or not you review them. Can ie file 2012 taxes now Commodities derivative financial instrument. Can ie file 2012 taxes now   A commodities derivative financial instrument is a commodities contract or other financial instrument for commodities (other than a share of corporate stock, a beneficial interest in a partnership or trust, a note, bond, debenture, or other evidence of indebtedness, or a section 1256 contract) the value or settlement price of which is calculated or determined by reference to a specified index (as defined in section 1221(b) of the Internal Revenue Code). Can ie file 2012 taxes now Commodities derivative dealer. Can ie file 2012 taxes now   A commodities derivative dealer is a person who regularly offers to enter into, assume, offset, assign, or terminate positions in commodities derivative financial instruments with customers in the ordinary course of a trade or business. Can ie file 2012 taxes now Hedging transaction. Can ie file 2012 taxes now   A hedging transaction is any transaction you enter into in the normal course of your trade or business primarily to manage any of the following. Can ie file 2012 taxes now Risk of price changes or currency fluctuations involving ordinary property you hold or will hold. Can ie file 2012 taxes now Risk of interest rate or price changes or currency fluctuations for borrowings you make or will make, or ordinary obligations you incur or will incur. Can ie file 2012 taxes now Sales and Exchanges Between Related Persons This section discusses the rules that may apply to the sale or exchange of property between related persons. Can ie file 2012 taxes now If these rules apply, gains may be treated as ordinary income and losses may not be deductible. Can ie file 2012 taxes now See Transfers to Spouse in chapter 1 for rules that apply to spouses. Can ie file 2012 taxes now Gain Is Ordinary Income If a gain is recognized on the sale or exchange of property to a related person, the gain may be ordinary income even if the property is a capital asset. Can ie file 2012 taxes now It is ordinary income if the sale or exchange is a depreciable property transaction or a controlled partnership transaction. Can ie file 2012 taxes now Depreciable property transaction. Can ie file 2012 taxes now   Gain on the sale or exchange of property, including a leasehold or a patent application, that is depreciable property in the hands of the person who receives it is ordinary income if the transaction is either directly or indirectly between any of the following pairs of entities. Can ie file 2012 taxes now A person and the person's controlled entity or entities. Can ie file 2012 taxes now A taxpayer and any trust in which the taxpayer (or his or her spouse) is a beneficiary unless the beneficiary's interest in the trust is a remote contingent interest; that is, the value of the interest computed actuarially is 5% or less of the value of the trust property. Can ie file 2012 taxes now An executor and a beneficiary of an estate unless the sale or exchange is in satisfaction of a pecuniary bequest (a bequest for a sum of money). Can ie file 2012 taxes now An employer (or any person related to the employer under rules (1), (2), or (3)) and a welfare benefit fund (within the meaning of section 419(e) of the Internal Revenue Code) that is controlled directly or indirectly by the employer (or any person related to the employer). Can ie file 2012 taxes now Controlled entity. Can ie file 2012 taxes now   A person's controlled entity is either of the following. Can ie file 2012 taxes now A corporation in which more than 50% of the value of all outstanding stock, or a partnership in which more than 50% of the capital interest or profits interest, is directly or indirectly owned by or for that person. Can ie file 2012 taxes now An entity whose relationship with that person is one of the following. Can ie file 2012 taxes now 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 profits interest in the partnership. Can ie file 2012 taxes now Two corporations that are members of the same controlled group as defined in section 1563(a) of the Internal Revenue Code, except that “more than 50%” is substituted for “at least 80%” in that definition. Can ie file 2012 taxes now Two S corporations, if the same persons own more than 50% in value of the outstanding stock of each corporation. Can ie file 2012 taxes now 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. Can ie file 2012 taxes now Controlled partnership transaction. Can ie file 2012 taxes now   A gain recognized in a controlled partnership transaction may be ordinary income. Can ie file 2012 taxes now The gain is ordinary income if it results from the sale or exchange of property that, in the hands of the party who receives it, is a noncapital asset such as trade accounts receivable, inventory, stock in trade, or depreciable or real property used in a trade or business. Can ie file 2012 taxes now   A controlled partnership transaction is a transaction directly or indirectly between either of the following pairs of entities. Can ie file 2012 taxes now A partnership and a person who directly or indirectly owns more than 50% of the capital interest or profits interest in the partnership. Can ie file 2012 taxes now Two partnerships, if the same persons directly or indirectly own more than 50% of the capital interests or profits interests in both partnerships. Can ie file 2012 taxes now Determining ownership. Can ie file 2012 taxes now   In the transactions under Depreciable property transaction and Controlled partnership transaction, earlier, use the following rules to determine the ownership of stock or a partnership interest. Can ie file 2012 taxes now Stock or a partnership interest 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. Can ie file 2012 taxes now (However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more in value of the stock of the corporation. Can ie file 2012 taxes now ) An individual is considered as owning the stock or partnership interest directly or indirectly owned by or for his or her family. Can ie file 2012 taxes now Family includes only brothers, sisters, half-brothers, half-sisters, spouse, ancestors, and lineal descendants. Can ie file 2012 taxes now For purposes of applying (1) or (2), above, stock or a partnership interest constructively owned by a person under (1) is treated as actually owned by that person. Can ie file 2012 taxes now But stock or a partnership interest constructively owned by an individual under (2) is not treated as owned by the individual for reapplying (2) to make another person the constructive owner of that stock or partnership interest. Can ie file 2012 taxes now Nondeductible Loss A loss on the sale or exchange of property between related persons is not deductible. Can ie file 2012 taxes now This applies to both direct and indirect transactions, but not to distributions of property from a corporation in a complete liquidation. Can ie file 2012 taxes now For the list of related persons, see Related persons next. Can ie file 2012 taxes now If a sale or exchange is between any of these related persons and involves the lump-sum sale of a number of blocks of stock or pieces of property, the gain or loss must be figured separately for each block of stock or piece of property. Can ie file 2012 taxes now The gain on each item is taxable. Can ie file 2012 taxes now The loss on any item is nondeductible. Can ie file 2012 taxes now Gains from the sales of any of these items may not be offset by losses on the sales of any of the other items. Can ie file 2012 taxes now Related persons. Can ie file 2012 taxes now   The following is a list of related persons. Can ie file 2012 taxes now Members of a family, including only brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. Can ie file 2012 taxes now ), and lineal descendants (children, grandchildren, etc. Can ie file 2012 taxes now ). Can ie file 2012 taxes now An individual and a corporation if the individual directly or indirectly owns more than 50% in value of the outstanding stock of the corporation. Can ie file 2012 taxes now Two corporations that are members of the same controlled group as defined in section 267(f) of the Internal Revenue Code. Can ie file 2012 taxes now A trust fiduciary and a corporation if the trust or the grantor of the trust directly or indirectly owns more than 50% in value of the outstanding stock of the corporation. Can ie file 2012 taxes now A grantor and fiduciary, and the fiduciary and beneficiary, of any trust. Can ie file 2012 taxes now Fiduciaries of two different trusts, and the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. Can ie file 2012 taxes now A tax-exempt educational or charitable organization and a person who directly or indirectly controls the organization, or a member of that person's family. Can ie file 2012 taxes now 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 profits interest in the partnership. Can ie file 2012 taxes now Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. Can ie file 2012 taxes now 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. Can ie file 2012 taxes now An executor and a beneficiary of an estate unless the sale or exchange is in satisfaction of a pecuniary bequest. Can ie file 2012 taxes now Two partnerships if the same persons directly or indirectly own more than 50% of the capital interests or profits interests in both partnerships. Can ie file 2012 taxes now A person and a partnership if the person directly or indirectly owns more than 50% of the capital interest or profits interest in the partnership. Can ie file 2012 taxes now Partnership interests. Can ie file 2012 taxes now   The nondeductible loss rule does not apply to a sale or exchange of an interest in the partnership between the related persons described in (12) or (13) above. Can ie file 2012 taxes now Controlled groups. Can ie file 2012 taxes now   Losses on transactions between members of the same controlled group described in (3) earlier are deferred rather than denied. Can ie file 2012 taxes now   For more information, see section 267(f) of the Internal Revenue Code. Can ie file 2012 taxes now Ownership of stock or partnership interests. Can ie file 2012 taxes now   In determining whether an individual directly or indirectly owns any of the outstanding stock of a corporation or an interest in a partnership for a loss on a sale or exchange, the following rules apply. Can ie file 2012 taxes now Stock or a partnership interest 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. Can ie file 2012 taxes now (However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more in value of the stock of the corporation. Can ie file 2012 taxes now ) An individual is considered as owning the stock or partnership interest directly or indirectly owned by or for his or her family. Can ie file 2012 taxes now Family includes only brothers, sisters, half-brothers, half-sisters, spouse, ancestors, and lineal descendants. Can ie file 2012 taxes now An individual owning (other than by applying (2)) any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. Can ie file 2012 taxes now For purposes of applying (1), (2), or (3), stock or a partnership interest constructively owned by a person under (1) is treated as actually owned by that person. Can ie file 2012 taxes now But stock or a partnership interest constructively owned by an individual under (2) or (3) is not treated as owned by the individual for reapplying either (2) or (3) to make another person the constructive owner of that stock or partnership interest. Can ie file 2012 taxes now Indirect transactions. Can ie file 2012 taxes now   You cannot deduct your loss on the sale of stock through your broker if under a prearranged plan a related person or entity buys the same stock you had owned. Can ie file 2012 taxes now This does not apply to a cross-trade between related parties through an exchange that is purely coincidental and is not prearranged. Can ie file 2012 taxes now Property received from a related person. Can ie file 2012 taxes now   If, in a purchase or exchange, you received property from a related person who had a loss that was not allowable and you later sell or exchange the property at a gain, you recognize the gain only to the extent it is more than the loss previously disallowed to the related person. Can ie file 2012 taxes now This rule applies only to the original transferee. Can ie file 2012 taxes now Example 1. Can ie file 2012 taxes now Your brother sold stock to you for $7,600. Can ie file 2012 taxes now His cost basis was $10,000. Can ie file 2012 taxes now His loss of $2,400 was not deductible. Can ie file 2012 taxes now You later sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900 ($10,500 − $7,600). Can ie file 2012 taxes now Your recognized gain is only $500, the gain that is more than the $2,400 loss not allowed to your brother. Can ie file 2012 taxes now Example 2. Can ie file 2012 taxes now Assume the same facts as in Example 1, except that you sell the stock for $6,900 instead of $10,500. Can ie file 2012 taxes now Your recognized loss is only $700 ($7,600 − $6,900). Can ie file 2012 taxes now You cannot deduct the loss not allowed to your brother. Can ie file 2012 taxes now Other Dispositions This section discusses rules for determining the treatment of gain or loss from various dispositions of property. Can ie file 2012 taxes now Sale of a Business The sale of a business usually is not a sale of one asset. Can ie file 2012 taxes now Instead, all the assets of the business are sold. Can ie file 2012 taxes now Generally, when this occurs, each asset is treated as being sold separately for determining the treatment of gain or loss. Can ie file 2012 taxes now A business usually has many assets. Can ie file 2012 taxes now When sold, these assets must be classified as capital assets, depreciable property used in the business, real property used in the business, or property held for sale to customers, such as inventory or stock in trade. Can ie file 2012 taxes now The gain or loss on each asset is figured separately. Can ie file 2012 taxes now The sale of capital assets results in capital gain or loss. Can ie file 2012 taxes now The sale of real property or depreciable property used in the business and held longer than 1 year results in gain or loss from a section 1231 transaction (discussed in chapter 3). Can ie file 2012 taxes now The sale of inventory results in ordinary income or loss. Can ie file 2012 taxes now Partnership interests. Can ie file 2012 taxes now   An interest in a partnership or joint venture is treated as a capital asset when sold. Can ie file 2012 taxes now The part of any gain or loss from unrealized receivables or inventory items will be treated as ordinary gain or loss. Can ie file 2012 taxes now For more information, see Disposition of Partner's Interest in Publication 541. Can ie file 2012 taxes now Corporation interests. Can ie file 2012 taxes now   Your interest in a corporation is represented by stock certificates. Can ie file 2012 taxes now When you sell these certificates, you usually realize capital gain or loss. Can ie file 2012 taxes now For information on the sale of stock, see chapter 4 in Publication 550. Can ie file 2012 taxes now Corporate liquidations. Can ie file 2012 taxes now   Corporate liquidations of property generally are treated as a sale or exchange. Can ie file 2012 taxes now Gain or loss generally is recognized by the corporation on a liquidating sale of its assets. Can ie file 2012 taxes now Gain or loss generally is recognized also on a liquidating distribution of assets as if the corporation sold the assets to the distributee at fair market value. Can ie file 2012 taxes now   In certain cases in which the distributee is a corporation in control of the distributing corporation, the distribution may not be taxable. Can ie file 2012 taxes now For more information, see section 332 of the Internal Revenue Code and the related regulations. Can ie file 2012 taxes now Allocation of consideration paid for a business. Can ie file 2012 taxes now   The sale of a trade or business for a lump sum is considered a sale of each individual asset rather than of a single asset. Can ie file 2012 taxes now Except for assets exchanged under any nontaxable exchange rules, both the buyer and seller of a business must use the residual method (explained later) to allocate the consideration to each business asset transferred. Can ie file 2012 taxes now This method determines gain or loss from the transfer of each asset and how much of the consideration is for goodwill and certain other intangible property. Can ie file 2012 taxes now It also determines the buyer's basis in the business assets. Can ie file 2012 taxes now Consideration. Can ie file 2012 taxes now   The buyer's consideration is the cost of the assets acquired. Can ie file 2012 taxes now The seller's consideration is the amount realized (money plus the fair market value of property received) from the sale of assets. Can ie file 2012 taxes now Residual method. Can ie file 2012 taxes now   The residual method must be used for any transfer of a group of assets that constitutes a trade or business and for which the buyer's basis is determined only by the amount paid for the assets. Can ie file 2012 taxes now This applies to both direct and indirect transfers, such as the sale of a business or the sale of a partnership interest in which the basis of the buyer's share of the partnership assets is adjusted for the amount paid under section 743(b) of the Internal Revenue Code. Can ie file 2012 taxes now Section 743(b) applies if a partnership has an election in effect under section 754 of the Internal Revenue Code. Can ie file 2012 taxes now   A group of assets constitutes a trade or business if either of the following applies. Can ie file 2012 taxes now Goodwill or going concern value could, under any circumstances, attach to them. Can ie file 2012 taxes now The use of the assets would constitute an active trade or business under section 355 of the Internal Revenue Code. Can ie file 2012 taxes now   The residual method provides for the consideration to be reduced first by the amount of Class I assets (defined below). Can ie file 2012 taxes now The consideration remaining after this reduction must be allocated among the various business assets in a certain order. Can ie file 2012 taxes now See Classes of assets next for the complete order. Can ie file 2012 taxes now Classes of assets. Can ie file 2012 taxes now   The following definitions are the classifications for deemed or actual asset acquisitions. Can ie file 2012 taxes now Allocate the consideration among the assets in the following order. Can ie file 2012 taxes now The amount allocated to an asset, other than a Class VII asset, cannot exceed its fair market value on the purchase date. Can ie file 2012 taxes now The amount you can allocate to an asset also is subject to any applicable limits under the Internal Revenue Code or general principles of tax law. Can ie file 2012 taxes now Class I assets are cash and general deposit accounts (including checking and savings accounts but excluding certificates of deposit). Can ie file 2012 taxes now Class II assets are certificates of deposit, U. Can ie file 2012 taxes now S. Can ie file 2012 taxes now Government securities, foreign currency, and actively traded personal property, including stock and securities. Can ie file 2012 taxes now Class III assets are accounts receivable, other debt instruments, and assets that you mark to market at least annually for federal income tax purposes. Can ie file 2012 taxes now However, see section 1. Can ie file 2012 taxes now 338-6(b)(2)(iii) of the regulations for exceptions that apply to debt instruments issued by persons related to a target corporation, contingent debt instruments, and debt instruments convertible into stock or other property. Can ie file 2012 taxes now Class IV assets are property of a kind that would properly be included in inventory if on hand at the end of the tax year or property held by the taxpayer primarily for sale to customers in the ordinary course of business. Can ie file 2012 taxes now Class V assets are all assets other than Class I, II, III, IV, VI, and VII assets. Can ie file 2012 taxes now    Note. Can ie file 2012 taxes now Furniture and fixtures, buildings, land, vehicles, and equipment, which constitute all or part of a trade or business are generally Class V assets. Can ie file 2012 taxes now Class VI assets are section 197 intangibles (other than goodwill and going concern value). Can ie file 2012 taxes now Class VII assets are goodwill and going concern value (whether the goodwill or going concern value qualifies as a section 197 intangible). Can ie file 2012 taxes now   If an asset described in one of the classifications described above can be included in more than one class, include it in the lower numbered class. Can ie file 2012 taxes now For example, if an asset is described in both Class II and Class IV, choose Class II. Can ie file 2012 taxes now Example. Can ie file 2012 taxes now The total paid in the sale of the assets of Company SKB is $21,000. Can ie file 2012 taxes now No cash or deposit accounts or similar accounts were sold. Can ie file 2012 taxes now The company's U. Can ie file 2012 taxes now S. Can ie file 2012 taxes now Government securities sold had a fair market value of $3,200. Can ie file 2012 taxes now The only other asset transferred (other than goodwill and going concern value) was inventory with a fair market value of $15,000. Can ie file 2012 taxes now Of the $21,000 paid for the assets of Company SKB, $3,200 is allocated to U. Can ie file 2012 taxes now S. Can ie file 2012 taxes now Government securities, $15,000 to inventory assets, and the remaining $2,800 to goodwill and going concern value. Can ie file 2012 taxes now Agreement. Can ie file 2012 taxes now   The buyer and seller may enter into a written agreement as to the allocation of any consideration or the fair market value of any of the assets. Can ie file 2012 taxes now This agreement is binding on both parties unless the IRS determines the amounts are not appropriate. Can ie file 2012 taxes now Reporting requirement. Can ie file 2012 taxes now   Both the buyer and seller involved in the sale of business assets must report to the IRS the allocation of the sales price among section 197 intangibles and the other business assets. Can ie file 2012 taxes now Use Form 8594, Asset Acquisition Statement Under Section 1060, to provide this information. Can ie file 2012 taxes now Generally, the buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. Can ie file 2012 taxes now See the Instructions for Form 8594. Can ie file 2012 taxes now Dispositions of Intangible Property Intangible property is any personal property that has value but cannot be seen or touched. Can ie file 2012 taxes now It includes such items as patents, copyrights, and the goodwill value of a business. Can ie file 2012 taxes now Gain or loss on the sale or exchange of amortizable or depreciable intangible property held longer than 1 year (other than an amount recaptured as ordinary income) is a section 1231 gain or loss. Can ie file 2012 taxes now The treatment of section 1231 gain or loss and the recapture of amortization and depreciation as ordinary income are explained in chapter 3. Can ie file 2012 taxes now See chapter 8 of Publication 535, Business Expenses, for information on amortizable intangible property and chapter 1 of Publication 946, How To Depreciate Property, for information on intangible property that can and cannot be depreciated. Can ie file 2012 taxes now Gain or loss on dispositions of other intangible property is ordinary or capital depending on whether the property is a capital asset or a noncapital asset. Can ie file 2012 taxes now The following discussions explain special rules that apply to certain dispositions of intangible property. Can ie file 2012 taxes now Section 197 Intangibles Section 197 intangibles are certain intangible assets acquired after August 10, 1993 (after July 25, 1991, if chosen), and held in connection with the conduct of a trade or business or an activity entered into for profit whose costs are amortized over 15 years. Can ie file 2012 taxes now They include the following assets. Can ie file 2012 taxes now Goodwill. Can ie file 2012 taxes now Going concern value. Can ie file 2012 taxes now Workforce in place. Can ie file 2012 taxes now Business books and records, operating systems, and other information bases. Can ie file 2012 taxes now Patents, copyrights, formulas, processes, designs, patterns, know how, formats, and similar items. Can ie file 2012 taxes now Customer-based intangibles. Can ie file 2012 taxes now Supplier-based intangibles. Can ie file 2012 taxes now Licenses, permits, and other rights granted by a governmental unit. Can ie file 2012 taxes now Covenants not to compete entered into in connection with the acquisition of a business. Can ie file 2012 taxes now Franchises, trademarks, and trade names. Can ie file 2012 taxes now See chapter 8 of Publication 535 for a description of each intangible. Can ie file 2012 taxes now Dispositions. Can ie file 2012 taxes now   You cannot deduct a loss from the disposition or worthlessness of a section 197 intangible you acquired in the same transaction (or series of related transactions) as another section 197 intangible you still hold. Can ie file 2012 taxes now Instead, you must increase the adjusted basis of your retained section 197 intangible by the nondeductible loss. Can ie file 2012 taxes now If you retain more than one section 197 intangible, increase each intangible's adjusted basis. Can ie file 2012 taxes now Figure the increase by multiplying the nondeductible loss by a fraction, the numerator (top number) of which is the retained intangible's adjusted basis on the date of the loss and the denominator (bottom number) of which is the total adjusted basis of all retained intangibles on the date of the loss. Can ie file 2012 taxes now   In applying this rule, members of the same controlled group of corporations and commonly controlled businesses are treated as a single entity. Can ie file 2012 taxes now For example, a corporation cannot deduct a loss on the sale of a section 197 intangible if, after the sale, a member of the same controlled group retains other section 197 intangibles acquired in the same transaction as the intangible sold. Can ie file 2012 taxes now Covenant not to compete. Can ie file 2012 taxes now   A covenant not to compete (or similar arrangement) that is a section 197 intangible cannot be treated as disposed of or worthless before you have disposed of your entire interest in the trade or business for which the covenant was entered into. Can ie file 2012 taxes now Members of the same controlled group of corporations and commonly controlled businesses are treated as a single entity in determining whether a member has disposed of its entire interest in a trade or business. Can ie file 2012 taxes now Anti-churning rules. Can ie file 2012 taxes now   Anti-churning rules prevent a taxpayer from converting section 197 intangibles that do not qualify for amortization into property that would qualify for amortization. Can ie file 2012 taxes now However, these rules do not apply to part of the basis of property acquired by certain related persons if the transferor elects to do both the following. Can ie file 2012 taxes now Recognize gain on the transfer of the property. Can ie file 2012 taxes now Pay income tax on the gain at the highest tax rate. Can ie file 2012 taxes now   If the transferor is a partnership or S corporation, the partnership or S corporation (not the partners or shareholders) can make the election. Can ie file 2012 taxes now But each partner or shareholder must pay the tax on his or her share of gain. Can ie file 2012 taxes now   To make the election, you, as the transferor, must attach a statement containing certain information to your income tax return for the year of the transfer. Can ie file 2012 taxes now You must file the tax return by the due date (including extensions). Can ie file 2012 taxes now You must also notify the transferee of the election in writing by the due date of the return. Can ie file 2012 taxes now   If you timely filed your return without making the election, you can make the election by filing an amended return within 6 months after the due date of the return (excluding extensions). Can ie file 2012 taxes now Attach the statement to the amended return and write “Filed pursuant to section 301. Can ie file 2012 taxes now 9100-2” at the top of the statement. Can ie file 2012 taxes now File the amended return at the same address the original return was filed. Can ie file 2012 taxes now For more information about making the election, see Regulations section 1. Can ie file 2012 taxes now 197-2(h)(9). Can ie file 2012 taxes now For information about reporting the tax on your income tax return, see the Instructions for Form 4797. Can ie file 2012 taxes now Patents The transfer of a patent by an individual is treated as a sale or exchange of a capital asset held longer than 1 year. Can ie file 2012 taxes now This applies even if the payments for the patent are made periodically during the transferee's use or are contingent on the productivity, use, or disposition of the patent. Can ie file 2012 taxes now For information on the treatment of gain or loss on the transfer of capital assets, see chapter 4. Can ie file 2012 taxes now This treatment applies to your transfer of a patent if you meet all the following conditions. Can ie file 2012 taxes now You are the holder of the patent. Can ie file 2012 taxes now You transfer the patent other than by gift, inheritance, or devise. Can ie file 2012 taxes now You transfer all substantial rights to the patent or an undivided interest in all such rights. Can ie file 2012 taxes now You do not transfer the patent to a related person. Can ie file 2012 taxes now Holder. Can ie file 2012 taxes now   You are the holder of a patent if you are either of the following. Can ie file 2012 taxes now The individual whose effort created the patent property and who qualifies as the original and first inventor. Can ie file 2012 taxes now The individual who bought an interest in the patent from the inventor before the invention was tested and operated successfully under operating conditions and who is neither related to, nor the employer of, the inventor. Can ie file 2012 taxes now All substantial rights. Can ie file 2012 taxes now   All substantial rights to patent property are all rights that have value when they are transferred. Can ie file 2012 taxes now A security interest (such as a lien), or a reservation calling for forfeiture for nonperformance, is not treated as a substantial right for these rules and may be kept by you as the holder of the patent. Can ie file 2012 taxes now   All substantial rights to a patent are not transferred if any of the following apply to the transfer. Can ie file 2012 taxes now The rights are limited geographically within a country. Can ie file 2012 taxes now The rights are limited to a period less than the remaining life of the patent. Can ie file 2012 taxes now The rights are limited to fields of use within trades or industries and are less than all the rights that exist and have value at the time of the transfer. Can ie file 2012 taxes now The rights are less than all the claims or inventions covered by the patent that exist and have value at the time of the transfer. Can ie file 2012 taxes now Related persons. Can ie file 2012 taxes now   This tax treatment does not apply if the transfer is directly or indirectly between you and a related person as defined earlier in the list under Nondeductible Loss, with the following changes. Can ie file 2012 taxes now Members of your family include your spouse, ancestors, and lineal descendants, but not your brothers, sisters, half-brothers, or half-sisters. Can ie file 2012 taxes now Substitute “25% or more” ownership for “more than 50%. Can ie file 2012 taxes now ”   If you fit within the definition of a related person independent of family status, the brother-sister exception in (1), earlier, does not apply. Can ie file 2012 taxes now For example, a transfer between a brother and a sister as beneficiary and fiduciary of the same trust is a transfer between related persons. Can ie file 2012 taxes now The brother-sister exception does not apply because the trust relationship is independent of family status. Can ie file 2012 taxes now Franchise, Trademark, or Trade Name If you transfer or renew a franchise, trademark, or trade name for a price contingent on its productivity, use, or disposition, the amount you receive generally is treated as an amount realized from the sale of a noncapital asset. Can ie file 2012 taxes now A franchise includes an agreement that gives one of the parties the right to distribute, sell, or provide goods, services, or facilities within a specified area. Can ie file 2012 taxes now Significant power, right, or continuing interest. Can ie file 2012 taxes now   If you keep any significant power, right, or continuing interest in the subject matter of a franchise, trademark, or trade name that you transfer or renew, the amount you receive is ordinary royalty income rather than an amount realized from a sale or exchange. Can ie file 2012 taxes now   A significant power, right, or continuing interest in a franchise, trademark, or trade name includes, but is not limited to, the following rights in the transferred interest. Can ie file 2012 taxes now A right to disapprove any assignment of the interest, or any part of it. Can ie file 2012 taxes now A right to end the agreement at will. Can ie file 2012 taxes now A right to set standards of quality for products used or sold, or for services provided, and for the equipment and facilities used to promote such products or services. Can ie file 2012 taxes now A right to make the recipient sell or advertise only your products or services. Can ie file 2012 taxes now A right to make the recipient buy most supplies and equipment from you. Can ie file 2012 taxes now A right to receive payments based on the productivity, use, or disposition of the transferred item of interest if those payments are a substantial part of the transfer agreement. Can ie file 2012 taxes now Subdivision of Land If you own a tract of land and, to sell or exchange it, you subdivide it into individual lots or parcels, the gain normally is ordinary income. Can ie file 2012 taxes now However, you may receive capital gain treatment on at least part of the proceeds provided you meet certain requirements. Can ie file 2012 taxes now See section 1237 of the Internal Revenue Code. Can ie file 2012 taxes now Timber Standing timber held as investment property is a capital asset. Can ie file 2012 taxes now Gain or loss from its sale is reported as a capital gain or loss on Form 8949, and Schedule D (Form 1040), as applicable. Can ie file 2012 taxes now If you held the timber primarily for sale to customers, it is not a capital asset. Can ie file 2012 taxes now Gain or loss on its sale is ordinary business income or loss. Can ie file 2012 taxes now It is reported in the gross receipts or sales and cost of goods sold items of your return. Can ie file 2012 taxes now Farmers who cut timber on their land and sell it as logs, firewood, or pulpwood usually have no cost or other basis for that timber. Can ie file 2012 taxes now These sales constitute a very minor part of their farm businesses. Can ie file 2012 taxes now In these cases, amounts realized from such sales, and the expenses of cutting, hauling, etc. Can ie file 2012 taxes now , are ordinary farm income and expenses reported on Schedule F (Form 1040), Profit or Loss From Farming. Can ie file 2012 taxes now Different rules apply if you owned the timber longer than 1 year and elect to either: Treat timber cutting as a sale or exchange, or Enter into a cutting contract. Can ie file 2012 taxes now Timber is considered cut on the date when, in the ordinary course of business, the quantity of felled timber is first definitely determined. Can ie file 2012 taxes now This is true whether the timber is cut under contract or whether you cut it yourself. Can ie file 2012 taxes now Under the rules discussed below, disposition of the timber is treated as a section 1231 transaction. Can ie file 2012 taxes now See chapter 3. Can ie file 2012 taxes now Gain or loss is reported on Form 4797. Can ie file 2012 taxes now Christmas trees. Can ie file 2012 taxes now   Evergreen trees, such as Christmas trees, that are more than 6 years old when severed from their roots and sold for ornamental purposes are included in the term timber. Can ie file 2012 taxes now They qualify for both rules discussed below. Can ie file 2012 taxes now Election to treat cutting as a sale or exchange. Can ie file 2012 taxes now   Under the general rule, the cutting of timber results in no gain or loss. Can ie file 2012 taxes now It is not until a sale or exchange occurs that gain or loss is realized. Can ie file 2012 taxes now But if you owned or had a contractual right to cut timber, you can elect to treat the cutting of timber as a section 1231 transaction in the year the timber is cut. Can ie file 2012 taxes now Even though the cut timber is not actually sold or exchanged, you report your gain or loss on the cutting for the year the timber is cut. Can ie file 2012 taxes now Any later sale results in ordinary business income or loss. Can ie file 2012 taxes now See Example, later. Can ie file 2012 taxes now   To elect this treatment, you must: Own or hold a contractual right to cut the timber for a period of more than 1 year before it is cut, and Cut the timber for sale or for use in your trade or business. Can ie file 2012 taxes now Making the election. Can ie file 2012 taxes now   You make the election on your return for the year the cutting takes place by including in income the gain or loss on the cutting and including a computation of the gain or loss. Can ie file 2012 taxes now You do not have to make the election in the first year you cut timber. Can ie file 2012 taxes now You can make it in any year to which the election would apply. Can ie file 2012 taxes now If the timber is partnership property, the election is made on the partnership return. Can ie file 2012 taxes now This election cannot be made on an amended return. Can ie file 2012 taxes now   Once you have made the election, it remains in effect for all later years unless you cancel it. Can ie file 2012 taxes now   If you previously elected to treat the cutting of timber as a sale or exchange, you may revoke this election without the consent of the IRS. Can ie file 2012 taxes now The prior election (and revocation) is disregarded for purposes of making a subsequent election. Can ie file 2012 taxes now See Form T (Timber), Forest Activities Schedule, for more information. Can ie file 2012 taxes now Gain or loss. Can ie file 2012 taxes now   Your gain or loss on the cutting of standing timber is the difference between its adjusted basis for depletion and its fair market value on the first day of your tax year in which it is cut. Can ie file 2012 taxes now   Your adjusted basis for depletion of cut timber is based on the number of units (feet board measure, log scale, or other units) of timber cut during the tax year and considered to be sold or exchanged. Can ie file 2012 taxes now Your adjusted basis for depletion is also based on the depletion unit of timber in the account used for the cut timber, and should be figured in the same manner as shown in section 611 of the Internal Revenue Code and the related regulations. Can ie file 2012 taxes now   Timber depletion is discussed in chapter 9 of Publication 535. Can ie file 2012 taxes now Example. Can ie file 2012 taxes now In April 2013, you had owned 4,000 MBF (1,000 board feet) of standing timber longer than 1 year. Can ie file 2012 taxes now It had an adjusted basis for depletion of $40 per MBF. Can ie file 2012 taxes now You are a calendar year taxpayer. Can ie file 2012 taxes now On January 1, 2013, the timber had a fair market value (FMV) of $350 per MBF. Can ie file 2012 taxes now It was cut in April for sale. Can ie file 2012 taxes now On your 2013 tax return, you elect to treat the cutting of the timber as a sale or exchange. Can ie file 2012 taxes now You report the difference between the fair market value and your adjusted basis for depletion as a gain. Can ie file 2012 taxes now This amount is reported on Form 4797 along with your other section 1231 gains and losses to figure whether it is treated as capital gain or as ordinary gain. Can ie file 2012 taxes now You figure your gain as follows. Can ie file 2012 taxes now FMV of timber January 1, 2013 $1,400,000 Minus: Adjusted basis for depletion 160,000 Section 1231 gain $1,240,000 The fair market value becomes your basis in the cut timber and a later sale of the cut timber including any by-product or tree tops will result in ordinary business income or loss. Can ie file 2012 taxes now Outright sales of timber. Can ie file 2012 taxes now   Outright sales of timber by landowners qualify for capital gains treatment using rules similar to the rules for certain disposal of timber under a contract with retained economic interest (defined below). Can ie file 2012 taxes now However, for outright sales, the date of disposal is not deemed to be the date the timber is cut because the landowner can elect to treat the payment date as the date of disposal (see below). Can ie file 2012 taxes now Cutting contract. Can ie file 2012 taxes now   You must treat the disposal of standing timber under a cutting contract as a section 1231 transaction if all the following apply to you. Can ie file 2012 taxes now You are the owner of the timber. Can ie file 2012 taxes now You held the timber longer than 1 year before its disposal. Can ie file 2012 taxes now You kept an economic interest in the timber. Can ie file 2012 taxes now   You have kept an economic interest in standing timber if, under the cutting contract, the expected return on your investment is conditioned on the cutting of the timber. Can ie file 2012 taxes now   The difference between the amount realized from the disposal of the timber and its adjusted basis for depletion is treated as gain or loss on its sale. Can ie file 2012 taxes now Include this amount on Form 4797 along with your other section 1231 gains or losses to figure whether it is treated as capital or ordinary gain or loss. Can ie file 2012 taxes now Date of disposal. Can ie file 2012 taxes now   The date of disposal is the date the timber is cut. Can ie file 2012 taxes now However, for outright sales by landowners or if you receive payment under the contract before the timber is cut, you can elect to treat the date of payment as the date of disposal. Can ie file 2012 taxes now   This election applies only to figure the holding period of the timber. Can ie file 2012 taxes now It has no effect on the time for reporting gain or loss (generally when the timber is sold or exchanged). Can ie file 2012 taxes now   To make this election, attach a statement to the tax return filed by the due date (including extensions) for the year payment is received. Can ie file 2012 taxes now The statement must identify the advance payments subject to the election and the contract under which they were made. Can ie file 2012 taxes now   If you timely filed your return for the year you received payment without making the election, you still can make the election by filing an amended return within 6 months after the due date for that year's return (excluding extensions). Can ie file 2012 taxes now Attach the statement to the amended return and write “Filed pursuant to section 301. Can ie file 2012 taxes now 9100-2” at the top of the statement. Can ie file 2012 taxes now File the amended return at the same address the original return was filed. Can ie file 2012 taxes now Owner. Can ie file 2012 taxes now   The owner of timber is any person who owns an interest in it, including a sublessor and the holder of a contract to cut the timber. Can ie file 2012 taxes now You own an interest in timber if you have the right to cut it for sale on your own account or for use in your business. Can ie file 2012 taxes now Tree stumps. Can ie file 2012 taxes now   Tree stumps are a capital asset if they are on land held by an investor who is not in the timber or stump business as a buyer, seller, or processor. Can ie file 2012 taxes now Gain from the sale of stumps sold in one lot by such a holder is taxed as a capital gain. Can ie file 2012 taxes now However, tree stumps held by timber operators after the saleable standing timber was cut and removed from the land are considered by-products. Can ie file 2012 taxes now Gain from the sale of stumps in lots or tonnage by such operators is taxed as ordinary income. Can ie file 2012 taxes now   See Form T (Timber) and its separate instructions for more information about dispositions of timber. Can ie file 2012 taxes now Precious Metals and Stones, Stamps, and Coins Gold, silver, gems, stamps, coins, etc. Can ie file 2012 taxes now , are capital assets except when they are held for sale by a dealer. Can ie file 2012 taxes now Any gain or loss from their sale or exchange generally is a capital gain or loss. Can ie file 2012 taxes now If you are a dealer, the amount received from the sale is ordinary business income. Can ie file 2012 taxes now Coal and Iron Ore You must treat the disposal of coal (including lignite) or iron ore mined in the United States as a section 1231 transaction if both the following apply to you. Can ie file 2012 taxes now You owned the coal or iron ore longer than 1 year before its disposal. Can ie file 2012 taxes now You kept an economic interest in the coal or iron ore. Can ie file 2012 taxes now For this rule, the date the coal or iron ore is mined is considered the date of its disposal. Can ie file 2012 taxes now Your gain or loss is the difference between the amount realized from disposal of the coal or iron ore and the adjusted basis you use to figure cost depletion (increased by certain expenses not allowed as deductions for the tax year). Can ie file 2012 taxes now This amount is included on Form 4797 along with your other section 1231 gains and losses. Can ie file 2012 taxes now You are considered an owner if you own or sublet an economic interest in the coal or iron ore in place. Can ie file 2012 taxes now If you own only an option to buy the coal in place, you do not qualify as an owner. Can ie file 2012 taxes now In addition, this gain or loss treatment does not apply to income realized by an owner who is a co-adventurer, partner, or principal in the mining of coal or iron ore. Can ie file 2012 taxes now The expenses of making and administering the contract under which the coal or iron ore was disposed of and the expenses of preserving the economic interest kept under the contract are not allowed as deductions in figuring taxable income. Can ie file 2012 taxes now Rather, their total, along with the adjusted depletion basis, is deducted from the amount received to determine gain. Can ie file 2012 taxes now If the total of these expenses plus the adjusted depletion basis is more than the amount received, the result is a loss. Can ie file 2012 taxes now Special rule. Can ie file 2012 taxes now   The above treatment does not apply if you directly or indirectly dispose of the iron ore or coal to any of the following persons. Can ie file 2012 taxes now A related person whose relationship to you would result in the disallowance of a loss (see Nondeductible Loss under Sales and Exchanges Between Related Persons, earlier). Can ie file 2012 taxes now An individual, trust, estate, partnership, association, company, or corporation owned or controlled directly or indirectly by the same interests that own or control your business. Can ie file 2012 taxes now Conversion Transactions Recognized gain on the disposition or termination of any position held as part of certain conversion transactions is treated as ordinary income. Can ie file 2012 taxes now This applies if substantially all your expected return is attributable to the time value of your net investment (like interest on a loan) and the transaction is any of the following. Can ie file 2012 taxes now An applicable straddle (generally, any set of offsetting positions with respect to personal property, including stock). Can ie file 2012 taxes now A transaction in which you acquire property and, at or about the same time, you contract to sell the same or substantially identical property at a specified price. Can ie file 2012 taxes now Any other transaction that is marketed and sold as producing capital gain from a transaction in which substantially all of your expected return is due to the time value of your net investment. Can ie file 2012 taxes now For more information, see chapter 4 of Publication 550. Can ie file 2012 taxes now Prev  Up  Next   Home   More Online Publications