Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Efile 2009 Taxes

Free TaxesFederal Income Tax Amendment2011 Irs 1040ez FormFree Tax FilingWhere Can I File Back Taxes OnlineFree File State Tax OnlyHow To Do A Tax AmendmentHow To File Taxes From 2009Turbotax Free 1040ez1040nr SoftwareHow To Submit An Amended Tax ReturnIrs 1040 Ez Form 2012Turbotax Deluxe Federal E File State 2012 For Pc DownloadH&r Block At Home FreeFree State Income TaxWww H&rblockfree Tax ReturnsOn Line 1040xHow To File A Tax Extension For FreeHttps Www Freefilefillableforms ComTax BackFiling 2012 Tax Return Late2011 Income Tax Returns1040x 2008Ct 1040nr PyAarp Tax Aide LocationsTurbotax 2005 Free DownloadTax Act1040ez 2014 FormsHrblock FreereturnAmended Tax Return For 20122011 1040 Form Download1040ez Tax FormHow To File State Taxes Online FreeIrs Income Tax Forms 2010State Income Tax Forms 2013File 1040ez ElectronicallyAmended Tax ReturnFile A 1040x Online For Free2012 Federal Tax ReturnFiling Taxes Online

Efile 2009 Taxes

Efile 2009 taxes Publication 517 - Introductory Material Table of Contents What's New Reminders IntroductionOrdering forms and publications. Efile 2009 taxes Tax questions. Efile 2009 taxes Useful Items - You may want to see: What's New SE tax rate. Efile 2009 taxes  For 2013 and 2014, the Old Age, Survivors, and Disability Insurance (OASDI) portion of the SE tax is 12. Efile 2009 taxes 4%. Efile 2009 taxes The Medicare (HI) portion of the SE tax remains 2. Efile 2009 taxes 9%. Efile 2009 taxes As a result, the SE tax rate returns to 15. Efile 2009 taxes 3%. Efile 2009 taxes For more information, see the Instructions for Schedule SE (Form 1040). Efile 2009 taxes Earnings subject to social security. Efile 2009 taxes  For 2013, the maximum wages and self-employment income subject to social security tax increases from $110,100 to $113,700. Efile 2009 taxes For 2014, the maximum wages and self-employment income subject to social security tax is $117,000. Efile 2009 taxes Additional Medicare Tax. Efile 2009 taxes  Beginning in 2013, a 0. Efile 2009 taxes 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 for any other filing status. Efile 2009 taxes For more information, see Form 8959, Additional Medicare Tax, and its separate instructions. Efile 2009 taxes Modified AGI limit for traditional IRA contributions increased. Efile 2009 taxes  For 2013, you may be able to take an IRA deduction if you were covered by a retirement plan at work and your modified AGI is: Less than $115,000 if married filing jointly or qualifying widow(er), Less than $69,000 if single or head of household, or Less than $10,000 if married filing separately. Efile 2009 taxes If you file a joint return and either you or your spouse was not covered by a retirement plan at work, you may be able to take an IRA deduction if your modified AGI is less than $188,000. Efile 2009 taxes Modified AGI limit for Roth IRA contributions increased. Efile 2009 taxes  For 2013, you may be able to contribute to your Roth IRA if your modified AGI is: Less than $188,000 if married filing jointly or qualifying widow(er), Less than $127,000 if single, head of household, or married filing separately and you did not live with your spouse at any time during the year, or Less than $10,000 if married filing separately and you lived with your spouse at any time during the year. Efile 2009 taxes Earned income credit (EIC). Efile 2009 taxes  For 2013, the maximum amount of income you can earn and still claim the EIC has increased. Efile 2009 taxes You may be able to take the EIC if you earned less than $46,227 ($51,567 for married filing jointly) and you have three or more qualifying children; $43,038 ($48,378 for married filing jointly) and you have two qualifying children; $37,870 ($43,210 for married filing jointly) and you have one qualifying child; and $14,340 ($19,680 for married filing jointly) and you do not have any qualifying children. Efile 2009 taxes Reminders Future developments. Efile 2009 taxes . Efile 2009 taxes   For the latest information about developments related to Publication 517, such as legislation enacted after it was published, go to www. Efile 2009 taxes irs. Efile 2009 taxes gov/pub517. Efile 2009 taxes Photographs of missing children. Efile 2009 taxes  The Internal Revenue Service is a proud partner with the National Center for Missing & Exploited Children. Efile 2009 taxes Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Efile 2009 taxes You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Efile 2009 taxes Introduction Three federal taxes are paid on wages and self-employment income—income tax, social security tax, and Medicare tax. Efile 2009 taxes Social security and Medicare taxes are collected under one of two systems. Efile 2009 taxes Under the Self-Employment Contributions Act (SECA), the self-employed person pays all the taxes. Efile 2009 taxes Under the Federal Insurance Contributions Act (FICA), the employee and the employer each pay half of the social security and Medicare taxes. Efile 2009 taxes No earnings are subject to both systems. Efile 2009 taxes Table 1. Efile 2009 taxes Are Your Ministerial Earnings* Covered Under FICA or SECA? Find the class to which you belong in the left column and read across the table to find if you are covered under FICA or SECA. Efile 2009 taxes Do not rely on this table alone. Efile 2009 taxes Also read the discussion for the class in the following pages. Efile 2009 taxes Class Covered under FICA? Covered under SECA? Minister NO. Efile 2009 taxes Your ministerial earnings are exempt. Efile 2009 taxes YES, if you do not have an approved exemption from the IRS. Efile 2009 taxes   NO, if you have an approved exemption. Efile 2009 taxes Member of a religious order who has not taken a vow of poverty NO. Efile 2009 taxes Your ministerial earnings are exempt. Efile 2009 taxes YES, if you do not have an approved exemption from the IRS. Efile 2009 taxes   NO, if you have an approved exemption. Efile 2009 taxes Member of a religious order who has taken a vow of poverty YES, if: Your order elected FICA coverage for its members, or You worked outside the order and the work was not required by, or done on behalf of, the order. Efile 2009 taxes   NO, if neither of the above applies. Efile 2009 taxes NO. Efile 2009 taxes Your ministerial earnings are exempt. Efile 2009 taxes Christian Science practitioner or reader NO. Efile 2009 taxes Your ministerial earnings are exempt. Efile 2009 taxes YES, if you do not have an approved exemption from the IRS. Efile 2009 taxes   NO, if you have an approved exemption. Efile 2009 taxes Religious worker (church employee) YES, if your employer did not elect to exclude you. Efile 2009 taxes    NO, if your employer elected to exclude you. Efile 2009 taxes YES, if your employer elected to exclude you from FICA. Efile 2009 taxes   NO, if you are covered under FICA. Efile 2009 taxes Member of a recognized religious sect YES, if you are an employee and do not have an approved exemption from the IRS. Efile 2009 taxes    NO, if you have an approved exemption. Efile 2009 taxes YES, if you are self-employed and do not have an approved exemption from the IRS. Efile 2009 taxes   NO, if you have an approved exemption. Efile 2009 taxes * Ministerial earnings are the self-employment earnings that result from ministerial services, defined and discussed later. Efile 2009 taxes In addition, all wages and self-employment income that are subject to Medicare tax are subject to a 0. Efile 2009 taxes 9% Additional Medicare Tax if they are paid in excess of the applicable threshold for an individual's filing status. Efile 2009 taxes Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 for any other filing status. Efile 2009 taxes Medicare wages and self-employment income are combined to determine if income exceeds the threshold. Efile 2009 taxes A self-employment loss is not considered for purposes of this tax. Efile 2009 taxes RRTA compensation is separately compared to the threshold. Efile 2009 taxes There is no employer match for Additional Medicare Tax. Efile 2009 taxes For more information, see Form 8959, Additional Medicare Tax, and its separate instructions. Efile 2009 taxes This publication contains information for the following classes of taxpayers. Efile 2009 taxes Ministers. Efile 2009 taxes Members of a religious order. Efile 2009 taxes Christian Science practitioners and readers. Efile 2009 taxes Religious workers (church employees). Efile 2009 taxes Members of a recognized religious sect. Efile 2009 taxes Note. Efile 2009 taxes Unless otherwise noted, in this publication references to members of the clergy include ministers, members of a religious order (but not members of a recognized religious sect), and Christian Science practitioners and readers. Efile 2009 taxes This publication covers the following topics about the collection of social security and Medicare taxes from members of the clergy, religious workers, and members of a recognized religious sect. Efile 2009 taxes Which earnings are taxed under FICA and which under SECA. Efile 2009 taxes See Table 1 above. Efile 2009 taxes How a member of the clergy can apply for an exemption from self-employment tax. Efile 2009 taxes How a member of a recognized religious sect can apply for an exemption from both self-employment tax and FICA taxes. Efile 2009 taxes How a member of the clergy or religious worker figures net earnings from self-employment. Efile 2009 taxes This publication also covers certain income tax rules of interest to ministers and members of a religious order. Efile 2009 taxes A Comprehensive Example shows filled-in forms for a minister who has income taxed under SECA, other income taxed under FICA, and income tax reporting of items specific to a minister. Efile 2009 taxes In the back of Publication 517 is a set of worksheets that you can use to figure the amount of your taxable ministerial income and allowable deductions. Efile 2009 taxes You will find these worksheets right after the Comprehensive Example . Efile 2009 taxes Note. Efile 2009 taxes In this publication, the term “church” is generally used in its generic sense and not in reference to any particular religion. Efile 2009 taxes Comments and suggestions. Efile 2009 taxes   We welcome your comments about this publication and your suggestions for future editions. Efile 2009 taxes   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Efile 2009 taxes NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Efile 2009 taxes Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Efile 2009 taxes   You can send your comments from www. Efile 2009 taxes irs. Efile 2009 taxes gov/formspubs/. Efile 2009 taxes Click on “More Information” and then on “Give us feedback”. Efile 2009 taxes   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Efile 2009 taxes Ordering forms and publications. Efile 2009 taxes   Visit www. Efile 2009 taxes irs. Efile 2009 taxes gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Efile 2009 taxes Internal Revenue Service 1201 N. Efile 2009 taxes Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Efile 2009 taxes   If you have a tax question, check the information available on IRS. Efile 2009 taxes gov or call 1-800-829-1040. Efile 2009 taxes We cannot answer tax questions sent to either of the above addresses. Efile 2009 taxes Useful Items - You may want to see: Publication 54 Tax Guide for U. Efile 2009 taxes S. Efile 2009 taxes Citizens and Resident Aliens Abroad 525 Taxable and Nontaxable Income 529 Miscellaneous Deductions 535 Business Expenses 590 Individual Retirement Arrangements (IRAs) 596 Earned Income Credit (EIC) Form (and Instructions) SS-8 Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding SS-16 Certificate of Election of Coverage Under the Federal Insurance Contributions Act Schedule C (Form 1040) Profit or Loss From Business (Sole Proprietorship) Schedule C-EZ (Form 1040) Net Profit From Business (Sole Proprietorship) Schedule SE (Form 1040) Self-Employment Tax 1040-ES Estimated Tax for Individuals 1040X Amended U. Efile 2009 taxes S. Efile 2009 taxes Individual Income Tax Return 4029 Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits 4361 Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners 8274 Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption From Employer Social Security and Medicare Taxes 8959 Additional Medicare Tax Ordering publications and forms. Efile 2009 taxes   See How To Get Tax Help , near the end of this publication, for information about getting these publications and forms. Efile 2009 taxes Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Understanding your CP10A Notice

We made a change(s) to your return because we believe there's a miscalculation involving your Earned Income Credit. This change(s) affected the estimated tax payment you wanted applied to your taxes for next year.

Tax publications you may find useful

How to get help

Calling the toll free number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 


What you need to do

  • Read your notice carefully ― it will explain why we were unable to apply the amount you requested to next year’s taxes. It also will suggest additional steps for you to take, depending on your situation.
  • Correct the copy of your tax return that you kept for your records.
  • Adjust this year's estimated tax payments to avoid a possible underpayment of next year's taxes.

You may want to...


Answers to Common Questions

How do I adjust my estimated tax payments?
You can adjust your estimated tax payments with a Form 1040-ES, Estimated Tax for Individuals. For more information, see Publication 505, Tax Withholding and Estimated Tax.

How can I find out what caused my tax return to change?
Please contact us at the number listed on your notice for specific information concerning your tax return.

What should I do if I disagree with the changes you made?
If you disagree, contact us at the toll free number listed on the top right corner of your notice.

If you contact us in writing within 60 days of the date of this notice, we'll reverse the change we made to your account. However, if you're unable to provide us additional information that justifies the reversal and we believe the reversal is in error, we'll forward your case for audit. This step gives you formal appeal rights, including the right to appeal our decision in court before you have to pay the additional tax. After we forward your case, the audit staff will contact you within five to six weeks to fully explain the audit process and your rights. If you don’t contact us within the 60-day period, you'll lose your right to appeal our decision before payment of tax.

If you don't contact us within 60 days, the change won’t be reversed and you must pay the additional tax. You may then file a claim for refund. You must submit the claim within three years of the date you filed the tax return, or within two years of the date of your last payment for this tax.

What's the difference between the "Child Tax Credit" and the "Additional Child Tax Credit?" Can I qualify for both?
The Child Tax Credit is for people who have a qualifying child. The maximum amount you can claim is $1000 for each qualifying child. The Additional Child Tax Credit is for individuals who receive less than the full amount of Child Tax Credit. You may qualify for both the Child Tax Credit and the Additional Child Tax Credit.

How do I claim an Additional Child Tax Credit?
You claim the credit by completing a Form 1040 Schedule 8812, Child Tax Credit and attaching it to your income tax return.

My child is turning 18 this year. Can I still get the Additional Child Tax Credit?
No. Your child must be under age 17 at the end of 2009 to qualify for both the Child Tax Credit and the Additional Child Tax Credit.


Tips for next year

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about e-file.

If you have any dependent children, remember to claim the Additional Child Tax Credit the next time you file your income tax return. Complete and attach a Form 1040 Schedule 8812, Child Tax Credit to your return to claim this credit.

Use the EITC Assistant to help you complete your Schedule EIC, Earned Income Credit and claim your Earned Income Credit.

Page Last Reviewed or Updated: 28-Mar-2014

The Efile 2009 Taxes

Efile 2009 taxes 6. Efile 2009 taxes   Basis of Assets Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Cost BasisReal Property Allocating the Basis Uniform Capitalization Rules Adjusted BasisIncreases to Basis Decreases to Basis Basis Other Than CostTaxable Exchanges Involuntary Conversions Nontaxable Exchanges Property Received as a Gift Property Transferred From a Spouse Inherited Property Property Distributed From a Partnership or Corporation Introduction Your basis is the amount of your investment in property for tax purposes. Efile 2009 taxes Use basis to figure the gain or loss on the sale, exchange, or other disposition of property. Efile 2009 taxes Also use basis to figure depreciation, amortization, depletion, and casualty losses. Efile 2009 taxes If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. Efile 2009 taxes Only the basis allocated to the business or investment use of the property can be depreciated. Efile 2009 taxes Your original basis in property is adjusted (increased or decreased) by certain events. Efile 2009 taxes For example, if you make improvements to the property, increase your basis. Efile 2009 taxes If you take deductions for depreciation, or casualty losses, or claim certain credits, reduce your basis. Efile 2009 taxes Keep accurate records of all items that affect the basis of your assets. Efile 2009 taxes For information on keeping records, see chapter 1. Efile 2009 taxes Topics - This chapter discusses: Cost basis Adjusted basis Basis other than cost Useful Items - You may want to see: Publication 535 Business Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 946 How To Depreciate Property See chapter 16 for information about getting publications and forms. Efile 2009 taxes Cost Basis The basis of property you buy is usually its cost. Efile 2009 taxes Cost is the amount you pay in cash, debt obligations, other property, or services. Efile 2009 taxes Your cost includes amounts you pay for sales tax, freight, installation, and testing. Efile 2009 taxes The basis of real estate and business assets will include other items, discussed later. Efile 2009 taxes Basis generally does not include interest payments. Efile 2009 taxes However, see Carrying charges and Capitalized interest in chapter 4 of Publication 535. Efile 2009 taxes You also may have to capitalize (add to basis) certain other costs related to buying or producing property. Efile 2009 taxes Under the uniform capitalization rules, discussed later, you may have to capitalize direct costs and certain indirect costs of producing property. Efile 2009 taxes Loans with low or no interest. Efile 2009 taxes   If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price minus the amount considered to be unstated interest. Efile 2009 taxes You generally have unstated interest if your interest rate is less than the applicable federal rate. Efile 2009 taxes See the discussion of unstated interest in Publication 537, Installment Sales. Efile 2009 taxes Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. Efile 2009 taxes If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. Efile 2009 taxes Some of these expenses are discussed next. Efile 2009 taxes Lump sum purchase. Efile 2009 taxes   If you buy improvements, such as buildings, and the land on which they stand for a lump sum, allocate your cost basis between the land and improvements. Efile 2009 taxes Allocate the cost basis according to the respective fair market values (FMVs) of the land and improvements at the time of purchase. Efile 2009 taxes Figure the basis of each asset by multiplying the lump sum by a fraction. Efile 2009 taxes The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. Efile 2009 taxes Fair market value (FMV). Efile 2009 taxes   FMV is the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. Efile 2009 taxes Sales of similar property on or about the same date may help in figuring the FMV of the property. Efile 2009 taxes If you are not certain of the FMV of the land and improvements, you can allocate the basis according to their assessed values for real estate tax purposes. Efile 2009 taxes Real estate taxes. Efile 2009 taxes   If you pay the real estate taxes the seller owed on real property you bought, and the seller did not reimburse you, treat those taxes as part of your basis. Efile 2009 taxes   If you reimburse the seller for taxes the seller paid for you, you generally can deduct that amount as a tax expense. Efile 2009 taxes Whether or not you reimburse the seller, do not include that amount in the basis of your property. Efile 2009 taxes Settlement costs. Efile 2009 taxes   Your basis includes the settlement fees and closing costs for buying the property. Efile 2009 taxes See Publication 551 for a detailed list of items you can and cannot include in basis. Efile 2009 taxes   Do not include fees and costs for getting a loan on the property. Efile 2009 taxes Also, do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Efile 2009 taxes Points. Efile 2009 taxes   If you pay points to get a loan (including a mortgage, second mortgage, or line-of-credit), do not add the points to the basis of the related property. Efile 2009 taxes You may be able to deduct the points currently or over the term of the loan. Efile 2009 taxes For more information about deducting points, see Points in chapter 4 of Publication 535. Efile 2009 taxes Assumption of a mortgage. Efile 2009 taxes   If you buy property and assume (or buy the property subject to) an existing mortgage, your basis includes the amount you pay for the property plus the amount you owe on the mortgage. Efile 2009 taxes Example. Efile 2009 taxes If you buy a farm for $100,000 cash and assume a mortgage of $400,000, your basis is $500,000. Efile 2009 taxes Constructing assets. Efile 2009 taxes   If you build property or have assets built for you, your expenses for this construction are part of your basis. Efile 2009 taxes Some of these expenses include the following costs: Land, Labor and materials, Architect's fees, Building permit charges, Payments to contractors, Payments for rental equipment, and Inspection fees. Efile 2009 taxes   In addition, if you use your own employees, farm materials, and equipment to build an asset, do not deduct the following expenses. Efile 2009 taxes You must capitalize them (include them in the asset's basis). Efile 2009 taxes Employee wages paid for the construction work, reduced by any employment credits allowed. Efile 2009 taxes Depreciation on equipment you own while it is used in the construction. Efile 2009 taxes Operating and maintenance costs for equipment used in the construction. Efile 2009 taxes The cost of business supplies and materials used in the construction. Efile 2009 taxes    Do not include the value of your own labor, or any other labor you did not pay for, in the basis of any property you construct. Efile 2009 taxes Allocating the Basis In some instances, the rules for determining basis apply to a group of assets acquired in the same transaction or to property that consists of separate items. Efile 2009 taxes To determine the basis of these assets or separate items, there must be an allocation of basis. Efile 2009 taxes Group of assets acquired. Efile 2009 taxes   If you buy multiple assets for a lump sum, allocate the amount you pay among the assets. Efile 2009 taxes Use this allocation to figure your basis for depreciation and gain or loss on a later disposition of any of these assets. Efile 2009 taxes You and the seller may agree in the sales contract to a specific allocation of the purchase price among the assets. Efile 2009 taxes If this allocation is based on the value of each asset and you and the seller have adverse tax interests, the allocation generally will be accepted. Efile 2009 taxes Farming business acquired. Efile 2009 taxes   If you buy a group of assets that makes up a farming business, there are special rules you must use to allocate the purchase price among the assets. Efile 2009 taxes Generally, reduce the purchase price by any cash received. Efile 2009 taxes Allocate the remaining purchase price to the other business assets received in proportion to (but not more than) their FMV and in a certain order. Efile 2009 taxes See Trade or Business Acquired under Allocating the Basis in Publication 551 for more information. Efile 2009 taxes Transplanted embryo. Efile 2009 taxes   If you buy a cow that is pregnant with a transplanted embryo, allocate to the basis of the cow the part of the purchase price equal to the FMV of the cow without the implant. Efile 2009 taxes Allocate the rest of the purchase price to the basis of the calf. Efile 2009 taxes Neither the cost allocated to the cow nor the cost allocated to the calf is deductible as a current business expense. Efile 2009 taxes Uniform Capitalization Rules Under the uniform capitalization rules, you must include certain direct and indirect costs in the basis of property you produce or in your inventory costs, rather than claim them as a current deduction. Efile 2009 taxes You recover these costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Efile 2009 taxes Generally, you are subject to the uniform capitalization rules if you do any of the following: Produce real or tangible personal property, or Acquire property for resale. Efile 2009 taxes However, this rule does not apply to personal property if your average annual gross receipts for the 3-tax-year period ending with the year preceding the current tax year are $10 million or less. Efile 2009 taxes You produce property if you construct, build, install, manufacture, develop, improve, or create the property. Efile 2009 taxes You are not subject to the uniform capitalization rules if the property is produced for personal use. Efile 2009 taxes In a farming business, you produce property if you raise or grow any agricultural or horticultural commodity, including plants and animals. Efile 2009 taxes Plants. Efile 2009 taxes   A plant produced in a farming business includes the following items: A fruit, nut, or other crop-bearing tree; An ornamental tree; A vine; A bush; Sod; and The crop or yield of a plant that will have more than one crop or yield. Efile 2009 taxes Animals. Efile 2009 taxes   An animal produced in a farming business includes any stock, poultry or other bird, and fish or other sea life. Efile 2009 taxes The direct and indirect costs of producing plants or animals include preparatory costs and preproductive period costs. Efile 2009 taxes Preparatory costs include the acquisition costs of the seed, seedling, plant, or animal. Efile 2009 taxes For plants, preproductive period costs include the costs of items such as irrigation, pruning, frost protection, spraying, and harvesting. Efile 2009 taxes For animals, preproductive period costs include the costs of items such as feed, maintaining pasture or pen areas, breeding, veterinary services, and bedding. Efile 2009 taxes Exceptions. Efile 2009 taxes   In a farming business, the uniform capitalization rules do not apply to: Any animal, Any plant with a preproductive period of 2 years or less, or Any costs of replanting certain plants lost or damaged due to casualty. Efile 2009 taxes   Exceptions (1) and (2) do not apply to a corporation, partnership, or tax shelter required to use an accrual method of accounting. Efile 2009 taxes See Accrual Method Required under Accounting Methods in chapter 2. Efile 2009 taxes   In addition, you can elect not to use the uniform capitalization rules for plants with a preproductive period of more than 2 years. Efile 2009 taxes If you make this election, special rules apply. Efile 2009 taxes This election cannot be made by a corporation, partnership, or tax shelter required to use an accrual method of accounting. Efile 2009 taxes This election also does not apply to any costs incurred for the planting, cultivation, maintenance, or development of any citrus or almond grove (or any part thereof) within the first 4 years the trees were planted. Efile 2009 taxes    If you elect not to use the uniform capitalization rules, you must use the alternative depreciation system for all property used in any of your farming businesses and placed in service in any tax year during which the election is in effect. Efile 2009 taxes See chapter 7, for additional information on depreciation. Efile 2009 taxes Example. Efile 2009 taxes You grow trees that have a preproductive period of more than 2 years. Efile 2009 taxes The trees produce an annual crop. Efile 2009 taxes You are an individual and the uniform capitalization rules apply to your farming business. Efile 2009 taxes You must capitalize the direct costs and an allocable part of indirect costs incurred due to the production of the trees. Efile 2009 taxes You are not required to capitalize the costs of producing the annual crop because its preproductive period is 2 years or less. Efile 2009 taxes Preproductive period of more than 2 years. Efile 2009 taxes   The preproductive period of plants grown in commercial quantities in the United States is based on their nationwide weighted average preproductive period. Efile 2009 taxes Plants producing the crops or yields shown in Table 6-1 have a nationwide weighted average preproductive period of more than 2 years. Efile 2009 taxes Other plants (not shown in Table 6-1) may also have a nationwide weighted average preproductive period of more than 2 years. Efile 2009 taxes More information. Efile 2009 taxes   For more information on the uniform capitalization rules that apply to property produced in a farming business, see Regulations section 1. Efile 2009 taxes 263A-4. Efile 2009 taxes Table 6-1. Efile 2009 taxes Plants With a Preproductive Period of More Than 2 Years Plants producing the following crops or yields have a nationwide weighted average preproductive period of more than 2 years. Efile 2009 taxes Almonds Apples Apricots Avocados Blueberries Cherries Chestnuts Coffee beans Currants Dates Figs Grapefruit Grapes Guavas Kiwifruit Kumquats Lemons Limes Macadamia nuts Mangoes Nectarines Olives Oranges Peaches Pears Pecans Persimmons Pistachio nuts Plums Pomegranates Prunes Tangelos Tangerines Tangors Walnuts Adjusted Basis Before figuring gain or loss on a sale, exchange, or other disposition of property or figuring allowable depreciation, depletion, or amortization, you must usually make certain adjustments to the cost basis or basis other than cost (discussed later) of the property. Efile 2009 taxes The adjustments to the original basis are increases or decreases to the cost basis or other basis which result in the adjusted basis of the property. Efile 2009 taxes Increases to Basis Increase the basis of any property by all items properly added to a capital account. Efile 2009 taxes These include the cost of any improvements having a useful life of more than 1 year. Efile 2009 taxes The following costs increase the basis of property. Efile 2009 taxes The cost of extending utility service lines to property. Efile 2009 taxes Legal fees, such as the cost of defending and perfecting title. Efile 2009 taxes Legal fees for seeking a decrease in an assessment levied against property to pay for local improvements. Efile 2009 taxes Assessments for items such as paving roads and building ditches that increase the value of the property assessed. Efile 2009 taxes Do not deduct these expenses as taxes. Efile 2009 taxes However, you can deduct as taxes amounts assessed for maintenance or repairs, or for meeting interest charges related to the improvements. Efile 2009 taxes If you make additions or improvements to business property, depreciate the basis of each addition or improvement as separate depreciable property using the rules that would apply to the original property if you had placed it in service at the same time you placed the addition or improvement in service. Efile 2009 taxes See chapter 7. Efile 2009 taxes Deducting vs. Efile 2009 taxes capitalizing costs. Efile 2009 taxes   Do not add to your basis costs you can deduct as current expenses. Efile 2009 taxes For example, amounts paid for incidental repairs or maintenance are deductible as business expenses and are not added to basis. Efile 2009 taxes However, you can elect either to deduct or to capitalize certain other costs. Efile 2009 taxes See chapter 7 in Publication 535. Efile 2009 taxes Decreases to Basis The following are some items that reduce the basis of property. Efile 2009 taxes Section 179 deduction. Efile 2009 taxes Deductions previously allowed or allowable for amortization, depreciation, and depletion. Efile 2009 taxes Alternative motor vehicle credit. Efile 2009 taxes See Form 8910. Efile 2009 taxes Alternative fuel vehicle refueling property credit. Efile 2009 taxes See Form 8911. Efile 2009 taxes Residential energy efficient property credits. Efile 2009 taxes See Form 5695. Efile 2009 taxes Investment credit (part or all) taken. Efile 2009 taxes Casualty and theft losses and insurance reimbursements. Efile 2009 taxes Payments you receive for granting an easement. Efile 2009 taxes Exclusion from income of subsidies for energy conservation measures. Efile 2009 taxes Certain canceled debt excluded from income. Efile 2009 taxes Rebates from a manufacturer or seller. Efile 2009 taxes Patronage dividends received from a cooperative association as a result of a purchase of property. Efile 2009 taxes See Patronage Dividends in chapter 3. Efile 2009 taxes Gas-guzzler tax. Efile 2009 taxes See Form 6197. Efile 2009 taxes Some of these items are discussed next. Efile 2009 taxes For a more detailed list of items that decrease basis, see section 1016 of the Internal Revenue Code and Publication 551. Efile 2009 taxes Depreciation and section 179 deduction. Efile 2009 taxes   The adjustments you must make to the basis of the property if you take the section 179 deduction or depreciate the property are explained next. Efile 2009 taxes For more information on these deductions, see chapter 7. Efile 2009 taxes Section 179 deduction. Efile 2009 taxes   If you take the section 179 expense deduction for all or part of the cost of qualifying business property, decrease the basis of the property by the deduction. Efile 2009 taxes Depreciation. Efile 2009 taxes   Decrease the basis of property by the depreciation you deducted or could have deducted on your tax returns under the method of depreciation you chose. Efile 2009 taxes If you took less depreciation than you could have under the method chosen, decrease the basis by the amount you could have taken under that method. Efile 2009 taxes If you did not take a depreciation deduction, reduce the basis by the full amount of the depreciation you could have taken. Efile 2009 taxes   If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted plus the part of the excess depreciation you deducted that actually reduced your tax liability for any year. Efile 2009 taxes   See chapter 7 for information on figuring the depreciation you should have claimed. Efile 2009 taxes   In decreasing your basis for depreciation, take into account the amount deducted on your tax returns as depreciation and any depreciation you must capitalize under the uniform capitalization rules. Efile 2009 taxes Casualty and theft losses. Efile 2009 taxes   If you have a casualty or theft loss, decrease the basis of the property by any insurance or other reimbursement. Efile 2009 taxes Also, decrease it by any deductible loss not covered by insurance. Efile 2009 taxes See chapter 11 for information about figuring your casualty or theft loss. Efile 2009 taxes   You must increase your basis in the property by the amount you spend on clean-up costs (such as debris removal) and repairs that restore the property to its pre-casualty condition. Efile 2009 taxes To make this determination, compare the repaired property to the property before the casualty. Efile 2009 taxes Easements. Efile 2009 taxes   The amount you receive for granting an easement is usually considered to be proceeds from the sale of an interest in the real property. Efile 2009 taxes It reduces the basis of the affected part of the property. Efile 2009 taxes If the amount received is more than the basis of the part of the property affected by the easement, reduce your basis in that part to zero and treat the excess as a recognized gain. Efile 2009 taxes See Easements and rights-of-way in chapter 3. Efile 2009 taxes Exclusion from income of subsidies for energy conservation measures. Efile 2009 taxes   You can exclude from gross income any subsidy you received from a public utility company for the purchase or installation of an energy conservation measure for a dwelling unit. Efile 2009 taxes Reduce the basis of the property by the excluded amount. Efile 2009 taxes Canceled debt excluded from income. Efile 2009 taxes   If a debt you owe is canceled or forgiven, other than as a gift or bequest, you generally must include the canceled amount in your gross income for tax purposes. Efile 2009 taxes A debt includes any indebtedness for which you are liable or which attaches to property you hold. Efile 2009 taxes   You can exclude your canceled debt from income if the debt is any of the following. Efile 2009 taxes Debt canceled in a bankruptcy case or when you are insolvent. Efile 2009 taxes Qualified farm debt. Efile 2009 taxes Qualified real property business debt (provided you are not a C corporation). Efile 2009 taxes Qualified principal residence indebtedness. Efile 2009 taxes Discharge of certain indebtedness of a qualified individual because of Midwestern disasters. Efile 2009 taxes If you exclude canceled debt described in (1) or (2), you may have to reduce the basis of your depreciable and nondepreciable property. Efile 2009 taxes If you exclude canceled debt described in (3), you must only reduce the basis of your depreciable property by the excluded amount. Efile 2009 taxes   For more information about canceled debt in a bankruptcy case, see Publication 908, Bankruptcy Tax Guide. Efile 2009 taxes For more information about insolvency and canceled debt that is qualified farm debt or qualified principal residence indebtedness, see chapter 3. Efile 2009 taxes For more information about qualified real property business debt, see Publication 334, Tax Guide for Small Business. Efile 2009 taxes For more information about canceled debt in Midwestern disaster areas, see Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. Efile 2009 taxes Basis Other Than Cost There are times when you cannot use cost as basis. Efile 2009 taxes In these situations, the fair market value or the adjusted basis of property may be used. Efile 2009 taxes Examples are discussed next. Efile 2009 taxes Property changed from personal to business or rental use. Efile 2009 taxes   When you hold property for personal use and then change it to business use or use it to produce rent, you must figure its basis for depreciation. Efile 2009 taxes An example of changing property from personal to business use would be changing the use of your pickup truck that you originally purchased for your personal use to use in your farming business. Efile 2009 taxes   The basis for depreciation is the lesser of: The FMV of the property on the date of the change, or Your adjusted basis on the date of the change. Efile 2009 taxes   If you later sell or dispose of this property, the basis you use will depend on whether you are figuring a gain or loss. Efile 2009 taxes The basis for figuring a gain is your adjusted basis in the property when you sell the property. Efile 2009 taxes Figure the basis for a loss starting with the smaller of your adjusted basis or the FMV of the property at the time of the change to business or rental use. Efile 2009 taxes Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . Efile 2009 taxes Property received for services. Efile 2009 taxes   If you receive property for services, include the property's FMV in income. Efile 2009 taxes The amount you include in income becomes your basis. Efile 2009 taxes If the services were performed for a price agreed on beforehand, it will be accepted as the FMV of the property if there is no evidence to the contrary. Efile 2009 taxes Example. Efile 2009 taxes George Smith is an accountant and also operates a farming business. Efile 2009 taxes George agreed to do some accounting work for his neighbor in exchange for a dairy cow. Efile 2009 taxes The accounting work and the cow are each worth $1,500. Efile 2009 taxes George must include $1,500 in income for his accounting services. Efile 2009 taxes George's basis in the cow is $1,500. Efile 2009 taxes Taxable Exchanges A taxable exchange is one in which the gain is taxable, or the loss is deductible. Efile 2009 taxes A taxable gain or deductible loss also is known as a recognized gain or loss. Efile 2009 taxes A taxable exchange occurs when you receive cash or get property that is not similar or related in use to the property exchanged. Efile 2009 taxes If you receive property in exchange for other property in a taxable exchange, the basis of the property you receive is usually its FMV at the time of the exchange. Efile 2009 taxes Example. Efile 2009 taxes You trade a tract of farmland with an adjusted basis of $2,000 for a tractor that has an FMV of $6,000. Efile 2009 taxes You must report a taxable gain of $4,000 for the land. Efile 2009 taxes The tractor has a basis of $6,000. Efile 2009 taxes Involuntary Conversions If you receive property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, figure the basis of the replacement property you receive using the basis of the converted property. Efile 2009 taxes Similar or related property. Efile 2009 taxes   If the replacement property is similar or related in service or use to the converted property, the replacement property's basis is the same as the old property's basis on the date of the conversion. Efile 2009 taxes However, make the following adjustments. Efile 2009 taxes Decrease the basis by the following amounts. Efile 2009 taxes Any loss you recognize on the involuntary conversion. Efile 2009 taxes Any money you receive that you do not spend on similar property. Efile 2009 taxes Increase the basis by the following amounts. Efile 2009 taxes Any gain you recognize on the involuntary conversion. Efile 2009 taxes Any cost of acquiring the replacement property. Efile 2009 taxes Money or property not similar or related. Efile 2009 taxes   If you receive money or property not similar or related in service or use to the converted property and you buy replacement property similar or related in service or use to the converted property, the basis of the replacement property is its cost decreased by the gain not recognized on the involuntary conversion. Efile 2009 taxes Allocating the basis. Efile 2009 taxes   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. Efile 2009 taxes Basis for depreciation. Efile 2009 taxes   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. Efile 2009 taxes For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. Efile 2009 taxes For more information about involuntary conversions, see chapter 11. Efile 2009 taxes Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. Efile 2009 taxes A nontaxable gain or loss also is known as an unrecognized gain or loss. Efile 2009 taxes If you receive property in a nontaxable exchange, its basis is usually the same as the basis of the property you transferred. Efile 2009 taxes Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. Efile 2009 taxes For an exchange to qualify as a like-kind exchange, you must hold for business or investment purposes both the property you transfer and the property you receive. Efile 2009 taxes There must also be an exchange of like-kind property. Efile 2009 taxes For more information, see Like-Kind Exchanges in  chapter 8. Efile 2009 taxes The basis of the property you receive generally is the same as the adjusted basis of the property you gave up. Efile 2009 taxes Example 1. Efile 2009 taxes You traded a truck you used in your farming business for a new smaller truck to use in farming. Efile 2009 taxes The adjusted basis of the old truck was $10,000. Efile 2009 taxes The FMV of the new truck is $30,000. Efile 2009 taxes Because this is a nontaxable exchange, you do not recognize any gain, and your basis in the new truck is $10,000, the same as the adjusted basis of the truck you traded. Efile 2009 taxes Example 2. Efile 2009 taxes You trade a field cultivator (adjusted basis of $8,000) for a planter (FMV of $9,000). Efile 2009 taxes You use both the field cultivator and the planter in your farming business. Efile 2009 taxes The basis of the planter you receive is $8,000, the same as the field cultivator traded Exchange expenses. Efile 2009 taxes   Exchange expenses generally are the closing costs that you pay. Efile 2009 taxes They include such items as brokerage commissions, attorney fees, and deed preparation fees. Efile 2009 taxes Add them to the basis of the like-kind property you receive. Efile 2009 taxes Property plus cash. Efile 2009 taxes   If you trade property in a like-kind exchange and also pay money, the basis of the property you receive is the adjusted basis of the property you gave up plus the money you paid. Efile 2009 taxes Example. Efile 2009 taxes You trade in a truck (adjusted basis of $3,000) for another truck (FMV of $7,500) and pay $4,000. Efile 2009 taxes Your basis in the new truck is $7,000 (the $3,000 adjusted basis of the old truck plus the $4,000 cash). Efile 2009 taxes Special rules for related persons. Efile 2009 taxes   If a like-kind exchange takes place directly or indirectly between related persons and either party disposes of the property within 2 years after the exchange, the exchange no longer qualifies for like-kind exchange treatment. Efile 2009 taxes Each person must report any gain or loss not recognized on the original exchange unless the loss is not deductible under the related party rules. Efile 2009 taxes Each person reports it on the tax return filed for the year in which the later disposition occurred. Efile 2009 taxes If this rule applies, the basis of the property received in the original exchange will be its FMV. Efile 2009 taxes For more information, see chapter 8. Efile 2009 taxes Exchange of business property. Efile 2009 taxes   Exchanging the property of one business for the property of another business generally is a multiple property exchange. Efile 2009 taxes For information on figuring basis, see Multiple Property Exchanges in chapter 1 of Publication 544. Efile 2009 taxes Basis for depreciation. Efile 2009 taxes   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind transaction. Efile 2009 taxes For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. Efile 2009 taxes Partially Nontaxable Exchanges A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. Efile 2009 taxes The basis of the property you receive is the same as the adjusted basis of the property you gave up with the following adjustments. Efile 2009 taxes Decrease the basis by the following amounts. Efile 2009 taxes Any money you receive. Efile 2009 taxes Any loss you recognize on the exchange. Efile 2009 taxes Increase the basis by the following amounts. Efile 2009 taxes Any additional costs you incur. Efile 2009 taxes Any gain you recognize on the exchange. Efile 2009 taxes If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. Efile 2009 taxes Example 1. Efile 2009 taxes You trade farmland (basis of $100,000) for another tract of farmland (FMV of $110,000) and $30,000 cash. Efile 2009 taxes You realize a gain of $40,000. Efile 2009 taxes This is the FMV of the land received plus the cash minus the basis of the land you traded ($110,000 + $30,000 − $100,000). Efile 2009 taxes Include your gain in income (recognize gain) only to the extent of the cash received. Efile 2009 taxes Your basis in the land you received is figured as follows. Efile 2009 taxes Basis of land traded $100,000 Minus: Cash received (adjustment 1(a)) − 30,000   $70,000 Plus: Gain recognized (adjustment 2(b)) + 30,000 Basis of land received $100,000 Example 2. Efile 2009 taxes You trade a truck (adjusted basis of $22,750) for another truck (FMV of $20,000) and $10,000 cash. Efile 2009 taxes You realize a gain of $7,250. Efile 2009 taxes This is the FMV of the truck received plus the cash minus the adjusted basis of the truck you traded ($20,000 + $10,000 − $22,750). Efile 2009 taxes You include all the gain in your income (recognize gain) because the gain is less than the cash you received. Efile 2009 taxes Your basis in the truck you received is figured as follows. Efile 2009 taxes Adjusted basis of truck traded $22,750 Minus: Cash received (adjustment 1(a)) −10,000   $12,750 Plus: Gain recognized (adjustment 2(b)) + 7,250 Basis of truck received $20,000 Allocation of basis. Efile 2009 taxes   If you receive like-kind and unlike properties in the exchange, allocate the basis first to the unlike property, other than money, up to its FMV on the date of the exchange. Efile 2009 taxes The rest is the basis of the like-kind property. Efile 2009 taxes Example. Efile 2009 taxes You traded a tractor with an adjusted basis of $15,000 for another tractor that had an FMV of $12,500. Efile 2009 taxes You also received $1,000 cash and a truck that had an FMV of $3,000. Efile 2009 taxes The truck is unlike property. Efile 2009 taxes You realized a gain of $1,500. Efile 2009 taxes This is the FMV of the tractor received plus the FMV of the truck received plus the cash minus the adjusted basis of the tractor you traded ($12,500 + $3,000 + $1,000 − $15,000). Efile 2009 taxes You include in income (recognize) all $1,500 of the gain because it is less than the FMV of the unlike property plus the cash received. Efile 2009 taxes Your basis in the properties you received is figured as follows. Efile 2009 taxes Adjusted basis of old tractor $15,000 Minus: Cash received (adjustment 1(a)) − 1,000   $14,000 Plus: Gain recognized (adjustment 2(b)) + 1,500 Total basis of properties received $15,500 Allocate the total basis of $15,500 first to the unlike property—the truck ($3,000). Efile 2009 taxes This is the truck's FMV. Efile 2009 taxes The rest ($12,500) is the basis of the tractor. Efile 2009 taxes Sale and Purchase If you sell property and buy similar property in two mutually dependent transactions, you may have to treat the sale and purchase as a single nontaxable exchange. Efile 2009 taxes Example. Efile 2009 taxes You used a tractor on your farm for 3 years. Efile 2009 taxes Its adjusted basis is $22,000 and its FMV is $40,000. Efile 2009 taxes You are interested in a new tractor, which sells for $60,000. Efile 2009 taxes Ordinarily, you would trade your old tractor for the new one and pay the dealer $20,000. Efile 2009 taxes Your basis for depreciating the new tractor would then be $42,000 ($20,000 + $22,000, the adjusted basis of your old tractor). Efile 2009 taxes However, you want a higher basis for depreciating the new tractor, so you agree to pay the dealer $60,000 for the new tractor if he will pay you $40,000 for your old tractor. Efile 2009 taxes Because the two transactions are dependent on each other, you are treated as having exchanged your old tractor for the new one and paid $20,000 ($60,000 − $40,000). Efile 2009 taxes Your basis for depreciating the new tractor is $42,000, the same as if you traded the old tractor. Efile 2009 taxes Property Received as a Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined earlier) to the donor just before it was given to you. Efile 2009 taxes You also must know its FMV at the time it was given to you and any gift tax paid on it. Efile 2009 taxes FMV equal to or greater than donor's adjusted basis. Efile 2009 taxes   If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis when you received the gift. Efile 2009 taxes Increase your basis by all or part of any gift tax paid, depending on the date of the gift. Efile 2009 taxes   Also, for figuring gain or loss from a sale or other disposition of the property, or for figuring depreciation, depletion, or amortization deductions on business property, you must increase or decrease your basis (the donor's adjusted basis) by any required adjustments to basis while you held the property. Efile 2009 taxes See Adjusted Basis , earlier. Efile 2009 taxes   If you received a gift during the tax year, increase your basis in the gift (the donor's adjusted basis) by the part of the gift tax paid on it due to the net increase in value of the gift. Efile 2009 taxes Figure the increase by multiplying the gift tax paid by the following fraction. Efile 2009 taxes Net increase in value of the gift Amount of the gift   The net increase in value of the gift is the FMV of the gift minus the donor's adjusted basis. Efile 2009 taxes The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Efile 2009 taxes Example. Efile 2009 taxes In 2013, you received a gift of property from your mother that had an FMV of $50,000. Efile 2009 taxes Her adjusted basis was $20,000. Efile 2009 taxes The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). Efile 2009 taxes She paid a gift tax of $7,320. Efile 2009 taxes Your basis, $26,076, is figured as follows. Efile 2009 taxes Fair market value $50,000 Minus: Adjusted basis −20,000 Net increase in value $30,000 Gift tax paid $7,320 Multiplied by ($30,000 ÷ $36,000) × . Efile 2009 taxes 83 Gift tax due to net increase in value $6,076 Adjusted basis of property to your mother +20,000 Your basis in the property $26,076 Note. Efile 2009 taxes If you received a gift before 1977, your basis in the gift (the donor's adjusted basis) includes any gift tax paid on it. Efile 2009 taxes However, your basis cannot exceed the FMV of the gift when it was given to you. Efile 2009 taxes FMV less than donor's adjusted basis. Efile 2009 taxes   If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. Efile 2009 taxes Your basis for figuring gain is the donor's adjusted basis plus or minus any required adjustments to basis while you held the property. Efile 2009 taxes Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustments to basis while you held the property. Efile 2009 taxes (See Adjusted Basis , earlier. Efile 2009 taxes )   If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and get a gain, you have neither gain nor loss on the sale or other disposition of the property. Efile 2009 taxes Example. Efile 2009 taxes You received farmland as a gift from your parents when they retired from farming. Efile 2009 taxes At the time of the gift, the land had an FMV of $80,000. Efile 2009 taxes Your parents' adjusted basis was $100,000. Efile 2009 taxes After you received the land, no events occurred that would increase or decrease your basis. Efile 2009 taxes If you sell the land for $120,000, you will have a $20,000 gain because you must use the donor's adjusted basis at the time of the gift ($100,000) as your basis to figure a gain. Efile 2009 taxes If you sell the land for $70,000, you will have a $10,000 loss because you must use the FMV at the time of the gift ($80,000) as your basis to figure a loss. Efile 2009 taxes If the sales price is between $80,000 and $100,000, you have neither gain nor loss. Efile 2009 taxes For instance, if the sales price was $90,000 and you tried to figure a gain using the donor's adjusted basis ($100,000), you would get a $10,000 loss. Efile 2009 taxes If you then tried to figure a loss using the FMV ($80,000), you would get a $10,000 gain. Efile 2009 taxes Business property. Efile 2009 taxes   If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deductions is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property. Efile 2009 taxes Property Transferred From a Spouse The basis of property transferred to you or transferred in trust for your benefit by your spouse is the same as your spouse's adjusted basis. Efile 2009 taxes The same rule applies to a transfer by your former spouse if the transfer is incident to divorce. Efile 2009 taxes However, for property transferred in trust, adjust your basis for any gain recognized by your spouse or former spouse if the liabilities assumed plus the liabilities to which the property is subject are more than the adjusted basis of the property transferred. Efile 2009 taxes The transferor must give you the records needed to determine the adjusted basis and holding period of the property as of the date of the transfer. Efile 2009 taxes For more information, see Property Settlements in Publication 504, Divorced or Separated Individuals. Efile 2009 taxes Inherited Property Your basis in property you inherited from a decedent, who died before January 1, 2010, or after December 31, 2010, is generally one of the following: The FMV of the property at the date of the decedent's death. Efile 2009 taxes If a federal estate return is filed, you can use its appraised value. Efile 2009 taxes The FMV on the alternate valuation date, if the personal representative for the estate elects to use alternate valuation. Efile 2009 taxes For information on the alternate valuation, see the Instructions for Form 706. Efile 2009 taxes The decedent's adjusted basis in land to the extent of the value that is excluded from the decedent's taxable estate as a qualified conservation easement. Efile 2009 taxes If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes. Efile 2009 taxes Special-use valuation method. Efile 2009 taxes   Under certain conditions, when a person dies, the executor or personal representative of that person's estate may elect to value qualified real property at other than its FMV. Efile 2009 taxes If so, the executor or personal representative values the qualified real property based on its use as a farm or other closely held business. Efile 2009 taxes If the executor or personal representative elects this method of valuation for estate tax purposes, this value is the basis of the property for the qualified heirs. Efile 2009 taxes The qualified heirs should be able to get the necessary value from the executor or personal representative of the estate. Efile 2009 taxes   If you are a qualified heir who received special-use valuation property, increase your basis by any gain recognized by the estate or trust because of post-death appreciation. Efile 2009 taxes Post-death appreciation is the property's FMV on the date of distribution minus the property's FMV either on the date of the individual's death or on the alternate valuation date. Efile 2009 taxes Figure all FMVs without regard to the special-use valuation. Efile 2009 taxes   You may be liable for an additional estate tax if, within 10 years after the death of the decedent, you transfer the property or the property stops being used as a farm. Efile 2009 taxes This tax does not apply if you dispose of the property in a like-kind exchange or in an involuntary conversion in which all of the proceeds are reinvested in qualified replacement property. Efile 2009 taxes The tax also does not apply if you transfer the property to a member of your family and certain requirements are met. Efile 2009 taxes   You can elect to increase your basis in special-use valuation property if it becomes subject to the additional estate tax. Efile 2009 taxes To increase your basis, you must make an irrevocable election and pay interest on the additional estate tax figured from the date 9 months after the decedent's death until the date of payment of the additional estate tax. Efile 2009 taxes If you meet these requirements, increase your basis in the property to its FMV on the date of the decedent's death or the alternate valuation date. Efile 2009 taxes The increase in your basis is considered to have occurred immediately before the event that resulted in the additional estate tax. Efile 2009 taxes   You make the election by filing, with Form 706-A, United States Additional Estate Tax Return, a statement that: Contains your (and the estate's) name, address, and taxpayer identification number; Identifies the election as an election under section 1016(c) of the Internal Revenue Code; Specifies the property for which you are making the election; and Provides any additional information required by the Form 706-A instructions. Efile 2009 taxes   For more information, see Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, Form 706-A, and the related instructions. Efile 2009 taxes Property inherited from a decedent who died in 2010. Efile 2009 taxes   If you inherited property from a decedent who died in 2010, different rules may apply. Efile 2009 taxes See Publication 4895, Tax Treatment of Property Acquired From a Decendent Dying in 2010, for details. Efile 2009 taxes Property Distributed From a Partnership or Corporation The following rules apply to determine a partner's basis and a shareholder's basis in property distributed respectively from a partnership to the partner with respect to the partner's interest in the partnership and from a corporation to the shareholder with respect to the shareholder's ownership of stock in the corporation. Efile 2009 taxes Partner's basis. Efile 2009 taxes   Unless there is a complete liquidation of a partner's interest, the basis of property (other than money) distributed by a partnership to the partner is its adjusted basis to the partnership immediately before the distribution. Efile 2009 taxes However, the basis of the property to the partner cannot be more than the adjusted basis of his or her interest in the partnership reduced by any money received in the same transaction. Efile 2009 taxes For more information, see Partner's Basis for Distributed Property in Publication 541, Partnerships. Efile 2009 taxes Shareholder's basis. Efile 2009 taxes   The basis of property distributed by a corporation to a shareholder is its fair market value. Efile 2009 taxes For more information about corporate distributions, see Distributions to Shareholders in Publication 542, Corporations. Efile 2009 taxes Prev  Up  Next   Home   More Online Publications