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Federal Income Tax Forms 2011

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Federal Income Tax Forms 2011

Federal income tax forms 2011 Publication 529 - Main Content Table of Contents Deductions Subject to the 2% LimitUnreimbursed Employee Expenses Tax Preparation Fees Other Expenses Deductions Not Subject to the 2% LimitList of Deductions Nondeductible ExpensesList of Nondeductible Expenses How To ReportWho can use Form 2106-EZ. Federal income tax forms 2011 Computer used in a home office. Federal income tax forms 2011 Example How To Get Tax HelpLow Income Taxpayer Clinics Deductions Subject to the 2% Limit You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040 or Form 1040NR). Federal income tax forms 2011 You can claim the amount of expenses that is more than 2% of your adjusted gross income. Federal income tax forms 2011 You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. Federal income tax forms 2011 Your adjusted gross income is the amount on Form 1040, line 38, or Form 1040NR, line 37. Federal income tax forms 2011 Generally, you apply the 2% limit after you apply any other deduction limit. Federal income tax forms 2011 For example, you apply the 50% (or 80%) limit on business-related meals and entertainment (discussed later under Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging ) before you apply the 2% limit. Federal income tax forms 2011 Deductions subject to the 2% limit are discussed in the following three categories. Federal income tax forms 2011 Unreimbursed employee expenses (Schedule A (Form 1040), line 21 or Schedule A (Form 1040NR), line 7). Federal income tax forms 2011 Tax preparation fees (Schedule A (Form 1040), line 22 or Schedule A (Form 1040NR), line 8). Federal income tax forms 2011 Other expenses (Schedule A (Form 1040), line 23 or Schedule A (Form 1040NR), line 9). Federal income tax forms 2011 Unreimbursed Employee Expenses Generally, the following expenses are deducted on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. Federal income tax forms 2011 You can deduct only unreimbursed employee expenses that are: Paid or incurred during your tax year, For carrying on your trade or business of being an employee, and Ordinary and necessary. Federal income tax forms 2011 An expense is ordinary if it is common and accepted in your trade, business, or profession. Federal income tax forms 2011 An expense is necessary if it is appropriate and helpful to your business. Federal income tax forms 2011 An expense does not have to be required to be considered necessary. Federal income tax forms 2011 You may be able to deduct the following items as unreimbursed employee expenses. Federal income tax forms 2011 Business bad debt of an employee. Federal income tax forms 2011 Business liability insurance premiums. Federal income tax forms 2011 Damages paid to a former employer for breach of an employment contract. Federal income tax forms 2011 Depreciation on a computer your employer requires you to use in your work. Federal income tax forms 2011 Dues to a chamber of commerce if membership helps you do your job. Federal income tax forms 2011 Dues to professional societies. Federal income tax forms 2011 Educator expenses. Federal income tax forms 2011 Home office or part of your home used regularly and exclusively in your work. Federal income tax forms 2011 Job search expenses in your present occupation. Federal income tax forms 2011 Laboratory breakage fees. Federal income tax forms 2011 Legal fees related to your job. Federal income tax forms 2011 Licenses and regulatory fees. Federal income tax forms 2011 Malpractice insurance premiums. Federal income tax forms 2011 Medical examinations required by an employer. Federal income tax forms 2011 Occupational taxes. Federal income tax forms 2011 Passport for a business trip. Federal income tax forms 2011 Repayment of an income aid payment received under an employer's plan. Federal income tax forms 2011 Research expenses of a college professor. Federal income tax forms 2011 Rural mail carriers' vehicle expenses. Federal income tax forms 2011 Subscriptions to professional journals and trade magazines related to your work. Federal income tax forms 2011 Tools and supplies used in your work. Federal income tax forms 2011 Travel, transportation, meals, entertainment, gifts, and local lodging related to your work. Federal income tax forms 2011 Union dues and expenses. Federal income tax forms 2011 Work clothes and uniforms if required and not suitable for everyday use. Federal income tax forms 2011 Work-related education. Federal income tax forms 2011 Business Bad Debt A business bad debt is a loss from a debt created or acquired in your trade or business. Federal income tax forms 2011 Any other worthless debt is a business bad debt only if there is a very close relationship between the debt and your trade or business when the debt becomes worthless. Federal income tax forms 2011 A debt has a very close relationship to your trade or business of being an employee if your main motive for incurring the debt is a business reason. Federal income tax forms 2011 Example. Federal income tax forms 2011 You make a bona fide loan to the corporation you work for. Federal income tax forms 2011 It fails to pay you back. Federal income tax forms 2011 You had to make the loan in order to keep your job. Federal income tax forms 2011 You have a business bad debt as an employee. Federal income tax forms 2011 More information. Federal income tax forms 2011   For more information on business bad debts, see chapter 10 in Publication 535. Federal income tax forms 2011 For information on nonbusiness bad debts, see chapter 4 in Publication 550, Investment Income and Expenses. Federal income tax forms 2011 Business Liability Insurance You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job. Federal income tax forms 2011 Damages for Breach of Employment Contract If you break an employment contract, you can deduct damages you pay your former employer if the damages are attributable to the pay you received from that employer. Federal income tax forms 2011 Depreciation on Computers You can claim a depreciation deduction for a computer that you use in your work as an employee if its use is: For the convenience of your employer, and Required as a condition of your employment. Federal income tax forms 2011 For the convenience of your employer. Federal income tax forms 2011   This means that your use of the computer is for a substantial business reason of your employer. Federal income tax forms 2011 You must consider all facts in making this determination. Federal income tax forms 2011 Use of your computer during your regular working hours to carry on your employer's business is generally for the convenience of your employer. Federal income tax forms 2011 Required as a condition of your employment. Federal income tax forms 2011   This means that you cannot properly perform your duties without the computer. Federal income tax forms 2011 Whether you can properly perform your duties without it depends on all the facts and circumstances. Federal income tax forms 2011 It is not necessary that your employer explicitly requires you to use your computer. Federal income tax forms 2011 But neither is it enough that your employer merely states that your use of the item is a condition of your employment. Federal income tax forms 2011 Example. Federal income tax forms 2011 You are an engineer with an engineering firm. Federal income tax forms 2011 You occasionally take work home at night rather than work late at the office. Federal income tax forms 2011 You own and use a computer that is similar to the one you use at the office to complete your work at home. Federal income tax forms 2011 Since your use of the computer is not for the convenience of your employer and is not required as a condition of your employment, you cannot claim a depreciation deduction for it. Federal income tax forms 2011 Which depreciation method to use. Federal income tax forms 2011   The depreciation method you use depends on whether you meet the more-than-50%-use test. Federal income tax forms 2011 More-than-50%-use test met. Federal income tax forms 2011   You meet this test if you use the computer more than 50% in your work. Federal income tax forms 2011 If you meet this test, you can claim accelerated depreciation under the General Depreciation System (GDS). Federal income tax forms 2011 In addition, you may be able to take the section 179 deduction for the year you place the item in service. Federal income tax forms 2011 More-than-50%-use test not met. Federal income tax forms 2011   If you do not meet the more-than-50%-use test, you are limited to the straight line method of depreciation under the Alternative Depreciation System (ADS). Federal income tax forms 2011 You also cannot claim the section 179 deduction. Federal income tax forms 2011 (But if you use your computer in a home office, see the exception below. Federal income tax forms 2011 ) Investment use. Federal income tax forms 2011   Your use of a computer in connection with investments (described later under Other Expenses ) does not count as use in your work. Federal income tax forms 2011 However, you can combine your investment use with your work use in figuring your depreciation deduction. Federal income tax forms 2011 Exception for computer used in a home office. Federal income tax forms 2011   The more-than-50%-use test does not apply to a computer used only in a part of your home that meets the requirements described later under Home Office . Federal income tax forms 2011 You can claim accelerated depreciation using GDS for a computer used in a qualifying home office, even if you do not use it more than 50% in your work. Federal income tax forms 2011 You also may be able to take a section 179 deduction for the year you place the computer in service. Federal income tax forms 2011 See Computer used in a home office under How To Report, later. Federal income tax forms 2011 More information. Federal income tax forms 2011   For more information on depreciation and the section 179 deduction for computers and other items used in a home office, see Business Furniture and Equipment in Publication 587. Federal income tax forms 2011 Publication 946 has detailed information about the section 179 deduction and depreciation deductions using GDS and ADS. Federal income tax forms 2011 Reporting your depreciation deduction. Federal income tax forms 2011    See How To Report, later, for information about reporting a deduction for depreciation. Federal income tax forms 2011 You must keep records to prove your percentage of business and investment use. Federal income tax forms 2011 Dues to Chambers of Commerce and Professional Societies You may be able to deduct dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps you carry out the duties of your job. Federal income tax forms 2011 Similar organizations include: Boards of trade, Business leagues, Civic or public service organizations, Real estate boards, and Trade associations. Federal income tax forms 2011 Lobbying and political activities. Federal income tax forms 2011    You may not be able to deduct that part of your dues that is for certain lobbying and political activities. Federal income tax forms 2011 See Lobbying Expenses under Nondeductible Expenses, later. Federal income tax forms 2011 Educator Expenses If you were an eligible educator in 2013, you can deduct up to $250 of qualified expenses you paid in 2013 as an adjustment to gross income on Form 1040, line 23, rather than as a miscellaneous itemized deduction. Federal income tax forms 2011 If you file Form 1040A, you can deduct these expenses on line 16. Federal income tax forms 2011 If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. Federal income tax forms 2011 However, neither spouse can deduct more than $250 of his or her qualified expenses. Federal income tax forms 2011 Eligible educator. Federal income tax forms 2011   An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in school for at least 900 hours during a school year. Federal income tax forms 2011 Qualified expenses. Federal income tax forms 2011   Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. Federal income tax forms 2011 An ordinary expense is one that is common and accepted in your educational field. Federal income tax forms 2011 A necessary expense is one that is helpful and appropriate for your profession as an educator. Federal income tax forms 2011 An expense does not have to be required to be considered necessary. Federal income tax forms 2011   Qualified expenses do not include expenses for home schooling or for nonathletic supplies for courses in health or physical education. Federal income tax forms 2011 You must reduce your qualified expenses by the following amounts. Federal income tax forms 2011 Excludable U. Federal income tax forms 2011 S. Federal income tax forms 2011 series EE and I savings bond interest from Form 8815. Federal income tax forms 2011 Nontaxable qualified state tuition program earnings. Federal income tax forms 2011 Nontaxable earnings from Coverdell education savings accounts. Federal income tax forms 2011 Any reimbursements you received for those expenses that were not reported to you on your Form W-2, box 1. Federal income tax forms 2011 Educator expenses over limit. Federal income tax forms 2011   If you were an educator in 2013 and you had qualified expenses that you cannot take as an adjustment to gross income, you can deduct the rest as an itemized deduction subject to the 2% limit. Federal income tax forms 2011 Home Office If you use a part of your home regularly and exclusively for business purposes, you may be able to deduct a part of the operating expenses and depreciation of your home. Federal income tax forms 2011 You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively: As your principal place of business for any trade or business, As a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business, or In the case of a separate structure not attached to your home, in connection with your trade or business. Federal income tax forms 2011 The regular and exclusive business use must be for the convenience of your employer and not just appropriate and helpful in your job. Federal income tax forms 2011 Principal place of business. Federal income tax forms 2011   If you have more than one place of business, the business part of your home is your principal place of business if: You use it regularly and exclusively for administrative or management activities of your trade or business, and You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Federal income tax forms 2011   Otherwise, the location of your principal place of business generally depends on the relative importance of the activities performed at each location and the time spent at each location. Federal income tax forms 2011 You should keep records that will give the information needed to figure the deduction according to these rules. Federal income tax forms 2011 Also keep canceled checks, substitute checks, or account statements and receipts of the expenses paid to prove the deductions you claim. Federal income tax forms 2011 More information. Federal income tax forms 2011   See Publication 587 for more detailed information and a worksheet for figuring the deduction. Federal income tax forms 2011 Job Search Expenses You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. Federal income tax forms 2011 You cannot deduct these expenses if: You are looking for a job in a new occupation, There was a substantial break between the ending of your last job and your looking for a new one, or You are looking for a job for the first time. Federal income tax forms 2011 Employment and outplacement agency fees. Federal income tax forms 2011    You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation. Federal income tax forms 2011 Employer pays you back. Federal income tax forms 2011   If, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. Federal income tax forms 2011 See Recoveries in Publication 525. Federal income tax forms 2011 Employer pays the employment agency. Federal income tax forms 2011   If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income. Federal income tax forms 2011 Résumé. Federal income tax forms 2011   You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers if you are looking for a new job in your present occupation. Federal income tax forms 2011 Travel and transportation expenses. Federal income tax forms 2011   If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. Federal income tax forms 2011 You can deduct the travel expenses if the trip is primarily to look for a new job. Federal income tax forms 2011 The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job. Federal income tax forms 2011   Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area. Federal income tax forms 2011    You can choose to use the standard mileage rate to figure your car expenses. Federal income tax forms 2011 The 2013 rate for business use of a vehicle is 56½ cents per mile. Federal income tax forms 2011 See Publication 463 for more information on travel and car expenses. Federal income tax forms 2011 Legal Fees You can deduct legal fees related to doing or keeping your job. Federal income tax forms 2011 Licenses and Regulatory Fees You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession. Federal income tax forms 2011 Occupational Taxes You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. Federal income tax forms 2011 If you are an employee, you can claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; you cannot claim them as a deduction for taxes elsewhere on your return. Federal income tax forms 2011 Repayment of Income Aid Payment An “income aid payment” is one that is received under an employer's plan to aid employees who lose their jobs because of lack of work. Federal income tax forms 2011 If you repay a lump-sum income aid payment that you received and included in income in an earlier year, you can deduct the repayment. Federal income tax forms 2011 Research Expenses of a College Professor If you are a college professor, you can deduct your research expenses, including travel expenses, for teaching, lecturing, or writing and publishing on subjects that relate directly to your teaching duties. Federal income tax forms 2011 You must have undertaken the research as a means of carrying out the duties expected of a professor and without expectation of profit apart from salary. Federal income tax forms 2011 However, you cannot deduct the cost of travel as a form of education. Federal income tax forms 2011 Rural Mail Carriers' Vehicle Expenses If your expenses to use a vehicle in performing services as a rural mail carrier are more than the amount of your reimbursements, you can deduct the unreimbursed expenses. Federal income tax forms 2011 See chapter 4 of Publication 463 for more information. Federal income tax forms 2011 Tools Used in Your Work Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. Federal income tax forms 2011 You can depreciate the cost of tools that have a useful life substantially beyond the tax year. Federal income tax forms 2011 For more information about depreciation, see Publication 946. Federal income tax forms 2011 Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging If you are an employee and have ordinary and necessary business-related expenses for travel away from home, local transportation, entertainment, and gifts, you may be able to deduct these expenses. Federal income tax forms 2011 Generally, you must file Form 2106 or Form 2106-EZ to claim these expenses. Federal income tax forms 2011 Travel expenses. Federal income tax forms 2011   Travel expenses are those incurred while traveling away from home for your employer. Federal income tax forms 2011 You can deduct travel expenses paid or incurred in connection with a temporary work assignment. Federal income tax forms 2011 Generally, you cannot deduct travel expenses paid or incurred in connection with an indefinite work assignment. Federal income tax forms 2011   Travel expenses may include: The cost of getting to and from your business destination (air, rail, bus, car, etc. Federal income tax forms 2011 ), Meals and lodging while away from home, Taxi fares, Baggage charges, and Cleaning and laundry expenses. Federal income tax forms 2011   Travel expenses are discussed more fully in chapter 1 of Publication 463. Federal income tax forms 2011 Temporary work assignment. Federal income tax forms 2011    If your assignment or job away from home in a single location is realistically expected to last (and does in fact last) for 1 year or less, it is temporary, unless there are facts and circumstances that indicate it is not. Federal income tax forms 2011 Indefinite work assignment. Federal income tax forms 2011   If your assignment or job away from home in a single location is realistically expected to last for more than 1 year, it is indefinite, whether or not it actually lasts for more than 1 year. Federal income tax forms 2011 If your assignment or job away from home in a single location is realistically expected to last for 1 year or less, but at some later date it is realistically expected to exceed 1 year, it will be treated as temporary (in the absence of facts and circumstances indicating otherwise) until the date that your realistic expectation changes, and it will be treated as indefinite after that date. Federal income tax forms 2011 Federal crime investigation and prosecution. Federal income tax forms 2011   If you are a federal employee participating in a federal crime investigation or prosecution, you are not subject to the 1-year rule for deducting temporary travel expenses. Federal income tax forms 2011 This means that you may be able to deduct travel expenses even if you are away from your tax home for more than 1 year. Federal income tax forms 2011   To qualify, the Attorney General must certify that you are traveling: For the Federal Government, In a temporary duty status, and To investigate, prosecute, or provide support services for the investigation or prosecution of a federal crime. Federal income tax forms 2011 Armed Forces reservists traveling more than 100 miles from home. Federal income tax forms 2011   If you are a member of a reserve component of the Armed Forces of the United States and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct some of your travel expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. Federal income tax forms 2011 The amount of expenses you can deduct as an adjustment to gross income is limited to the regular federal per diem rate (for lodging, meals, and incidental expenses) and the standard mileage rate (for car expenses) plus any parking fees, ferry fees, and tolls. Federal income tax forms 2011 The balance, if any, is reported on Schedule A. Federal income tax forms 2011   You are a member of a reserve component of the Armed Forces of the United States if you are in the Army, Naval, Marine Corps, Air Force, Coast Guard Reserve, the Army National Guard of the United States, the Air National Guard of the United States, or the Reserve Corps of the Public Health Service. Federal income tax forms 2011   For more information on travel expenses, see Publication 463. Federal income tax forms 2011 Local transportation expenses. Federal income tax forms 2011   Local transportation expenses are the expenses of getting from one workplace to another when you are not traveling away from home. Federal income tax forms 2011 They include the cost of transportation by air, rail, bus, taxi, and the cost of using your car. Federal income tax forms 2011   You can choose to use the standard mileage rate to figure your car expenses. Federal income tax forms 2011 The 2013 rate for business use of a vehicle is 56½ cents per mile. Federal income tax forms 2011    In general, the costs of commuting between your residence and your place of business are nondeductible. Federal income tax forms 2011 Work at two places in a day. Federal income tax forms 2011   If you work at two places in a day, whether or not for the same employer, you can generally deduct the expenses of getting from one workplace to the other. Federal income tax forms 2011 Temporary work location. Federal income tax forms 2011   You can deduct expenses incurred in going between your home and a temporary work location if at least one of the following applies. Federal income tax forms 2011 The work location is outside the metropolitan area where you live and normally work. Federal income tax forms 2011 You have at least one regular work location (other than your home) for the same trade or business. Federal income tax forms 2011 (If this applies, the distance between your home and the temporary work location does not matter. Federal income tax forms 2011 )   For this purpose, a work location is generally considered temporary if your work there is realistically expected to last (and does in fact last) for 1 year or less. Federal income tax forms 2011 It is not temporary if your work there is realistically expected to last for more than 1 year, even if it actually lasts for 1 year or less. Federal income tax forms 2011 If your work there initially is realistically expected to last for 1 year or less, but later is realistically expected to last for more than 1 year, the work location is generally considered temporary until the date your realistic expectation changes and not temporary after that date. Federal income tax forms 2011 For more information, see chapter 1 of Publication 463. Federal income tax forms 2011 Home office. Federal income tax forms 2011   You can deduct expenses incurred in going between your home and a workplace if your home is your principal place of business for the same trade or business. Federal income tax forms 2011 (In this situation, whether the other workplace is temporary or regular and its distance from your home do not matter. Federal income tax forms 2011 ) See Home Office , earlier, for a discussion on the use of your home as your principal place of business. Federal income tax forms 2011 Meals and entertainment. Federal income tax forms 2011   Generally, you can deduct entertainment expenses (including entertainment-related meals) only if they are directly related to the active conduct of your trade or business. Federal income tax forms 2011 However, the expense only needs to be associated with the active conduct of your trade or business if it directly precedes or follows a substantial and bona fide business-related discussion. Federal income tax forms 2011   You can deduct only 50% of your business-related meal and entertainment expenses unless the expenses meet certain exceptions. Federal income tax forms 2011 You apply this 50% limit before you apply the 2%-of-adjusted-gross-income limit. Federal income tax forms 2011 Meals when subject to “hours of service” limits. Federal income tax forms 2011   You can deduct 80% of your business-related meal expenses if you consume the meals during or incident to any period subject to the Department of Transportation's “hours of service” limits. Federal income tax forms 2011 You apply this 80% limit before you apply the 2%-of-adjusted-gross-income limit. Federal income tax forms 2011 Gift expenses. Federal income tax forms 2011   You can generally deduct up to $25 of business gifts you give to any one individual during the year. Federal income tax forms 2011 The following items do not count toward the $25 limit. Federal income tax forms 2011 Identical, widely distributed items costing $4 or less that have your name clearly and permanently imprinted. Federal income tax forms 2011 Signs, racks, and promotional materials to be displayed on the business premises of the recipient. Federal income tax forms 2011 Local lodging. Federal income tax forms 2011   If your employer provides or requires you to obtain lodging while you are not traveling away from home, you can deduct the cost of the lodging if it is: on a temporary basis, necessary for you to participate in or be available for a business meeting or employer function, and the costs are ordinary and necessary, but not lavish or extravagant. Federal income tax forms 2011   If your employer provides the lodging or reimburses you for the cost of the lodging, you can deduct the cost only if the value or the reimbursement is included in your gross income because it is reported as wages on your Form W-2. Federal income tax forms 2011 Additional information. Federal income tax forms 2011    See Publication 463 for more information on travel, transportation, meal, entertainment, and gift expenses, and reimbursements for these expenses. Federal income tax forms 2011 Union Dues and Expenses You can deduct dues and initiation fees you pay for union membership. Federal income tax forms 2011 You can also deduct assessments for benefit payments to unemployed union members. Federal income tax forms 2011 However, you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. Federal income tax forms 2011 Also, you cannot deduct contributions to a pension fund even if the union requires you to make the contributions. Federal income tax forms 2011 You may not be able to deduct amounts you pay to the union that are related to certain lobbying and political activities. Federal income tax forms 2011 See Lobbying Expenses under Nondeductible Expenses, later. Federal income tax forms 2011 Work Clothes and Uniforms You can deduct the cost and upkeep of work clothes if the following two requirements are met. Federal income tax forms 2011 You must wear them as a condition of your employment. Federal income tax forms 2011 The clothes are not suitable for everyday wear. Federal income tax forms 2011 It is not enough that you wear distinctive clothing. Federal income tax forms 2011 The clothing must be specifically required by your employer. Federal income tax forms 2011 Nor is it enough that you do not, in fact, wear your work clothes away from work. Federal income tax forms 2011 The clothing must not be suitable for taking the place of your regular clothing. Federal income tax forms 2011 Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc. Federal income tax forms 2011 ). Federal income tax forms 2011 Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear. Federal income tax forms 2011 However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of a uniform. Federal income tax forms 2011 Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible. Federal income tax forms 2011 Protective clothing. Federal income tax forms 2011   You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves. Federal income tax forms 2011   Examples of workers who may be required to wear safety items are: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers. Federal income tax forms 2011 Military uniforms. Federal income tax forms 2011   You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. Federal income tax forms 2011 However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. Federal income tax forms 2011 In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses. Federal income tax forms 2011   If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive. Federal income tax forms 2011   If you are a student at an armed forces academy, you cannot deduct the cost of your uniforms if they replace regular clothing. Federal income tax forms 2011 However, you can deduct the cost of insignia, shoulder boards, and related items. Federal income tax forms 2011    You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school. Federal income tax forms 2011 Work-Related Education You can deduct expenses you have for education, even if the education may lead to a degree, if the education meets at least one of the following two tests. Federal income tax forms 2011 It maintains or improves skills required in your present work. Federal income tax forms 2011 It is required by your employer or the law to keep your salary, status, or job, and the requirement serves a business purpose of your employer. Federal income tax forms 2011 You cannot deduct expenses you have for education, even though one or both of the preceding tests are met, if the education: Is needed to meet the minimum educational requirements to qualify you in your trade or business, or Is part of a program of study that will lead to qualifying you in a new trade or business. Federal income tax forms 2011 If your education qualifies, you can deduct expenses for tuition, books, supplies, laboratory fees, and similar items, and certain transportation costs. Federal income tax forms 2011 If the education qualifies you for a new trade or business, you cannot deduct the educational expenses even if you do not intend to enter that trade or business. Federal income tax forms 2011 Travel as education. Federal income tax forms 2011   You cannot deduct the cost of travel that in itself constitutes a form of education. Federal income tax forms 2011 For example, a French teacher who travels to France to maintain general familiarity with the French language and culture cannot deduct the cost of the trip as an educational expense. Federal income tax forms 2011 More information. Federal income tax forms 2011    See Publication 970, Tax Benefits for Education, for a complete discussion of the deduction for work-related education expenses. Federal income tax forms 2011 Education Expenses During Unemployment If you stop working for a year or less in order to get education in order to maintain or improve skills needed in your present work and then return to the same general type of work, your absence is considered temporary. Federal income tax forms 2011 Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. Federal income tax forms 2011 Tax Preparation Fees You can usually deduct tax preparation fees on the return for the year in which you pay them. Federal income tax forms 2011 Thus, on your 2013 return, you can deduct fees paid in 2013 for preparing your 2012 return. Federal income tax forms 2011 These fees include the cost of tax preparation software programs and tax publications. Federal income tax forms 2011 They also include any fee you paid for electronic filing of your return. Federal income tax forms 2011 See Tax preparation fees under How To Report, later. Federal income tax forms 2011 Other Expenses You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2%-of-adjusted-gross-income limit. Federal income tax forms 2011 On Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9, you can deduct the ordinary and necessary expenses that you pay: To produce or collect income that must be included in your gross income, To manage, conserve, or maintain property held for producing such income, or To determine, contest, pay, or claim a refund of any tax. Federal income tax forms 2011 You can deduct expenses you pay for the purposes in (1) and (2) above only if they are reasonable and closely related to these purposes. Federal income tax forms 2011 These other expenses include the following items. Federal income tax forms 2011 Appraisal fees for a casualty loss or charitable contribution. Federal income tax forms 2011 Casualty and theft losses from property used in performing services as an employee. Federal income tax forms 2011 Clerical help and office rent in caring for investments. Federal income tax forms 2011 Depreciation on home computers used for investments. Federal income tax forms 2011 Excess deductions (including administrative expenses) allowed a beneficiary on termination of an estate or trust. Federal income tax forms 2011 Fees to collect interest and dividends. Federal income tax forms 2011 Hobby expenses, but generally not more than hobby income. Federal income tax forms 2011 Indirect miscellaneous deductions from pass-through entities. Federal income tax forms 2011 Investment fees and expenses. Federal income tax forms 2011 Legal fees related to producing or collecting taxable income or getting tax advice. Federal income tax forms 2011 Loss on deposits in an insolvent or bankrupt financial institution. Federal income tax forms 2011 Loss on traditional IRAs or Roth IRAs, when all amounts have been distributed to you. Federal income tax forms 2011 Repayments of income. Federal income tax forms 2011 Repayments of social security benefits. Federal income tax forms 2011 Safe deposit box rental, except for storing jewelry and other personal effects. Federal income tax forms 2011 Service charges on dividend reinvestment plans. Federal income tax forms 2011 Tax advice fees. Federal income tax forms 2011 Trustee's fees for your IRA, if separately billed and paid. Federal income tax forms 2011 If the expenses you pay produce income that is only partially taxable, see Tax-Exempt Income Expenses, later, under Nondeductible Expenses. Federal income tax forms 2011 Appraisal Fees You can deduct appraisal fees if you pay them to figure a casualty loss or the fair market value of donated property. Federal income tax forms 2011 Casualty and Theft Losses You can deduct a casualty or theft loss as a miscellaneous itemized deduction subject to the 2% limit if you used the damaged or stolen property in performing services as an employee. Federal income tax forms 2011 First report the loss in Section B of Form 4684, Casualties and Thefts. Federal income tax forms 2011 You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. Federal income tax forms 2011 To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Federal income tax forms 2011 For more information on casualty and theft losses, see Publication 547, Casualties, Disasters, and Thefts. Federal income tax forms 2011 Clerical Help and Office Rent You can deduct office expenses, such as rent and clerical help, that you have in connection with your investments and collecting the taxable income on them. Federal income tax forms 2011 Credit or Debit Card Convenience Fees You can deduct the convenience fee charged by the card processor for paying your income tax (including estimated tax payments) by credit or debit card. Federal income tax forms 2011 The fees are deductible on the return for the year in which you paid them. Federal income tax forms 2011 For example, fees charged to payments made in 2013 can be claimed on the 2013 tax return. Federal income tax forms 2011 Depreciation on Home Computer You can deduct depreciation on your home computer if you use it to produce income (for example, to manage your investments that produce taxable income). Federal income tax forms 2011 You generally must depreciate the computer using the straight line method over the Alternative Depreciation System (ADS) recovery period. Federal income tax forms 2011 But if you work as an employee and also use the computer in that work, see Depreciation on Computers under Unreimbursed Employee Expenses, earlier. Federal income tax forms 2011 For more information on depreciation, see Publication 946. Federal income tax forms 2011 Excess Deductions of an Estate If an estate's total deductions in its last tax year are more than its gross income for that year, the beneficiaries succeeding to the estate's property can deduct the excess. Federal income tax forms 2011 Do not include deductions for the estate's personal exemption and charitable contributions when figuring the estate's total deductions. Federal income tax forms 2011 The beneficiaries can claim the deduction only for the tax year in which, or with which, the estate terminates, whether the year of termination is a normal year or a short tax year. Federal income tax forms 2011 For more information, see Termination of Estate in Publication 559, Survivors, Executors, and Administrators. Federal income tax forms 2011 Fees To Collect Interest and Dividends You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect your taxable bond interest or dividends on shares of stock. Federal income tax forms 2011 But you cannot deduct a fee you pay to a broker to buy investment property, such as stocks or bonds. Federal income tax forms 2011 You must add the fee to the cost of the property. Federal income tax forms 2011 You cannot deduct the fee you pay to a broker to sell securities. Federal income tax forms 2011 You can use the fee only to figure gain or loss from the sale. Federal income tax forms 2011 See the instructions for Schedule D (Form 1040) for information on how to report the fee. Federal income tax forms 2011 Hobby Expenses You can generally deduct hobby expenses, but only up to the amount of hobby income. Federal income tax forms 2011 A hobby is not a business because it is not carried on to make a profit. Federal income tax forms 2011 See Not-for-Profit Activities in chapter 1 of Publication 535. Federal income tax forms 2011 Indirect Deductions of Pass-Through Entities Pass-through entities include partnerships, S corporations, and mutual funds that are not publicly offered. Federal income tax forms 2011 Deductions of pass-through entities are passed through to the partners or shareholders. Federal income tax forms 2011 The partners or shareholders can deduct their share of passed-through deductions for investment expenses as miscellaneous itemized deductions subject to the 2% limit. Federal income tax forms 2011 Example. Federal income tax forms 2011 You are a member of an investment club that is formed solely to invest in securities. Federal income tax forms 2011 The club is treated as a partnership. Federal income tax forms 2011 The partnership's income is solely from taxable dividends, interest, and gains from sales of securities. Federal income tax forms 2011 In this case, you can deduct your share of the partnership's operating expenses as miscellaneous itemized deductions subject to the 2% limit. Federal income tax forms 2011 However, if the investment club partnership has investments that also produce nontaxable income, you cannot deduct your share of the partnership's expenses that produce the nontaxable income. Federal income tax forms 2011 Publicly offered mutual funds. Federal income tax forms 2011   Publicly offered mutual funds do not pass deductions for investment expenses through to shareholders. Federal income tax forms 2011 A mutual fund is “publicly offered” if it is: Continuously offered pursuant to a public offering, Regularly traded on an established securities market, or Held by or for at least 500 persons at all times during the tax year. Federal income tax forms 2011   A publicly offered mutual fund will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing the net amount of dividend income (gross dividends minus investment expenses). Federal income tax forms 2011 This net figure is the amount you report on your return as income. Federal income tax forms 2011 You cannot further deduct investment expenses related to publicly offered mutual funds because they are already included as part of the net income amount. Federal income tax forms 2011 Information returns. Federal income tax forms 2011   You should receive information returns from pass-through entities. Federal income tax forms 2011 Partnerships and S corporations. Federal income tax forms 2011   These entities issue Schedule K-1, which lists the items and amounts you must report, and identifies the tax return schedules and lines to use. Federal income tax forms 2011 Nonpublicly offered mutual funds. Federal income tax forms 2011   These funds will send you a Form 1099-DIV, or a substitute form, showing your share of gross income and investment expenses. Federal income tax forms 2011 You can claim the expenses only as a miscellaneous itemized deduction subject to the 2% limit. Federal income tax forms 2011 Investment Fees and Expenses You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income. Federal income tax forms 2011 Legal Expenses You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax. Federal income tax forms 2011 You can also deduct legal expenses that are: Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business, For tax advice related to a divorce if the bill specifies how much is for tax advice and it is determined in a reasonable way, or To collect taxable alimony. Federal income tax forms 2011 You can deduct expenses of resolving tax issues relating to profit or loss from business (Schedule C or C-EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F) on the appropriate schedule. Federal income tax forms 2011 You deduct expenses of resolving nonbusiness tax issues on Schedule A (Form 1040 or Form 1040NR). Federal income tax forms 2011 See Tax Preparation Fees, earlier. Federal income tax forms 2011 Unlawful discrimination claims. Federal income tax forms 2011   You may be able to deduct, as an adjustment to income on Form 1040, line 36, or Form 1040NR, line 35, rather than as a miscellaneous itemized deduction, attorney fees and court costs for actions settled or decided after October 22, 2004, involving a claim of unlawful discrimination, a claim against the U. Federal income tax forms 2011 S. Federal income tax forms 2011 Government, or a claim made under section 1862(b)(3)(A) of the Social Security Act. Federal income tax forms 2011 However, the amount you can deduct on Form 1040, line 36, or Form 1040NR, line 35, is limited to the amount of the judgment or settlement you are including in income for the tax year. Federal income tax forms 2011 See Publication 525 for more information. Federal income tax forms 2011 Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. Federal income tax forms 2011 If you can reasonably estimate the amount of your loss on money you have on deposit in a financial institution that becomes insolvent or bankrupt, you can generally choose to deduct it in the current year even though its exact amount has not been finally determined. Federal income tax forms 2011 If elected, the casualty loss is subject to certain deduction limitations. Federal income tax forms 2011 The election is made on Form 4684. Federal income tax forms 2011 Once you make this choice, you cannot change it without IRS approval. Federal income tax forms 2011 If none of the deposit is federally insured, you can deduct the loss in either of the following ways. Federal income tax forms 2011 As an ordinary loss (as a miscellaneous itemized deduction subject to the 2% limit). Federal income tax forms 2011 Write the name of the financial institution and “Insolvent Financial Institution” beside the amount on Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9. Federal income tax forms 2011 This deduction is limited to $20,000 ($10,000 if you are married filing separately) for each financial institution, reduced by any expected state insurance proceeds. Federal income tax forms 2011 As a casualty loss. Federal income tax forms 2011 Report it on Form 4684 first and then on Schedule A (Form 1040). Federal income tax forms 2011 See Publication 547 for details. Federal income tax forms 2011 As a nonbusiness bad debt. Federal income tax forms 2011 Report it on Schedule D (Form 1040). Federal income tax forms 2011 If any part of the deposit is federally insured, you can deduct the loss only as a casualty loss. Federal income tax forms 2011 Exception. Federal income tax forms 2011   You cannot make this choice if you are a 1%-or-more-owner or an officer of the financial institution, or are related to such owner or officer. Federal income tax forms 2011 For a definition of “related,” see Deposit in Insolvent or Bankrupt Financial Institution in chapter 4 of Publication 550. Federal income tax forms 2011 Actual loss different from estimated loss. Federal income tax forms 2011   If you make this choice and your actual loss is less than your estimated loss, you must include the excess in income. Federal income tax forms 2011 See Recoveries in Publication 525. Federal income tax forms 2011 If your actual loss is more than your estimated loss, treat the excess loss as explained under Choice not made, next. Federal income tax forms 2011 Choice not made. Federal income tax forms 2011   If you do not make this choice (or if you have an excess actual loss after choosing to deduct your estimated loss), treat your loss (or excess loss) as a nonbusiness bad debt (deductible as a short-term capital loss) in the year its amount is finally determined. Federal income tax forms 2011 See Nonbusiness Bad Debts in chapter 4 of Publication 550. Federal income tax forms 2011 Loss on IRA If you have a loss on your traditional IRA (or Roth IRA) investment, you can deduct the loss as a miscellaneous itemized deduction subject to the 2% limit, but only when all the amounts in all your traditional IRA (or Roth IRA) accounts have been distributed to you and the total distributions are less than your unrecovered basis. Federal income tax forms 2011 For more information, see Publication 590, Individual Retirement Arrangements (IRAs). Federal income tax forms 2011 Repayments of Income If you had to repay an amount that you included in income in an earlier year, you may be able to deduct the amount you repaid. Federal income tax forms 2011 If the amount you had to repay was ordinary income of $3,000 or less, the deduction is subject to the 2% limit. Federal income tax forms 2011 If it was more than $3,000, see Repayments Under Claim of Right under Deductions Not Subject to the 2% Limit, later. Federal income tax forms 2011 Repayments of Social Security Benefits If the total of the amounts in box 5 (net benefits for 2013) of all your Forms SSA-1099, Social Security Benefit Statement, and Forms RRB-1099, Payments By the Railroad Retirement Board, is a negative figure (a figure in parentheses), you may be able to take a miscellaneous itemized deduction subject to the 2% limit. Federal income tax forms 2011 The amount you can deduct is the part of the negative figure that represents an amount you included in gross income in an earlier year. Federal income tax forms 2011 The amount in box 5 of Form SSA-1099 or RRB-1099 is the net amount of your benefits for the year. Federal income tax forms 2011 It will be a negative figure if the amount of benefits you repaid in 2013 (box 4) is more than the gross amount of benefits paid to you in 2013 (box 3). Federal income tax forms 2011 If the deduction is more than $3,000, you will have to use a special computation to figure your tax. Federal income tax forms 2011 See Publication 915, Social Security and Equivalent Railroad Retirement Benefits, for additional information. Federal income tax forms 2011 Safe Deposit Box Rent You can deduct safe deposit box rent if you use the box to store taxable income-producing stocks, bonds, or investment-related papers and documents. Federal income tax forms 2011 You cannot deduct the rent if you use the box only for jewelry, other personal items, or tax-exempt securities. Federal income tax forms 2011 Service Charges on Dividend Reinvestment Plans You can deduct service charges you pay as a subscriber in a dividend reinvestment plan. Federal income tax forms 2011 These service charges include payments for: Holding shares acquired through a plan, Collecting and reinvesting cash dividends, and Keeping individual records and providing detailed statements of accounts. Federal income tax forms 2011 Trustee's Administrative Fees for IRA Trustee's administrative fees that are billed separately and paid by you in connection with your IRA are deductible (if they are ordinary and necessary) as a miscellaneous itemized deduction subject to the 2% limit. Federal income tax forms 2011 Deductions Not Subject to the 2% Limit You can deduct the items listed below as miscellaneous itemized deductions. Federal income tax forms 2011 They are not subject to the 2% limit. Federal income tax forms 2011 Report these items on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14. Federal income tax forms 2011 List of Deductions Amortizable premium on taxable bonds. Federal income tax forms 2011 Casualty and theft losses from income-producing property. Federal income tax forms 2011 Federal estate tax on income in respect of a decedent. Federal income tax forms 2011 Gambling losses up to the amount of gambling winnings. Federal income tax forms 2011 Impairment-related work expenses of persons with disabilities. Federal income tax forms 2011 Loss from other activities from Schedule K-1 (Form 1065-B), box 2. Federal income tax forms 2011 Losses from Ponzi-type investment schemes. Federal income tax forms 2011 Repayments of more than $3,000 under a claim of right. Federal income tax forms 2011 Unrecovered investment in an annuity. Federal income tax forms 2011 Amortizable Premium on Taxable Bonds In general, if the amount you pay for a bond is greater than its stated principal amount, the excess is bond premium. Federal income tax forms 2011 You can elect to amortize the premium on taxable bonds. Federal income tax forms 2011 The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item. Federal income tax forms 2011 Pre-1998 election to amortize bond premium. Federal income tax forms 2011   Generally, if you first elected to amortize bond premium before 1998, the above treatment of the premium does not apply to bonds you acquired before 1988. Federal income tax forms 2011 Bonds acquired after October 22, 1986, and before 1988. Federal income tax forms 2011   The amortization of the premium on these bonds is investment interest expense subject to the investment interest limit, unless you chose to treat it as an offset to interest income on the bond. Federal income tax forms 2011 Bonds acquired before October 23, 1986. Federal income tax forms 2011   The amortization of the premium on these bonds is a miscellaneous itemized deduction not subject to the 2% limit. Federal income tax forms 2011 Deduction for excess premium. Federal income tax forms 2011   On certain bonds (such as bonds that pay a variable rate of interest or that provide for an interest-free period), the amount of bond premium allocable to a period may exceed the amount of stated interest allocable to the period. Federal income tax forms 2011 If this occurs, treat the excess as a miscellaneous itemized deduction that is not subject to the 2% limit. Federal income tax forms 2011 However, the amount deductible is limited to the amount by which your total interest inclusions on the bond in prior periods exceed the total amount you treated as a bond premium deduction on the bond in prior periods. Federal income tax forms 2011 If any of the excess bond premium cannot be deducted because of the limit, this amount is carried forward to the next period and is treated as bond premium allocable to that period. Federal income tax forms 2011    Pre-1998 choice to amortize bond premium. Federal income tax forms 2011 If you made the choice to amortize the premium on taxable bonds before 1998, you can deduct the bond premium amortization that is more than your interest income only for bonds acquired during 1998 and later years. Federal income tax forms 2011 More information. Federal income tax forms 2011    For more information on bond premium, see Bond Premium Amortization in chapter 3 of Publication 550. Federal income tax forms 2011 Casualty and Theft Losses of Income-Producing Property You can deduct a casualty or theft loss as a miscellaneous itemized deduction not subject to the 2% limit if the damaged or stolen property was income-producing property (property held for investment, such as stocks, notes, bonds, gold, silver, vacant lots, and works of art). Federal income tax forms 2011 First report the loss in Section B of Form 4684. Federal income tax forms 2011 You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. Federal income tax forms 2011 To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Federal income tax forms 2011 For more information on casualty and theft losses, see Publication 547. Federal income tax forms 2011 Federal Estate Tax on Income in Respect of a Decedent You can deduct the federal estate tax attributable to income in respect of a decedent that you as a beneficiary include in your gross income. Federal income tax forms 2011 Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent's final income tax return. Federal income tax forms 2011 See Publication 559 for information about figuring the amount of this deduction. Federal income tax forms 2011 Gambling Losses Up to the Amount of Gambling Winnings You must report the full amount of your gambling winnings for the year on Form 1040, line 21. Federal income tax forms 2011 You deduct your gambling losses for the year on Schedule A (Form 1040), line 28. Federal income tax forms 2011 You cannot deduct gambling losses that are more than your winnings. Federal income tax forms 2011 Generally, nonresident aliens cannot deduct gambling losses on Schedule A (Form 1040NR). Federal income tax forms 2011 You cannot reduce your gambling winnings by your gambling losses and report the difference. Federal income tax forms 2011 You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. Federal income tax forms 2011 Therefore, your records should show your winnings separately from your losses. Federal income tax forms 2011 Diary of winnings and losses. Federal income tax forms 2011 You must keep an accurate diary or similar record of your losses and winnings. Federal income tax forms 2011 Your diary should contain at least the following information. Federal income tax forms 2011 The date and type of your specific wager or wagering activity. Federal income tax forms 2011 The name and address or location of the gambling establishment. Federal income tax forms 2011 The names of other persons present with you at the gambling establishment. Federal income tax forms 2011 The amount(s) you won or lost. Federal income tax forms 2011 Proof of winnings and losses. Federal income tax forms 2011   In addition to your diary, you should also have other documentation. Federal income tax forms 2011 You can generally prove your winnings and losses through Form W-2G, Certain Gambling Winnings, Form 5754, Statement by Person(s) Receiving Gambling Winnings, wagering tickets, canceled checks, substitute checks, credit records, bank withdrawals, and statements of actual winnings or payment slips provided to you by the gambling establishment. Federal income tax forms 2011   For specific wagering transactions, you can use the following items to support your winnings and losses. Federal income tax forms 2011    These recordkeeping suggestions are intended as general guidelines to help you establish your winnings and losses. Federal income tax forms 2011 They are not all-inclusive. Federal income tax forms 2011 Your tax liability depends on your particular facts and circumstances. Federal income tax forms 2011 Keno. Federal income tax forms 2011   Copies of the keno tickets you purchased that were validated by the gambling establishment, copies of your casino credit records, and copies of your casino check cashing records. Federal income tax forms 2011 Slot machines. Federal income tax forms 2011   A record of the machine number and all winnings by date and time the machine was played. Federal income tax forms 2011 Table games (twenty-one (blackjack), craps, poker, baccarat, roulette, wheel of fortune, etc. Federal income tax forms 2011 ). Federal income tax forms 2011   The number of the table at which you were playing. Federal income tax forms 2011 Casino credit card data indicating whether the credit was issued in the pit or at the cashier's cage. Federal income tax forms 2011 Bingo. Federal income tax forms 2011   A record of the number of games played, cost of tickets purchased, and amounts collected on winning tickets. Federal income tax forms 2011 Supplemental records include any receipts from the casino, parlor, etc. Federal income tax forms 2011 Racing (horse, harness, dog, etc. Federal income tax forms 2011 ). Federal income tax forms 2011   A record of the races, amounts of wagers, amounts collected on winning tickets, and amounts lost on losing tickets. Federal income tax forms 2011 Supplemental records include unredeemed tickets and payment records from the racetrack. Federal income tax forms 2011 Lotteries. Federal income tax forms 2011   A record of ticket purchases, dates, winnings, and losses. Federal income tax forms 2011 Supplemental records include unredeemed tickets, payment slips, and winnings statements. Federal income tax forms 2011 Impairment-Related Work Expenses If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, you can deduct your impairment-related work expenses. Federal income tax forms 2011 Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and other expenses in connection with your place of work that are necessary for you to be able to work. Federal income tax forms 2011 Example. Federal income tax forms 2011 You are blind. Federal income tax forms 2011 You must use a reader to do your work. Federal income tax forms 2011 You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. Federal income tax forms 2011 The reader's services are only for your work. Federal income tax forms 2011 You can deduct your expenses for the reader as impairment-related work expenses. Federal income tax forms 2011 Self-employed. Federal income tax forms 2011   If you are self-employed, enter your impairment-related work expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. Federal income tax forms 2011 See Impairment-related work expenses. Federal income tax forms 2011 , later under How To Report. Federal income tax forms 2011 Loss From Other Activities From Schedule K-1 (Form 1065-B), Box 2 If the amount reported in Schedule K-1 (Form 1065-B), box 2, is a loss, report it on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14 (only if effectively connected with a U. Federal income tax forms 2011 S. Federal income tax forms 2011 trade or business). Federal income tax forms 2011 It is not subject to the passive activity limitations. Federal income tax forms 2011 Officials Paid on a Fee Basis If you are a fee-basis official, you can claim your expenses in performing services in that job as an adjustment to income rather than as a miscellaneous itemized deduction. Federal income tax forms 2011 See Publication 463 for more information. Federal income tax forms 2011 Performing Artists If you are a qualified performing artist, you can deduct your employee business expenses as an adjustment to income rather than as a miscellaneous itemized deduction. Federal income tax forms 2011 If you are an employee, complete Form 2106 or Form 2106-EZ. Federal income tax forms 2011 See Publication 463 for more information. Federal income tax forms 2011 Losses From Ponzi-type Investment Schemes These losses are deductible as theft losses of income-producing property on your tax return for the year the loss was discovered. Federal income tax forms 2011 You figure the deductible loss in Section B of Form 4684. Federal income tax forms 2011 However, if you qualify to use Revenue Procedure 2009-20 (as modified by Revenue Procedure 2011-58) and you choose to follow the procedures in the guidance, complete Section C of Form 4684 before completing Section B. Federal income tax forms 2011 Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. Federal income tax forms 2011 You do not need to complete Appendix A. Federal income tax forms 2011 See the Form 4684 instructions and Publication 547, Casualties, Disasters, and Thefts, for more information. Federal income tax forms 2011 Repayments Under Claim of Right If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid, or take a credit against your tax. Federal income tax forms 2011 See Repayments in Publication 525 for more information. Federal income tax forms 2011 Unrecovered Investment in Annuity A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment. Federal income tax forms 2011 If the retiree dies before the entire investment is recovered tax free, any unrecovered investment can be deducted on the retiree's final income tax return. Federal income tax forms 2011 See Publication 575, Pension and Annuity Income, for more information about the tax treatment of pensions and annuities. Federal income tax forms 2011 Nondeductible Expenses You cannot deduct the following expenses. Federal income tax forms 2011 List of Nondeductible Expenses Adoption expenses. Federal income tax forms 2011 Broker's commissions. Federal income tax forms 2011 Burial or funeral expenses, including the cost of a cemetery lot. Federal income tax forms 2011 Campaign expenses. Federal income tax forms 2011 Capital expenses. Federal income tax forms 2011 Check-writing fees. Federal income tax forms 2011 Club dues. Federal income tax forms 2011 Commuting expenses. Federal income tax forms 2011 Fees and licenses, such as car licenses, marriage licenses, and dog tags. Federal income tax forms 2011 Fines and penalties, such as parking tickets. Federal income tax forms 2011 Health spa expenses. Federal income tax forms 2011 Hobby losses—but see Hobby Expenses, earlier. Federal income tax forms 2011 Home repairs, insurance, and rent. Federal income tax forms 2011 Home security system. Federal income tax forms 2011 Illegal bribes and kickbacks—see Bribes and kickbacks in chapter 11 of Publication 535. Federal income tax forms 2011 Investment-related seminars. Federal income tax forms 2011 Life insurance premiums paid by the insured. Federal income tax forms 2011 Lobbying expenses. Federal income tax forms 2011 Losses from the sale of your home, furniture, personal car, etc. Federal income tax forms 2011 Lost or misplaced cash or property. Federal income tax forms 2011 Lunches with co-workers. Federal income tax forms 2011 Meals while working late. Federal income tax forms 2011 Medical expenses as business expenses other than medical examinations required by your employer. Federal income tax forms 2011 Personal disability insurance premiums. Federal income tax forms 2011 Personal legal expenses. Federal income tax forms 2011 Personal, living, or family expenses. Federal income tax forms 2011 Political contributions. Federal income tax forms 2011 Professional accreditation fees. Federal income tax forms 2011 Professional reputation, expenses to improve. Federal income tax forms 2011 Relief fund contributions. Federal income tax forms 2011 Residential telephone line. Federal income tax forms 2011 Stockholders' meeting, expenses of attending. Federal income tax forms 2011 Tax-exempt income, expenses of earning or collecting. Federal income tax forms 2011 The value of wages never received or lost vacation time. Federal income tax forms 2011 Travel expenses for another individual. Federal income tax forms 2011 Voluntary unemployment benefit fund contributions. Federal income tax forms 2011 Wristwatches. Federal income tax forms 2011 Adoption Expenses You cannot deduct the expenses of adopting a child but you may be able to take a credit for those expenses. Federal income tax forms 2011 For details, see Form 8839, Qualified Adoption Expenses. Federal income tax forms 2011 Commissions Commissions paid on the purchase of securities are not deductible, either as business or nonbusiness expenses. Federal income tax forms 2011 Instead, these fees must be added to the taxpayer's cost of the securities. Federal income tax forms 2011 Commissions paid on the sale are deductible as business expenses only by dealers. Federal income tax forms 2011 Campaign Expenses You cannot deduct campaign expenses of a candidate for any office, even if the candidate is running for reelection to the office. Federal income tax forms 2011 These include qualification and registration fees for primary elections. Federal income tax forms 2011 Legal fees. Federal income tax forms 2011   You cannot deduct legal fees paid to defend charges that arise from participation in a political campaign. Federal income tax forms 2011 Capital Expenses You cannot currently deduct amounts paid to buy property that has a useful life substantially beyond the tax year or amounts paid to increase the value or prolong the life of property. Federal income tax forms 2011 If you use such property in your work, you may be able to take a depreciation deduction. Federal income tax forms 2011 See Publication 946. Federal income tax forms 2011 If the property is a car used in your work, also see Publication 463. Federal income tax forms 2011 Check-Writing Fees on Personal Account If you have a personal checking account, you cannot deduct fees charged by the bank for the privilege of writing checks, even if the account pays interest. Federal income tax forms 2011 Club Dues Generally, you cannot deduct the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. Federal income tax forms 2011 This includes business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs. Federal income tax forms 2011 You cannot deduct dues paid to an organization if one of its main purposes is to: Conduct entertainment activities for members or their guests, or Provide members or their guests with access to entertainment facilities. Federal income tax forms 2011 Dues paid to airline, hotel, and luncheon clubs are not deductible. Federal income tax forms 2011 Commuting Expenses You cannot deduct commuting expenses (the cost of transportation between your home and your main or regular place of work). Federal income tax forms 2011 If you haul tools, instruments, or other items in your car to and from work, you can deduct only the additional cost of hauling the items, such as the rent on a trailer to carry the items. Federal income tax forms 2011 Fines or Penalties You cannot deduct fines or penalties you pay to a governmental unit for violating a law. Federal income tax forms 2011 This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). Federal income tax forms 2011 Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike. Federal income tax forms 2011 Health Spa Expenses You cannot deduct health spa expenses, even if there is a job requirement to stay in excellent physical condition, such as might be required of a law enforcement officer. Federal income tax forms 2011 Home Security System You cannot deduct the cost of a home security system as a miscellaneous deduction. Federal income tax forms 2011 However, you may be able to claim a deduction for a home security system as a business expense if you have a home office. Federal income tax forms 2011 See Home Office under Unreimbursed Employee Expenses, earlier, and Publication 587. Federal income tax forms 2011 Investment-Related Seminars You cannot deduct any expenses for attending a convention, seminar, or similar meeting for investment purposes. Federal income tax forms 2011 Life Insurance Premiums You cannot deduct premiums you pay on your life insurance. Federal income tax forms 2011 You may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse. Federal income tax forms 2011 See Publication 504, Divorced or Separated Individuals, for information on alimony. Federal income tax forms 2011 Lobbying Expenses You generally cannot deduct amounts paid or incurred for lobbying expenses. Federal income tax forms 2011 These include expenses to: Influence legislation, Participate, or intervene, in any political campaign for, or against, any candidate for public office, Attempt to influence the general public, or segments of the public, about elections, legislative matters, or referendums, or Communicate directly with covered executive branch officials in any attempt to influence the official actions or positions of those officials. Federal income tax forms 2011 Lobbying expenses also include any amounts paid or incurred for research, preparation, planning, or coordination of any of these activities. Federal income tax forms 2011 Covered executive branch official. Federal income tax forms 2011   A covered executive branch official, for the purpose of (4) above, is any of the following officials. Federal income tax forms 2011 The President. Federal income tax forms 2011 The Vice President. Federal income tax forms 2011 Any officer or employee of the White House Office of the Executive Office of the President, and the two most senior level officers of each of the other agencies in the Executive Office. Federal income tax forms 2011 Any individual serving in a position in Level I of the Executive Schedule under section 5312 of Title 5, United States Code, any other individual designated by the President as having Cabinet-level status, and any immediate deputy of one of these individuals. Federal income tax forms 2011 Dues used for lobbying. Federal income tax forms 2011   If a tax-exempt organization notifies you that part of the dues or other amounts you pay to the organization are used to pay nondeductible lobbying expenses, you cannot deduct that part. Federal income tax forms 2011 Exceptions. Federal income tax forms 2011   You can deduct certain lobbying expenses if they are ordinary and necessary expenses of carrying on your trade or business. Federal income tax forms 2011 You can deduct expenses for attempting to influence the legislation of any local council or similar governing body (local legislation). Federal income tax forms 2011 An Indian tribal government is considered a local council or similar governing body. Federal income tax forms 2011 You can deduct in-house expenses for influencing legislation or communicating directly with a covered executive branch official if the expenses for the tax year are not more than $2,000 (not counting overhead expenses). Federal income tax forms 2011 If you are a professional lobbyist, you can deduct the expenses you incur in the trade or business of lobbying on behalf of another person. Federal income tax forms 2011 Payments by the other person to you for lobbying activities cannot be deducted. Federal income tax forms 2011 Lost or Mislaid Cash or Property You cannot deduct a loss based on the mere disappearance of money or property. Federal income tax forms 2011 However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. Federal income tax forms 2011 See Publication 547. Federal income tax forms 2011 Example. Federal income tax forms 2011 A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Federal income tax forms 2011 The diamond falls from the ring and is never found. Federal income tax forms 2011 The loss of the diamond is a casualty. Federal income tax forms 2011 Lunches With Co-workers You cannot deduct the expenses of lunches with co-workers, except while traveling away from home on business. Federal income tax forms 2011 See Publication 463 for information on deductible expenses while traveling away from home. Federal income tax forms 2011 Meals While Working Late You cannot deduct the cost of meals while working late. Federal income tax forms 2011 However, you may be able to claim a deduction if the cost of the meals is a deductible entertainment expense, or if you are traveling away from home. Federal income tax forms 2011 See Publication 463 for information on deductible entertainment expenses and expenses while traveling away from home. Federal income tax forms 2011 Personal Legal Expenses You cannot deduct personal legal expenses such as those for the following. Federal income tax forms 2011 Custody of children. Federal income tax forms 2011 Breach of promise to marry suit. Federal income tax forms 2011 Civil or criminal charges resulting from a personal relationship. Federal income tax forms 2011 Damages for personal injury (except certain whistleblower claims and unlawful discrimination claims). Federal income tax forms 2011 For more information about unlawful discrimination claims, see Deductions Subject to the 2% Limit, earlier. Federal income tax forms 2011 Preparation of a title (or defense or perfection of a title). Federal income tax forms 2011 Preparation of a will. Federal income tax forms 2011 Property claims or property settlement in a divorce. Federal income tax forms 2011 You cannot deduct these expenses even if a result of the legal proceeding is the loss of income-producing property. Federal income tax forms 2011 Political Contributions You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. Federal income tax forms 2011 Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible. Federal income tax forms 2011 Professional Accreditation Fees You cannot deduct professional accreditation fees such as the following. Federal income tax forms 2011 Accounting certificate fees paid for the initial right to practice accounting. Federal income tax forms 2011 Bar exam fees and incidental expenses in securing initial admission to the bar. Federal income tax forms 2011 Medical and dental license fees paid to get initial licensing. Federal income tax forms 2011 Professional Reputation You cannot deduct expenses of radio and TV appearances to increase your personal prestige or establish your professional reputation. Federal income tax forms 2011 Relief Fund Contributions You cannot deduct contributions paid to a private plan that pays benefits to any covered employee who cannot work because of any injury or illness not related to the job. Federal income tax forms 2011 Residential Telephone Service You cannot deduct any charge (including taxes) for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business. Federal income tax forms 2011 Stockholders' Meetings You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you own stock but have no other interest. Federal income tax forms 2011 You cannot deduct these expenses even if you are attending the meeting to get information that would be useful in making further investments. Federal income tax forms 2011 Tax-Exempt Income Expenses You cannot deduct expenses to produce tax-exempt income. Federal income tax forms 2011 You cannot deduct interest on a debt incurred or continued to buy or carry tax-exempt securities. Federal income tax forms 2011 If you have expenses to p
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The Federal Income Tax Forms 2011

Federal income tax forms 2011 Publication 561 - Main Contents Table of Contents What Is Fair Market Value (FMV)?Factors. Federal income tax forms 2011 Stock. Federal income tax forms 2011 Options. Federal income tax forms 2011 Determining Fair Market Value Problems in Determining Fair Market Value Valuation of Various Kinds of PropertyHousehold Goods Used Clothing Jewelry and Gems Paintings, Antiques, and Other Objects of Art Collections Cars, Boats, and Aircraft Inventory Patents Stocks and Bonds Real Estate Interest in a Business Annuities, Interests for Life or Terms of Years, Remainders, and Reversions Certain Life Insurance and Annuity Contracts Partial Interest in Property Not in Trust AppraisalsDeductions of More Than $5,000 Deductions of More Than $500,000 Qualified Appraisal Form 8283 Internal Revenue Service Review of Appraisals Penalty How To Get Tax HelpLow income tax clinics (LITCs). Federal income tax forms 2011 What Is Fair Market Value (FMV)? To figure how much you may deduct for property that you contribute, you must first determine its fair market value on the date of the contribution. Federal income tax forms 2011 Fair market value. Federal income tax forms 2011   Fair market value (FMV) is the price that property would sell for on the open market. Federal income tax forms 2011 It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. Federal income tax forms 2011 If you put a restriction on the use of property you donate, the FMV must reflect that restriction. Federal income tax forms 2011 Example 1. Federal income tax forms 2011 If you give used clothing to the Salvation Army, the FMV would be the price that typical buyers actually pay for clothing of this age, condition, style, and use. Federal income tax forms 2011 Usually, such items are worth far less than what you paid for them. Federal income tax forms 2011 Example 2. Federal income tax forms 2011 If you donate land and restrict its use to agricultural purposes, you must value the land at its value for agricultural purposes, even though it would have a higher FMV if it were not restricted. Federal income tax forms 2011 Factors. Federal income tax forms 2011   In making and supporting the valuation of property, all factors affecting value are relevant and must be considered. Federal income tax forms 2011 These include: The cost or selling price of the item, Sales of comparable properties, Replacement cost, and Opinions of experts. Federal income tax forms 2011   These factors are discussed later. Federal income tax forms 2011 Also, see Table 1 for a summary of questions to ask as you consider each factor. Federal income tax forms 2011 Date of contribution. Federal income tax forms 2011   Ordinarily, the date of a contribution is the date that the transfer of the property takes place. Federal income tax forms 2011 Stock. Federal income tax forms 2011   If you deliver, without any conditions, a properly endorsed stock certificate to a qualified organization or to an agent of the organization, the date of the contribution is the date of delivery. Federal income tax forms 2011 If the certificate is mailed and received through the regular mail, it is the date of mailing. Federal income tax forms 2011 If you deliver the certificate to a bank or broker acting as your agent or to the issuing corporation or its agent, for transfer into the name of the organization, the date of the contribution is the date the stock is transferred on the books of the corporation. Federal income tax forms 2011 Options. Federal income tax forms 2011   If you grant an option to a qualified organization to buy real property, you have not made a charitable contribution until the organization exercises the option. Federal income tax forms 2011 The amount of the contribution is the FMV of the property on the date the option is exercised minus the exercise price. Federal income tax forms 2011 Example. Federal income tax forms 2011 You grant an option to a local university, which is a qualified organization, to buy real property. Federal income tax forms 2011 Under the option, the university could buy the property at any time during a 2-year period for $40,000. Federal income tax forms 2011 The FMV of the property on the date the option is granted is $50,000. Federal income tax forms 2011 In the following tax year, the university exercises the option. Federal income tax forms 2011 The FMV of the property on the date the option is exercised is $55,000. Federal income tax forms 2011 Therefore, you have made a charitable contribution of $15,000 ($55,000, the FMV, minus $40,000, the exercise price) in the tax year the option is exercised. Federal income tax forms 2011 Determining Fair Market Value Determining the value of donated property would be a simple matter if you could rely only on fixed formulas, rules, or methods. Federal income tax forms 2011 Usually it is not that simple. Federal income tax forms 2011 Using such formulas, etc. Federal income tax forms 2011 , seldom results in an acceptable determination of FMV. Federal income tax forms 2011 There is no single formula that always applies when determining the value of property. Federal income tax forms 2011 This is not to say that a valuation is only guesswork. Federal income tax forms 2011 You must consider all the facts and circumstances connected with the property, such as its desirability, use, and scarcity. Federal income tax forms 2011 For example, donated furniture should not be evaluated at some fixed rate such as 15% of the cost of new replacement furniture. Federal income tax forms 2011 When the furniture is contributed, it may be out of style or in poor condition, therefore having little or no market value. Federal income tax forms 2011 On the other hand, it may be an antique, the value of which could not be determined by using any formula. Federal income tax forms 2011 Cost or Selling Price of the Donated Property The cost of the property to you or the actual selling price received by the qualified organization may be the best indication of its FMV. Federal income tax forms 2011 However, because conditions in the market change, the cost or selling price of property may have less weight if the property was not bought or sold reasonably close to the date of contribution. Federal income tax forms 2011 The cost or selling price is a good indication of the property's value if: The purchase or sale took place close to the valuation date in an open market, The purchase or sale was at “arm's-length,” The buyer and seller knew all relevant facts, The buyer and seller did not have to act, and The market did not change between the date of purchase or sale and the valuation date. Federal income tax forms 2011 Example. Federal income tax forms 2011 Tom Morgan, who is not a dealer in gems, bought an assortment of gems for $5,000 from a promoter. Federal income tax forms 2011 The promoter claimed that the price was “wholesale” even though he and other dealers made similar sales at similar prices to other persons who were not dealers. Federal income tax forms 2011 The promoter said that if Tom kept the gems for more than 1 year and then gave them to charity, Tom could claim a charitable deduction of $15,000, which, according to the promoter, would be the value of the gems at the time of contribution. Federal income tax forms 2011 Tom gave the gems to a qualified charity 13 months after buying them. Federal income tax forms 2011 The selling price for these gems had not changed from the date of purchase to the date he donated them to charity. Federal income tax forms 2011 The best evidence of FMV depends on actual transactions and not on some artificial estimate. Federal income tax forms 2011 The $5,000 charged Tom and others is, therefore, the best evidence of the maximum FMV of the gems. Federal income tax forms 2011 Terms of the purchase or sale. Federal income tax forms 2011   The terms of the purchase or sale should be considered in determining FMV if they influenced the price. Federal income tax forms 2011 These terms include any restrictions, understandings, or covenants limiting the use or disposition of the property. Federal income tax forms 2011 Rate of increase or decrease in value. Federal income tax forms 2011   Unless you can show that there were unusual circumstances, it is assumed that the increase or decrease in the value of your donated property from your cost has been at a reasonable rate. Federal income tax forms 2011 For time adjustments, an appraiser may consider published price indexes for information on general price trends, building costs, commodity costs, securities, and works of art sold at auction in arm's-length sales. Federal income tax forms 2011 Example. Federal income tax forms 2011 Bill Brown bought a painting for $10,000. Federal income tax forms 2011 Thirteen months later he gave it to an art museum, claiming a charitable deduction of $15,000 on his tax return. Federal income tax forms 2011 The appraisal of the painting should include information showing that there were unusual circumstances that justify a 50% increase in value for the 13 months Bill held the property. Federal income tax forms 2011 Arm's-length offer. Federal income tax forms 2011   An arm's-length offer to buy the property close to the valuation date may help to prove its value if the person making the offer was willing and able to complete the transaction. Federal income tax forms 2011 To rely on an offer, you should be able to show proof of the offer and the specific amount to be paid. Federal income tax forms 2011 Offers to buy property other than the donated item will help to determine value if the other property is reasonably similar to the donated property. Federal income tax forms 2011 Sales of Comparable Properties The sales prices of properties similar to the donated property are often important in determining the FMV. Federal income tax forms 2011 The weight to be given to each sale depends on the following. Federal income tax forms 2011 The degree of similarity between the property sold and the donated property. Federal income tax forms 2011 The time of the sale—whether it was close to the valuation date. Federal income tax forms 2011 The circumstances of the sale—whether it was at arm's-length with a knowledgeable buyer and seller, with neither having to act. Federal income tax forms 2011 The conditions of the market in which the sale was made—whether unusually inflated or deflated. Federal income tax forms 2011 The comparable sales method of valuing real estate is explained later under Valuation of Various Kinds of Property. Federal income tax forms 2011 Example 1. Federal income tax forms 2011 Mary Black, who is not a book dealer, paid a promoter $10,000 for 500 copies of a single edition of a modern translation of the Bible. Federal income tax forms 2011 The promoter had claimed that the price was considerably less than the “retail” price, and gave her a statement that the books had a total retail value of $30,000. Federal income tax forms 2011 The promoter advised her that if she kept the Bibles for more than 1 year and then gave them to a qualified organization, she could claim a charitable deduction for the “retail” price of $30,000. Federal income tax forms 2011 Thirteen months later she gave all the Bibles to a church that she selected from a list provided by the promoter. Federal income tax forms 2011 At the time of her donation, wholesale dealers were selling similar quantities of Bibles to the general public for $10,000. Federal income tax forms 2011 The FMV of the Bibles is $10,000, the price at which similar quantities of Bibles were being sold to others at the time of the contribution. Federal income tax forms 2011 Example 2. Federal income tax forms 2011 The facts are the same as in Example 1, except that the promoter gave Mary Black a second option. Federal income tax forms 2011 The promoter said that if Mary wanted a charitable deduction within 1 year of the purchase, she could buy the 500 Bibles at the “retail” price of $30,000, paying only $10,000 in cash and giving a promissory note for the remaining $20,000. Federal income tax forms 2011 The principal and interest on the note would not be due for 12 years. Federal income tax forms 2011 According to the promoter, Mary could then, within 1 year of the purchase, give the Bibles to a qualified organization and claim the full $30,000 retail price as a charitable contribution. Federal income tax forms 2011 She purchased the Bibles under the second option and, 3 months later, gave them to a church, which will use the books for church purposes. Federal income tax forms 2011 At the time of the gift, the promoter was selling similar lots of Bibles for either $10,000 or $30,000. Federal income tax forms 2011 The difference between the two prices was solely at the discretion of the buyer. Federal income tax forms 2011 The promoter was a willing seller for $10,000. Federal income tax forms 2011 Therefore, the value of Mary's contribution of the Bibles is $10,000, the amount at which similar lots of Bibles could be purchased from the promoter by members of the general public. Federal income tax forms 2011 Replacement Cost The cost of buying, building, or manufacturing property similar to the donated item should be considered in determining FMV. Federal income tax forms 2011 However, there must be a reasonable relationship between the replacement cost and the FMV. Federal income tax forms 2011 The replacement cost is the amount it would cost to replace the donated item on the valuation date. Federal income tax forms 2011 Often there is no relationship between the replacement cost and the FMV. Federal income tax forms 2011 If the supply of the donated property is more or less than the demand for it, the replacement cost becomes less important. Federal income tax forms 2011 To determine the replacement cost of the donated property, find the “estimated replacement cost new. Federal income tax forms 2011 ” Then subtract from this figure an amount for depreciation due to the physical condition and obsolescence of the donated property. Federal income tax forms 2011 You should be able to show the relationship between the depreciated replacement cost and the FMV, as well as how you arrived at the “estimated replacement cost new. Federal income tax forms 2011 ” Opinions of Experts Generally, the weight given to an expert's opinion on matters such as the authenticity of a coin or a work of art, or the most profitable and best use of a piece of real estate, depends on the knowledge and competence of the expert and the thoroughness with which the opinion is supported by experience and facts. Federal income tax forms 2011 For an expert's opinion to deserve much weight, the facts must support the opinion. Federal income tax forms 2011 For additional information, see Appraisals, later. Federal income tax forms 2011 Table 1. Federal income tax forms 2011 Factors That Affect FMV IF the factor you are considering is. Federal income tax forms 2011 . Federal income tax forms 2011 . Federal income tax forms 2011 THEN you should ask these questions. Federal income tax forms 2011 . Federal income tax forms 2011 . Federal income tax forms 2011     cost or selling price Was the purchase or sale of the property reasonably close to the date of contribution? Was any increase or decrease in value, as compared to your cost, at a reasonable rate? Do the terms of purchase or sale limit what can be done with the property? Was there an arm's-length offer to buy the property close to the valuation date?     sales of comparable properties How similar is the property sold to the property donated? How close is the date of sale to the valuation date? Was the sale at arm's-length? What was the condition of the market at the time of sale?     replacement cost What would it cost to replace the donated property? Is there a reasonable relationship between replacement cost and FMV? Is the supply of the donated property more or less than the demand for it?     opinions of experts Is the expert knowledgeable and competent? Is the opinion thorough and supported by facts and experience? Problems in Determining Fair Market Value There are a number of problems in determining the FMV of donated property. Federal income tax forms 2011 Unusual Market Conditions The sale price of the property itself in an arm's-length transaction in an open market is often the best evidence of its value. Federal income tax forms 2011 When you rely on sales of comparable property, the sales must have been made in an open market. Federal income tax forms 2011 If those sales were made in a market that was artificially supported or stimulated so as not to be truly representative, the prices at which the sales were made will not indicate the FMV. Federal income tax forms 2011 For example, liquidation sale prices usually do not indicate the FMV. Federal income tax forms 2011 Also, sales of stock under unusual circumstances, such as sales of small lots, forced sales, and sales in a restricted market, may not represent the FMV. Federal income tax forms 2011 Selection of Comparable Sales Using sales of comparable property is an important method for determining the FMV of donated property. Federal income tax forms 2011 However, the amount of weight given to a sale depends on the degree of similarity between the comparable and the donated properties. Federal income tax forms 2011 The degree of similarity must be close enough so that this selling price would have been given consideration by reasonably well-informed buyers or sellers of the property. Federal income tax forms 2011 Example. Federal income tax forms 2011 You give a rare, old book to your former college. Federal income tax forms 2011 The book is a third edition and is in poor condition because of a missing back cover. Federal income tax forms 2011 You discover that there was a sale for $300, near the valuation date, of a first edition of the book that was in good condition. Federal income tax forms 2011 Although the contents are the same, the books are not at all similar because of the different editions and their physical condition. Federal income tax forms 2011 Little consideration would be given to the selling price of the $300 property by knowledgeable buyers or sellers. Federal income tax forms 2011 Future Events You may not consider unexpected events happening after your donation of property in making the valuation. Federal income tax forms 2011 You may consider only the facts known at the time of the gift, and those that could be reasonably expected at the time of the gift. Federal income tax forms 2011 Example. Federal income tax forms 2011 You give farmland to a qualified charity. Federal income tax forms 2011 The transfer provides that your mother will have the right to all income and full use of the property for her life. Federal income tax forms 2011 Even though your mother dies 1 week after the transfer, the value of the property on the date it is given is its present value, subject to the life interest as estimated from actuarial tables. Federal income tax forms 2011 You may not take a higher deduction because the charity received full use and possession of the land only 1 week after the transfer. Federal income tax forms 2011 Using Past Events to Predict the Future A common error is to rely too much on past events that do not fairly reflect the probable future earnings and FMV. Federal income tax forms 2011 Example. Federal income tax forms 2011 You give all your rights in a successful patent to your favorite charity. Federal income tax forms 2011 Your records show that before the valuation date there were three stages in the patent's history of earnings. Federal income tax forms 2011 First, there was rapid growth in earnings when the invention was introduced. Federal income tax forms 2011 Then, there was a period of high earnings when the invention was being exploited. Federal income tax forms 2011 Finally, there was a decline in earnings when competing inventions were introduced. Federal income tax forms 2011 The entire history of earnings may be relevant in estimating the future earnings. Federal income tax forms 2011 However, the appraiser must not rely too much on the stage of rapid growth in earnings, or of high earnings. Federal income tax forms 2011 The market conditions at those times do not represent the condition of the market at the valuation date. Federal income tax forms 2011 What is most significant is the trend of decline in earnings up to the valuation date. Federal income tax forms 2011 For more information about donations of patents, see Patents, later. Federal income tax forms 2011 Valuation of Various Kinds of Property This section contains information on determining the FMV of ordinary kinds of donated property. Federal income tax forms 2011 For information on appraisals, see Appraisals, later. Federal income tax forms 2011 Household Goods The FMV of used household goods, such as furniture, appliances, and linens, is usually much lower than the price paid when new. Federal income tax forms 2011 Such used property may have little or no market value because of its worn condition. Federal income tax forms 2011 It may be out of style or no longer useful. Federal income tax forms 2011 You cannot take a deduction for household goods donated after August 17, 2006, unless they are in good used condition or better. Federal income tax forms 2011 A household good that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal. Federal income tax forms 2011 See Deduction over $500 for certain clothing or household items, later. Federal income tax forms 2011 If the property is valuable because it is old or unique, see the discussion under Paintings, Antiques, and Other Objects of Art. Federal income tax forms 2011 Used Clothing Used clothing and other personal items are usually worth far less than the price you paid for them. Federal income tax forms 2011 Valuation of items of clothing does not lend itself to fixed formulas or methods. Federal income tax forms 2011 The price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops, is an indication of the value. Federal income tax forms 2011 You cannot take a deduction for clothing donated after August 17, 2006, unless it is in good used condition or better. Federal income tax forms 2011 An item of clothing that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal. Federal income tax forms 2011 See Deduction over $500 for certain clothing or household items, later. Federal income tax forms 2011 For valuable furs or very expensive gowns, a Form 8283 may have to be sent with your tax return. Federal income tax forms 2011 Jewelry and Gems Jewelry and gems are of such a specialized nature that it is almost always necessary to get an appraisal by a specialized jewelry appraiser. Federal income tax forms 2011 The appraisal should describe, among other things, the style of the jewelry, the cut and setting of the gem, and whether it is now in fashion. Federal income tax forms 2011 If not in fashion, the possibility of having the property redesigned, recut, or reset should be reported in the appraisal. Federal income tax forms 2011 The stone's coloring, weight, cut, brilliance, and flaws should be reported and analyzed. Federal income tax forms 2011 Sentimental personal value has no effect on FMV. Federal income tax forms 2011 But if the jewelry was owned by a famous person, its value might increase. Federal income tax forms 2011 Paintings, Antiques, and Other Objects of Art Your deduction for contributions of paintings, antiques, and other objects of art, should be supported by a written appraisal from a qualified and reputable source, unless the deduction is $5,000 or less. Federal income tax forms 2011 Examples of information that should be included in appraisals of art objects—paintings in particular—are found later under Qualified Appraisal. Federal income tax forms 2011 Art valued at $20,000 or more. Federal income tax forms 2011   If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the signed appraisal to your return. Federal income tax forms 2011 For individual objects valued at $20,000 or more, a photograph of a size and quality fully showing the object, preferably an 8 x 10 inch color photograph or a color transparency no smaller than 4 x 5 inches, must be provided upon request. Federal income tax forms 2011 Art valued at $50,000 or more. Federal income tax forms 2011   If you donate an item of art that has been appraised at $50,000 or more, you can request a Statement of Value for that item from the IRS. Federal income tax forms 2011 You must request the statement before filing the tax return that reports the donation. Federal income tax forms 2011 Your request must include the following. Federal income tax forms 2011 A copy of a qualified appraisal of the item. Federal income tax forms 2011 See Qualified Appraisal, later. Federal income tax forms 2011 A $2,500 check or money order payable to the Internal Revenue Service for the user fee that applies to your request regarding one, two, or three items of art. Federal income tax forms 2011 Add $250 for each item in excess of three. Federal income tax forms 2011 A completed Form 8283, Section B. Federal income tax forms 2011 The location of the IRS territory that has examination responsibility for your return. Federal income tax forms 2011 If your request lacks essential information, you will be notified and given 30 days to provide the missing information. Federal income tax forms 2011   Send your request to: Internal Revenue Service Attention: Art Appraisal (C:AP:ART) P. Federal income tax forms 2011 O. Federal income tax forms 2011 Box 27720 McPherson Station Washington, DC 20038 Refunds. Federal income tax forms 2011   You can withdraw your request for a Statement of Value at any time before it is issued. Federal income tax forms 2011 However, the IRS will not refund the user fee if you do. Federal income tax forms 2011   If the IRS declines to issue a Statement of Value in the interest of efficient tax administration, the IRS will refund the user fee. Federal income tax forms 2011 Authenticity. Federal income tax forms 2011   The authenticity of the donated art must be determined by the appraiser. Federal income tax forms 2011 Physical condition. Federal income tax forms 2011   Important items in the valuation of antiques and art are physical condition and extent of restoration. Federal income tax forms 2011 These have a significant effect on the value and must be fully reported in an appraisal. Federal income tax forms 2011 An antique in damaged condition, or lacking the “original brasses,” may be worth much less than a similar piece in excellent condition. Federal income tax forms 2011 Art appraisers. Federal income tax forms 2011   More weight will usually be given to an appraisal prepared by an individual specializing in the kind and price range of the art being appraised. Federal income tax forms 2011 Certain art dealers or appraisers specialize, for example, in old masters, modern art, bronze sculpture, etc. Federal income tax forms 2011 Their opinions on the authenticity and desirability of such art would usually be given more weight than the opinions of more generalized art dealers or appraisers. Federal income tax forms 2011 They can report more recent comparable sales to support their opinion. Federal income tax forms 2011   To identify and locate experts on unique, specialized items or collections, you may wish to use the current Official Museum Directory of the American Association of Museums. Federal income tax forms 2011 It lists museums both by state and by category. Federal income tax forms 2011   To help you locate a qualified appraiser for your donation, you may wish to ask an art historian at a nearby college or the director or curator of a local museum. Federal income tax forms 2011 The Yellow Pages often list specialized art and antique dealers, auctioneers, and art appraisers. Federal income tax forms 2011 You may be able to find a qualified appraiser on the Internet. Federal income tax forms 2011 You may also contact associations of dealers for guidance. Federal income tax forms 2011 Collections Since many kinds of hobby collections may be the subject of a charitable donation, it is not possible to discuss all of the possible collectibles in this publication. Federal income tax forms 2011 Most common are rare books, autographs, sports memorabilia, dolls, manuscripts, stamps, coins, guns, phonograph records, and natural history items. Federal income tax forms 2011 Many of the elements of valuation that apply to paintings and other objects of art, discussed earlier, also apply to miscellaneous collections. Federal income tax forms 2011 Reference material. Federal income tax forms 2011   Publications available to help you determine the value of many kinds of collections include catalogs, dealers' price lists, and specialized hobby periodicals. Federal income tax forms 2011 When using one of these price guides, you must use the current edition at the date of contribution. Federal income tax forms 2011 However, these sources are not always reliable indicators of FMV and should be supported by other evidence. Federal income tax forms 2011   For example, a dealer may sell an item for much less than is shown on a price list, particularly after the item has remained unsold for a long time. Federal income tax forms 2011 The price an item sold for in an auction may have been the result of a rigged sale or a mere bidding duel. Federal income tax forms 2011 The appraiser must analyze the reference material, and recognize and make adjustments for misleading entries. Federal income tax forms 2011 If you are donating a valuable collection, you should get an appraisal. Federal income tax forms 2011 If your donation appears to be of little value, you may be able to make a satisfactory valuation using reference materials available at a state, city, college, or museum library. Federal income tax forms 2011 Stamp collections. Federal income tax forms 2011   Most libraries have catalogs or other books that report the publisher's estimate of values. Federal income tax forms 2011 Generally, two price levels are shown for each stamp: the price postmarked and the price not postmarked. Federal income tax forms 2011 Stamp dealers generally know the value of their merchandise and are able to prepare satisfactory appraisals of valuable collections. Federal income tax forms 2011 Coin collections. Federal income tax forms 2011   Many catalogs and other reference materials show the writer's or publisher's opinion of the value of coins on or near the date of the publication. Federal income tax forms 2011 Like many other collectors' items, the value of a coin depends on the demand for it, its age, and its rarity. Federal income tax forms 2011 Another important factor is the coin's condition. Federal income tax forms 2011 For example, there is a great difference in the value of a coin that is in mint condition and a similar coin that is only in good condition. Federal income tax forms 2011   Catalogs usually establish a category for coins, based on their physical condition—mint or uncirculated, extremely fine, very fine, fine, very good, good, fair, or poor—with a different valuation for each category. Federal income tax forms 2011 Books. Federal income tax forms 2011   The value of books is usually determined by selecting comparable sales and adjusting the prices according to the differences between the comparable sales and the item being evaluated. Federal income tax forms 2011 This is difficult to do and, except for a collection of little value, should be done by a specialized appraiser. Federal income tax forms 2011 Within the general category of literary property, there are dealers who specialize in certain areas, such as Americana, foreign imports, Bibles, and scientific books. Federal income tax forms 2011 Modest value of collection. Federal income tax forms 2011   If the collection you are donating is of modest value, not requiring a written appraisal, the following information may help you in determining the FMV. Federal income tax forms 2011   A book that is very old, or very rare, is not necessarily valuable. Federal income tax forms 2011 There are many books that are very old or rare, but that have little or no market value. Federal income tax forms 2011 Condition of book. Federal income tax forms 2011   The condition of a book may have a great influence on its value. Federal income tax forms 2011 Collectors are interested in items that are in fine, or at least good, condition. Federal income tax forms 2011 When a book has a missing page, a loose binding, tears, stains, or is otherwise in poor condition, its value is greatly lowered. Federal income tax forms 2011 Other factors. Federal income tax forms 2011   Some other factors in the valuation of a book are the kind of binding (leather, cloth, paper), page edges, and illustrations (drawings and photographs). Federal income tax forms 2011 Collectors usually want first editions of books. Federal income tax forms 2011 However, because of changes or additions, other editions are sometimes worth as much as, or more than, the first edition. Federal income tax forms 2011 Manuscripts, autographs, diaries, and similar items. Federal income tax forms 2011   When these items are handwritten, or at least signed by famous people, they are often in demand and are valuable. Federal income tax forms 2011 The writings of unknowns also may be of value if they are of unusual historical or literary importance. Federal income tax forms 2011 Determining the value of such material is difficult. Federal income tax forms 2011 For example, there may be a great difference in value between two diaries that were kept by a famous person—one kept during childhood and the other during a later period in his or her life. Federal income tax forms 2011 The appraiser determines a value in these cases by applying knowledge and judgment to such factors as comparable sales and conditions. Federal income tax forms 2011 Signatures. Federal income tax forms 2011   Signatures, or sets of signatures, that were cut from letters or other papers usually have little or no value. Federal income tax forms 2011 But complete sets of the signatures of U. Federal income tax forms 2011 S. Federal income tax forms 2011 presidents are in demand. Federal income tax forms 2011 Cars, Boats, and Aircraft If you donate a car, a boat, or an aircraft to a charitable organization, its FMV must be determined. Federal income tax forms 2011 Certain commercial firms and trade organizations publish monthly or seasonal guides for different regions of the country, containing complete dealer sale prices or dealer average prices for recent model years. Federal income tax forms 2011 Prices are reported for each make, model, and year. Federal income tax forms 2011 These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. Federal income tax forms 2011 The prices are not “official,” and these publications are not considered an appraisal of any specific donated property. Federal income tax forms 2011 But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area. Federal income tax forms 2011 These publications are sometimes available from public libraries or at a bank, credit union, or finance company. Federal income tax forms 2011 You can also find pricing information about used cars on the Internet. Federal income tax forms 2011 An acceptable measure of the FMV of a donated car, boat, or airplane is an amount not in excess of the price listed in a used vehicle pricing guide for a private party sale, not the dealer retail value, of a similar vehicle. Federal income tax forms 2011 However, the FMV may be less than that amount if the vehicle has engine trouble, body damage, high mileage, or any type of excessive wear. Federal income tax forms 2011 The FMV of a donated vehicle is the same as the price listed in a used vehicle pricing guide for a private party sale only if the guide lists a sales price for a vehicle that is the same make, model, and year, sold in the same area, in the same condition, with the same or similar options or accessories, and with the same or similar warranties as the donated vehicle. Federal income tax forms 2011 Example. Federal income tax forms 2011 You donate a used car in poor condition to a local high school for use by students studying car repair. Federal income tax forms 2011 A used car guide shows the dealer retail value for this type of car in poor condition is $1,600. Federal income tax forms 2011 However, the guide shows the price for a private party sale of the car is only $750. Federal income tax forms 2011 The FMV of the car is considered to be no more than $750. Federal income tax forms 2011 Boats. Federal income tax forms 2011   Except for inexpensive small boats, the valuation of boats should be based on an appraisal by a marine surveyor because the physical condition is so critical to the value. Federal income tax forms 2011 More information. Federal income tax forms 2011   Your deduction for a donated car, boat, or airplane generally is limited to the gross proceeds from its sale by the qualified organization. Federal income tax forms 2011 This rule applies if the claimed value of the donated vehicle is more than $500. Federal income tax forms 2011 In certain cases, you can deduct the vehicle's FMV. Federal income tax forms 2011 For details, see Publication 526. Federal income tax forms 2011 Inventory If you donate any inventory item to a charitable organization, the amount of your deductible contribution generally is the FMV of the item, minus any gain you would have realized if you had sold the item at its FMV on the date of the gift. Federal income tax forms 2011 For more information, see Publication 526. Federal income tax forms 2011 Patents To determine the FMV of a patent, you must take into account, among other factors: Whether the patented technology has been made obsolete by other technology; Any restrictions on the donee's use of, or ability to transfer, the patented technology; and The length of time remaining before the patent expires. Federal income tax forms 2011 However, your deduction for a donation of a patent or other intellectual property is its FMV, minus any gain you would have realized if you had sold the property at its FMV on the date of the gift. Federal income tax forms 2011 Generally, this means your deduction is the lesser of the property's FMV or its basis. Federal income tax forms 2011 For details, see Publication 526. Federal income tax forms 2011 Stocks and Bonds The value of stocks and bonds is the FMV of a share or bond on the valuation date. Federal income tax forms 2011 See Date of contribution, earlier, under What Is Fair Market Value (FMV). Federal income tax forms 2011 Selling prices on valuation date. Federal income tax forms 2011   If there is an active market for the contributed stocks or bonds on a stock exchange, in an over-the-counter market, or elsewhere, the FMV of each share or bond is the average price between the highest and lowest quoted selling prices on the valuation date. Federal income tax forms 2011 For example, if the highest selling price for a share was $11, and the lowest $9, the average price is $10. Federal income tax forms 2011 You get the average price by adding $11 and $9 and dividing the sum by 2. Federal income tax forms 2011 No sales on valuation date. Federal income tax forms 2011   If there were no sales on the valuation date, but there were sales within a reasonable period before and after the valuation date, you determine FMV by taking the average price between the highest and lowest sales prices on the nearest date before and on the nearest date after the valuation date. Federal income tax forms 2011 Then you weight these averages in inverse order by the respective number of trading days between the selling dates and the valuation date. Federal income tax forms 2011 Example. Federal income tax forms 2011   On the day you gave stock to a qualified organization, there were no sales of the stock. Federal income tax forms 2011 Sales of the stock nearest the valuation date took place two trading days before the valuation date at an average selling price of $10 and three trading days after the valuation date at an average selling price of $15. Federal income tax forms 2011 The FMV on the valuation date was $12, figured as follows: [(3 x $10) + (2 x $15)] ÷ 5 = $12 Listings on more than one stock exchange. Federal income tax forms 2011   Stocks or bonds listed on more than one stock exchange are valued based on the prices of the exchange on which they are principally dealt. Federal income tax forms 2011 This applies if these prices are published in a generally available listing or publication of general circulation. Federal income tax forms 2011 If this is not applicable, and the stocks or bonds are reported on a composite listing of combined exchanges in a publication of general circulation, use the composite list. Federal income tax forms 2011 See also Unavailable prices or closely held corporation, later. Federal income tax forms 2011 Bid and asked prices on valuation date. Federal income tax forms 2011   If there were no sales within a reasonable period before and after the valuation date, the FMV is the average price between the bona fide bid and asked prices on the valuation date. Federal income tax forms 2011 Example. Federal income tax forms 2011 Although there were no sales of Blue Corporation stock on the valuation date, bona fide bid and asked prices were available on that date of $14 and $16, respectively. Federal income tax forms 2011 The FMV is $15, the average price between the bid and asked prices. Federal income tax forms 2011 No prices on valuation date. Federal income tax forms 2011   If there were no prices available on the valuation date, you determine FMV by taking the average prices between the bona fide bid and asked prices on the closest trading date before and after the valuation date. Federal income tax forms 2011 Both dates must be within a reasonable period. Federal income tax forms 2011 Then you weight these averages in inverse order by the respective number of trading days between the bid and asked dates and the valuation date. Federal income tax forms 2011 Example. Federal income tax forms 2011 On the day you gave stock to a qualified organization, no prices were available. Federal income tax forms 2011 Bona fide bid and asked prices 3 days before the valuation date were $10 and 2 days after the valuation date were $15. Federal income tax forms 2011 The FMV on the valuation date is $13, figured as follows: [(2 x $10) + (3 x $15)] ÷ 5 = $13 Prices only before or after valuation date, but not both. Federal income tax forms 2011   If no selling prices or bona fide bid and asked prices are available on a date within a reasonable period before the valuation date, but are available on a date within a reasonable period after the valuation date, or vice versa, then the average price between the highest and lowest of such available prices may be treated as the value. Federal income tax forms 2011 Large blocks of stock. Federal income tax forms 2011   When a large block of stock is put on the market, it may lower the selling price of the stock if the supply is greater than the demand. Federal income tax forms 2011 On the other hand, market forces may exist that will afford higher prices for large blocks of stock. Federal income tax forms 2011 Because of the many factors to be considered, determining the value of large blocks of stock usually requires the help of experts specializing in underwriting large quantities of securities, or in trading in the securities of the industry of which the particular company is a part. Federal income tax forms 2011 Unavailable prices or closely held corporation. Federal income tax forms 2011   If selling prices or bid and asked prices are not available, or if securities of a closely held corporation are involved, determine the FMV by considering the following factors. Federal income tax forms 2011 For bonds, the soundness of the security, the interest yield, the date of maturity, and other relevant factors. Federal income tax forms 2011 For shares of stock, the company's net worth, prospective earning power and dividend-paying capacity, and other relevant factors. Federal income tax forms 2011 Other factors. Federal income tax forms 2011   Other relevant factors include: The nature and history of the business, especially its recent history, The goodwill of the business, The economic outlook in the particular industry, The company's position in the industry, its competitors, and its management, and The value of securities of corporations engaged in the same or similar business. Federal income tax forms 2011 For preferred stock, the most important factors are its yield, dividend coverage, and protection of its liquidation preference. Federal income tax forms 2011   You should keep complete financial and other information on which the valuation is based. Federal income tax forms 2011 This includes copies of reports of examinations of the company made by accountants, engineers, or any technical experts on or close to the valuation date. Federal income tax forms 2011 Restricted securities. Federal income tax forms 2011   Some classes of stock cannot be traded publicly because of restrictions imposed by the Securities and Exchange Commission, or by the corporate charter or a trust agreement. Federal income tax forms 2011 These restricted securities usually trade at a discount in relation to freely traded securities. Federal income tax forms 2011   To arrive at the FMV of restricted securities, factors that you must consider include the resale provisions found in the restriction agreements, the relative negotiating strengths of the buyer and seller, and the market experience of freely traded securities of the same class as the restricted securities. Federal income tax forms 2011 Real Estate Because each piece of real estate is unique and its valuation is complicated, a detailed appraisal by a professional appraiser is necessary. Federal income tax forms 2011 The appraiser must be thoroughly trained in the application of appraisal principles and theory. Federal income tax forms 2011 In some instances the opinions of equally qualified appraisers may carry unequal weight, such as when one appraiser has a better knowledge of local conditions. Federal income tax forms 2011 The appraisal report must contain a complete description of the property, such as street address, legal description, and lot and block number, as well as physical features, condition, and dimensions. Federal income tax forms 2011 The use to which the property is put, zoning and permitted uses, and its potential use for other higher and better uses are also relevant. Federal income tax forms 2011 In general, there are three main approaches to the valuation of real estate. Federal income tax forms 2011 An appraisal may require the combined use of two or three methods rather than one method only. Federal income tax forms 2011 1. Federal income tax forms 2011 Comparable Sales The comparable sales method compares the donated property with several similar properties that have been sold. Federal income tax forms 2011 The selling prices, after adjustments for differences in date of sale, size, condition, and location, would then indicate the estimated FMV of the donated property. Federal income tax forms 2011 If the comparable sales method is used to determine the value of unimproved real property (land without significant buildings, structures, or any other improvements that add to its value), the appraiser should consider the following factors when comparing the potential comparable property and the donated property: Location, size, and zoning or use restrictions, Accessibility and road frontage, and available utilities and water rights, Riparian rights (right of access to and use of the water by owners of land on the bank of a river) and existing easements, rights-of-way, leases, etc. Federal income tax forms 2011 , Soil characteristics, vegetative cover, and status of mineral rights, and Other factors affecting value. Federal income tax forms 2011 For each comparable sale, the appraisal must include the names of the buyer and seller, the deed book and page number, the date of sale and selling price, a property description, the amount and terms of mortgages, property surveys, the assessed value, the tax rate, and the assessor's appraised FMV. Federal income tax forms 2011 The comparable selling prices must be adjusted to account for differences between the sale property and the donated property. Federal income tax forms 2011 Because differences of opinion may arise between appraisers as to the degree of comparability and the amount of the adjustment considered necessary for comparison purposes, an appraiser should document each item of adjustment. Federal income tax forms 2011 Only comparable sales having the least adjustments in terms of items and/or total dollar adjustments should be considered as comparable to the donated property. Federal income tax forms 2011 2. Federal income tax forms 2011 Capitalization of Income This method capitalizes the net income from the property at a rate that represents a fair return on the particular investment at the particular time, considering the risks involved. Federal income tax forms 2011 The key elements are the determination of the income to be capitalized and the rate of capitalization. Federal income tax forms 2011 3. Federal income tax forms 2011 Replacement Cost New or Reproduction Cost Minus Observed Depreciation This method, used alone, usually does not result in a determination of FMV. Federal income tax forms 2011 Instead, it generally tends to set the upper limit of value, particularly in periods of rising costs, because it is reasonable to assume that an informed buyer will not pay more for the real estate than it would cost to reproduce a similar property. Federal income tax forms 2011 Of course, this reasoning does not apply if a similar property cannot be created because of location, unusual construction, or some other reason. Federal income tax forms 2011 Generally, this method serves to support the value determined from other methods. Federal income tax forms 2011 When the replacement cost method is applied to improved realty, the land and improvements are valued separately. Federal income tax forms 2011 The replacement cost of a building is figured by considering the materials, the quality of workmanship, and the number of square feet or cubic feet in the building. Federal income tax forms 2011 This cost represents the total cost of labor and material, overhead, and profit. Federal income tax forms 2011 After the replacement cost has been figured, consideration must be given to the following factors: Physical deterioration—the wear and tear on the building itself, Functional obsolescence—usually in older buildings with, for example, inadequate lighting, plumbing, or heating, small rooms, or a poor floor plan, and Economic obsolescence—outside forces causing the whole area to become less desirable. Federal income tax forms 2011 Interest in a Business The FMV of any interest in a business, whether a sole proprietorship or a partnership, is the amount that a willing buyer would pay for the interest to a willing seller after consideration of all relevant factors. Federal income tax forms 2011 The relevant factors to be considered in valuing the business are: The FMV of the assets of the business, The demonstrated earnings capacity of the business, based on a review of past and current earnings, and The other factors used in evaluating corporate stock, if they apply. Federal income tax forms 2011 The value of the goodwill of the business should also be taken into consideration. Federal income tax forms 2011 You should keep complete financial and other information on which you base the valuation. Federal income tax forms 2011 This includes copies of reports of examinations of the business made by accountants, engineers, or any technical experts on or close to the valuation date. Federal income tax forms 2011 Annuities, Interests for Life or Terms of Years, Remainders, and Reversions The value of these kinds of property is their present value, except in the case of annuities under contracts issued by companies regularly engaged in their sale. Federal income tax forms 2011 The valuation of these commercial annuity contracts and of insurance policies is discussed later under Certain Life Insurance and Annuity Contracts. Federal income tax forms 2011 To determine present value, you must know the applicable interest rate and use actuarial tables. Federal income tax forms 2011 Interest rate. Federal income tax forms 2011   The applicable interest rate varies. Federal income tax forms 2011 It is announced monthly in a news release and published in the Internal Revenue Bulletin as a Revenue Ruling. Federal income tax forms 2011 The interest rate to use is under the heading “Rate Under Section 7520” for a given month and year. Federal income tax forms 2011 You can call the IRS office at 1-800-829-1040 to obtain this rate. Federal income tax forms 2011 Actuarial tables. Federal income tax forms 2011   You need to refer to actuarial tables to determine a qualified interest in the form of an annuity, any interest for life or a term of years, or any remainder interest to a charitable organization. Federal income tax forms 2011   Use the valuation tables set forth in IRS Publications 1457, Actuarial Values (Book Aleph), and 1458, Actuarial Values (Book Beth). Federal income tax forms 2011 Both of these publications provide tables containing actuarial factors to be used in determining the present value of an annuity, an interest for life or for a term of years, or a remainder or reversionary interest. Federal income tax forms 2011 For qualified charitable transfers, you can use the factor for the month in which you made the contribution or for either of the 2 months preceding that month. Federal income tax forms 2011   Publication 1457 also contains actuarial factors for computing the value of a remainder interest in a charitable remainder annuity trust and a pooled income fund. Federal income tax forms 2011 Publication 1458 contains the factors for valuing the remainder interest in a charitable remainder unitrust. Federal income tax forms 2011 You can download Publications 1457 and 1458 from www. Federal income tax forms 2011 irs. Federal income tax forms 2011 gov. Federal income tax forms 2011 In addition, they are available for purchase via the website of the U. Federal income tax forms 2011 S. Federal income tax forms 2011 Government Printing Office, by phone at (202) 512-1800, or by mail from the: Superintendent of Documents P. Federal income tax forms 2011 O. Federal income tax forms 2011 Box 371954 Pittsburgh, PA 15250-7954 Tables containing actuarial factors for transfers to pooled income funds may also be found in Income Tax Regulation 1. Federal income tax forms 2011 642(c)-6(e)(6), transfers to charitable remainder unitrusts in Regulation 1. Federal income tax forms 2011 664-4(e), and other transfers in Regulation 20. Federal income tax forms 2011 2031-7(d)(6). Federal income tax forms 2011 Special factors. Federal income tax forms 2011   If you need a special factor for an actual transaction, you can request a letter ruling. Federal income tax forms 2011 Be sure to include the date of birth of each person the duration of whose life may affect the value of the interest. Federal income tax forms 2011 Also include copies of the relevant instruments. Federal income tax forms 2011 IRS charges a user fee for providing special factors. Federal income tax forms 2011   For more information about requesting a ruling, see Revenue Procedure 2006-1 (or annual update), 2006-1 I. Federal income tax forms 2011 R. Federal income tax forms 2011 B. Federal income tax forms 2011 1. Federal income tax forms 2011 Revenue Procedure 2006-1 is available at www. Federal income tax forms 2011 irs. Federal income tax forms 2011 gov/irb/2006-01_IRB/ar06. Federal income tax forms 2011 html. Federal income tax forms 2011   For information on the circumstances under which a charitable deduction may be allowed for the donation of a partial interest in property not in trust, see Partial Interest in Property Not in Trust, later. Federal income tax forms 2011 Certain Life Insurance and Annuity Contracts The value of an annuity contract or a life insurance policy issued by a company regularly engaged in the sale of such contracts or policies is the amount that company would charge for a comparable contract. Federal income tax forms 2011 But if the donee of a life insurance policy may reasonably be expected to cash the policy rather than hold it as an investment, then the FMV is the cash surrender value rather than the replacement cost. Federal income tax forms 2011 If an annuity is payable under a combination annuity contract and life insurance policy (for example, a retirement income policy with a death benefit) and there was no insurance element when it was transferred to the charity, the policy is treated as an annuity contract. Federal income tax forms 2011 Partial Interest in Property Not in Trust Generally, no deduction is allowed for a charitable contribution, not made in trust, of less than your entire interest in property. Federal income tax forms 2011 However, this does not apply to a transfer of less than your entire interest if it is a transfer of: A remainder interest in your personal residence or farm, An undivided part of your entire interest in property, or A qualified conservation contribution. Federal income tax forms 2011 Remainder Interest in Real Property The amount of the deduction for a donation of a remainder interest in real property is the FMV of the remainder interest at the time of the contribution. Federal income tax forms 2011 To determine this value, you must know the FMV of the property on the date of the contribution. Federal income tax forms 2011 Multiply this value by the appropriate factor. Federal income tax forms 2011 Publications 1457 and 1458 contain these factors. Federal income tax forms 2011 You must make an adjustment for depreciation or depletion using the factors shown in Publication 1459, Actuarial Values (Book Gimel). Federal income tax forms 2011 You can use the factors for the month in which you made the contribution or for either of the two months preceding that month. Federal income tax forms 2011 See the earlier discussion on Annuities, Interests for Life or Terms of Years, Remainders, and Reversions. Federal income tax forms 2011 You can download Publication 1459 from www. Federal income tax forms 2011 irs. Federal income tax forms 2011 gov. Federal income tax forms 2011 For this purpose, the term “depreciable property” means any property subject to wear and tear or obsolescence, even if not used in a trade or business or for the production of income. Federal income tax forms 2011 If the remainder interest includes both depreciable and nondepreciable property, for example a house and land, the FMV must be allocated between each kind of property at the time of the contribution. Federal income tax forms 2011 This rule also applies to a gift of a remainder interest that includes property that is part depletable and part not depletable. Federal income tax forms 2011 Take into account depreciation or depletion only for the property that is subject to depreciation or depletion. Federal income tax forms 2011 For more information, see section 1. Federal income tax forms 2011 170A-12 of the Income Tax Regulations. Federal income tax forms 2011 Undivided Part of Your Entire Interest A contribution of an undivided part of your entire interest in property must consist of a part of each and every substantial interest or right you own in the property. Federal income tax forms 2011 It must extend over the entire term of your interest in the property. Federal income tax forms 2011 For example, you are entitled to the income from certain property for your life (life estate) and you contribute 20% of that life estate to a qualified organization. Federal income tax forms 2011 You can claim a deduction for the contribution if you do not have any other interest in the property. Federal income tax forms 2011 To figure the value of a contribution involving a partial interest, see Publication 1457. Federal income tax forms 2011 If the only interest you own in real property is a remainder interest and you transfer part of that interest to a qualified organization, see the previous discussion on valuation of a remainder interest in real property. Federal income tax forms 2011 Qualified Conservation Contribution A qualified conservation contribution is a contribution of a qualified real property interest to a qualified organization to be used only for conservation purposes. Federal income tax forms 2011 Qualified organization. Federal income tax forms 2011   For purposes of a qualified conservation contribution, a qualified organization is: A governmental unit, A publicly supported charitable, religious, scientific, literary, educational, etc. Federal income tax forms 2011 , organization, or An organization that is controlled by, and operated for the exclusive benefit of, a governmental unit or a publicly supported charity. Federal income tax forms 2011 The organization also must have a commitment to protect the conservation purposes of the donation and must have the resources to enforce the restrictions. Federal income tax forms 2011 Conservation purposes. Federal income tax forms 2011   Your contribution must be made only for one of the following conservation purposes. Federal income tax forms 2011 Preserving land areas for outdoor recreation by, or for the education of, the general public. Federal income tax forms 2011 Protecting a relatively natural habitat of fish, wildlife, or plants, or a similar ecosystem. Federal income tax forms 2011 Preserving open space, including farmland and forest land, if it yields a significant public benefit. Federal income tax forms 2011 It must be either for the scenic enjoyment of the general public or under a clearly defined federal, state, or local governmental conservation policy. Federal income tax forms 2011 Preserving a historically important land area or a certified historic structure. Federal income tax forms 2011 There must be some visual public access to the property. Federal income tax forms 2011 Factors used in determining the type and amount of public access required include the historical significance of the property, the remoteness or accessibility of the site, and the extent to which intrusions on the privacy of individuals living on the property would be unreasonable. Federal income tax forms 2011 Building in registered historic district. Federal income tax forms 2011   A contribution after July 25, 2006, of a qualified real property interest that is an easement or other restriction on the exterior of a building in a registered historic district is deductible only if it meets all of the following three conditions. Federal income tax forms 2011 The restriction must preserve the entire exterior of the building and must prohibit any change to the exterior of the building that is inconsistent with its historical character. Federal income tax forms 2011 You and the organization receiving the contribution must enter into a written agreement certifying, that the organization is a qualified organization and that it has the resources and commitment to maintain the property as donated. Federal income tax forms 2011 If you make the contribution in a tax year beginning after August 17, 2006, you must include with your return: A qualified appraisal, Photographs of the building's entire exterior, and A description of all restrictions on development of the building, such as zoning laws and restrictive covenants. Federal income tax forms 2011   If you make this type of contribution after February 12, 2007, and claim a deduction of more than $10,000, your deduction will not be allowed unless you pay a $500 filing fee. Federal income tax forms 2011 See Form 8283-V, Payment Voucher for Filing Fee Under Section 170(f)(13), and its instructions. Federal income tax forms 2011 Qualified real property interest. Federal income tax forms 2011   This is any of the following interests in real property. Federal income tax forms 2011 Your entire interest in real estate other than a mineral interest (subsurface oil, gas, or other minerals, and the right of access to these minerals). Federal income tax forms 2011 A remainder interest. Federal income tax forms 2011 A restriction (granted in perpetuity) on the use that may be made of the real property. Federal income tax forms 2011 Valuation. Federal income tax forms 2011   A qualified real property interest described in (1) should be valued in a manner that is consistent with the type of interest transferred. Federal income tax forms 2011 If you transferred all the interest in the property, the FMV of the property is the amount of the contribution. Federal income tax forms 2011 If you do not transfer the mineral interest, the FMV of the surface rights in the property is the amount of the contribution. Federal income tax forms 2011   If you owned only a remainder interest or an income interest (life estate), see Undivided Part of Your Entire Interest, earlier. Federal income tax forms 2011 If you owned the entire property but transferred only a remainder interest (item (2)), see Remainder Interest in Real Property, earlier. Federal income tax forms 2011   In determining the value of restrictions, you should take into account the selling price in arm's-length transactions of other properties that have comparable restrictions. Federal income tax forms 2011 If there are no comparable sales, the restrictions are valued indirectly as the difference between the FMVs of the property involved before and after the grant of the restriction. Federal income tax forms 2011   The FMV of the property before contribution of the restriction should take into account not only current use but the likelihood that the property, without the restriction, would be developed. Federal income tax forms 2011 You should also consider any zoning, conservation, or historical preservation laws that would restrict development. Federal income tax forms 2011 Granting an easement may increase, rather than reduce, the value of property, and in such a situation no deduction would be allowed. Federal income tax forms 2011 Example. Federal income tax forms 2011   You own 10 acres of farmland. Federal income tax forms 2011 Similar land in the area has an FMV of $2,000 an acre. Federal income tax forms 2011 However, land in the general area that is restricted solely to farm use has an FMV of $1,500 an acre. Federal income tax forms 2011 Your county wants to preserve open space and prevent further development in your area. Federal income tax forms 2011   You grant to the county an enforceable open space easement in perpetuity on 8 of the 10 acres, restricting its use to farmland. Federal income tax forms 2011 The value of this easement is $4,000, determined as follows: FMV of the property before granting easement:   $2,000 × 10 acres $20,000 FMV of the property after granting easement:   $1,500 × 8 acres $12,000   $2,000 × 2 acres 4,000 16,000 Value of easement   $4,000   If you later transfer in fee your remaining interest in the 8 acres to another qualified organization, the FMV of your remaining interest is the FMV of the 8 acres reduced by the FMV of the easement granted to the first organization. Federal income tax forms 2011 More information. Federal income tax forms 2011   For more information about qualified conservation contributions, see Publication 526. Federal income tax forms 2011 Appraisals Appraisals are not necessary for items of property for which you claim a deduction of $5,000 or less. Federal income tax forms 2011 (There is one exception, described next, for certain clothing and household items. Federal income tax forms 2011 ) However, you generally will need an appraisal for donated property for which you claim a deduction of more than $5,000. Federal income tax forms 2011 There are exceptions. Federal income tax forms 2011 See Deductions of More Than $5,000, later. Federal income tax forms 2011 The weight given an appraisal depends on the completeness of the report, the qualifications of the appraiser, and the appraiser's demonstrated knowledge of the donated property. Federal income tax forms 2011 An appraisal must give all the facts on which to base an intelligent judgment of the value of the property. Federal income tax forms 2011 The appraisal will not be given much weight if: All the factors that apply are not considered, The opinion is not supported with facts, such as purchase price and comparable sales, or The opinion is not consistent with known facts. Federal income tax forms 2011 The appraiser's opinion is never more valid than the facts on which it is based; without these facts it is simply a guess. Federal income tax forms 2011 The opinion of a person claiming to be an expert is not binding on the Internal Revenue Service. Federal income tax forms 2011 All facts associated with the donation must be considered. Federal income tax forms 2011 Deduction over $500 for certain clothing or household items. Federal income tax forms 2011   You must include with your return a qualified appraisal of any single item of clothing or any household item that is not in good used condition or better, that you donated after August 17, 2006, and for which you deduct more than $500. Federal income tax forms 2011 See Household Goods and Used Clothing, earlier. Federal income tax forms 2011 Cost of appraisals. Federal income tax forms 2011   You may not take a charitable contribution deduction for fees you pay for appraisals of your donated property. Federal income tax forms 2011 However, these fees may qualify as a miscellaneous deduction, subject to the 2% limit, on Schedule A (Form 1040) if paid to determine the amount allowable as a charitable contribution. Federal income tax forms 2011 Deductions of More Than $5,000 Generally, if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal made by a qualified appraiser, and you must attach Section B of Form 8283 to your tax return. Federal income tax forms 2011 There are exceptions, discussed later. Federal income tax forms 2011 You should keep the appraiser's report with your written records. Federal income tax forms 2011 Records are discussed in Publication 526. Federal income tax forms 2011 The phrase “similar items” means property of the same generic category or type (whether or not donated to the same donee), such as stamp collections, coin collections, lithographs, paintings, photographs, books, nonpublicly traded stock, nonpublicly traded securities other than nonpublicly traded stock, land, buildings, clothing, jewelry, furniture, electronic equipment, household appliances, toys, everyday kitchenware, china, crystal, or silver. Federal income tax forms 2011 For example, if you give books to three schools and you deduct $2,000, $2,500, and $900, respectively, your claimed deduction is more than $5,000 for these books. Federal income tax forms 2011 You must get a qualified appraisal of the books and for each school you must attach a fully completed Form 8283, Section B, to your tax return. Federal income tax forms 2011 Exceptions. Federal income tax forms 2011   You do not need an appraisal if the property is: Nonpublicly traded stock of $10,000 or less, A vehicle (including a car, boat, or airplane) for which your deduction is limited to the gross proceeds from its sale, Qualified intellectual property, such as a patent, Certain publicly traded securities described next, Inventory and other property donated by a corporation that are “qualified contributions” for the care of the ill, the needy, or infants, within the meaning of section 170(e)(3)(A) of the Internal Revenue Code, or Stock in trade, inventory, or property held primarily for sale to customers in the ordinary course of your trade or business. Federal income tax forms 2011   Although an appraisal is not required for the types of property just listed, you must provide certain information about a donation of any of these types of property on Form 8283. Federal income tax forms 2011 Publicly traded securities. Federal income tax forms 2011   Even if your claimed deduction is more than $5,000, neither a qualified appraisal nor Section B of Form 8283 is required for publicly traded securities that are: Listed on a stock exchange in which quotations are published on a daily basis, Regularly traded in a national or regional over-the-counter market for which published quotations are available, or Shares of an open-end investment company (mutual fund) for which quotations are published on a daily basis in a newspaper of general circulation throughout the United States. Federal income tax forms 2011 Publicly traded securities that meet these requirements must be reported on Form 8283, Section A. Federal income tax forms 2011   A qualified appraisal is not required, but Form 8283, Section B, Parts I and IV, must be completed, for an issue of a security that does not meet the requirements just listed but does meet these requirements: The issue is regularly traded during the computation period (defined later) in a market for which there is an “interdealer quotation system” (defined later), The issuer or agent computes the “average trading price” (defined later) for the same issue for the computation period, The average trading price and total volume of the issue during the computation period are published in a newspaper of general circulation throughout the United States, not later than the last day of the month following the end of the calendar quarter in which the computation period ends, The issuer or agent keeps books and records that list for each transaction during the computation period the date of settlement of the transaction, the name and address of the broker or dealer making the market in which the transaction occurred, and the trading price and volume, and The issuer or agent permits the Internal Revenue Service to review the books and records described in item (4) with respect to transactions during the computation period upon receiving reasonable notice. Federal income tax forms 2011   An interdealer quotation system is any system of general circulation to brokers and dealers that regularly disseminates quotations of obligations by two or more identified brokers or dealers who are not related to either the issuer or agent who computes the average trading price of the security. Federal income tax forms 2011 A quotation sheet prepared and distributed by a broker or dealer in the regular course of business and containing only quotations of that broker or dealer is not an interdealer quotation system. Federal income tax forms 2011   The average trading price is the average price of all transactions (weighted by volume), other than original issue or redemption transactions, conducted through a United States office of a broker or dealer who maintains a market in the issue of the security during the computation period. Federal income tax forms 2011 Bid and asked quotations are not taken into account. Federal income tax forms 2011   The computation period is weekly during October through December and monthly during January through September. Federal income tax forms 2011 The weekly computation periods during October through December begin with the first Monday in October and end with the first Sunday following the last Monday in December. Federal income tax forms 2011 Nonpublicly traded stock. Federal income tax forms 2011   If you contribute nonpublicly traded stock, for which you claim a deduction of $10,000 or less, a qualified appraisal is not required. Federal income tax forms 2011 However, you must attach Form 8283 to your tax return, with Section B, Parts I and IV, completed. Federal income tax forms 2011 Deductions of More Than $500,000 If you claim a deduction of more than $500,000 for a donation of property, you must attach a qualified appraisal of the property to your return. Federal income tax forms 2011 This does not apply to contributions of cash, inventory, publicly traded stock, or intellectual property. Federal income tax forms 2011 If you do not attach the appraisal, you cannot deduct your contribution, unless your failure to attach the appraisal is due to reasonable cause and not to willful neglect. Federal income tax forms 2011 Qualified Appraisal Generally, if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal made by a qualified appraiser. Federal income tax forms 2011 You must also complete Form 8283, Section B, and attach it to your tax return. Federal income tax forms 2011 See Deductions of More Than $5,000, earlier. Federal income tax forms 2011 A qualified appraisal is an appraisal document that: Is made, signed, and dated by a qualified appraiser (defined later) in accordance with generally accepted appraisal standards, Meets the relevant requirements of Regulations section 1. Federal income tax forms 2011 170A-13(c)(3) and Notice 2006-96, 2006-46 I. Federal income tax forms 2011 R. Federal income tax forms 2011 B. Federal income tax forms 2011 902 (available at www. Federal income tax forms 2011 irs. Federal income tax forms 2011 gov/irb/2006-46_IRB/ar13. Federal income tax forms 2011 html), Relates to an appraisal made not earlier than 60 days before the date of contribution of the appraised property, Does not involve a prohibited appraisal fee, and Includes certain information (covered later). Federal income tax forms 2011 You must receive the qualified appraisal before the due date, including extensions, of the return on which a charitable contribution deduction is first claimed for the donated property. Federal income tax forms 2011 If the deduction is first claimed on an amended return, the qualified appraisal must be received before the date on which the amended return is filed. Federal income tax forms 2011 Form 8283, Section B, must be attached to your tax return. Federal income tax forms 2011 Generally, you do not need to attach the qualified appraisal itself, but you should keep a copy as long as it may be relevant under the tax law. Federal income tax forms 2011 There are four exceptions. Federal income tax forms 2011 If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the appraisal. Federal income tax forms 2011 See Paintings, Antiques, and Other Objects of Art, earlier. Federal income tax forms 2011 If you claim a deduction of more than $500,000 for a donation of property, you must attach the appraisal. Federal income tax forms 2011 See Deductions of More Than $500,000, earlier. Federal income tax forms 2011 If you claim a deduction of more than $500 for an article of clothing, or a household item, that is not in good used condition or better, that you donated after August 17, 2006, you must attach the appraisal. Federal income tax forms 2011 See Deduction over $500 for certain clothing or household items, earlier. Federal income tax forms 2011 If you claim a deduction in a tax year beginning after August 17, 2006, for an easement or other restriction on the exterior of a building in a historic district, you must attach the appraisal. Federal income tax forms 2011 See Building in registered historic district, earlier. Federal income tax forms 2011 Prohibited appraisal fee. Federal income tax forms 2011   Generally, no part of the fee arrangement for a qualified appraisal can be based on a percentage of the appraised value of the property. Federal income tax forms 2011 If a fee arrangement is based on what is allowed as a deduction, after Internal Revenue Service examination or otherwise, it is treated as a fee based on a percentage of appraised value. Federal income tax forms 2011 However, appraisals are not disqualified when an otherwise prohi