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File 2010 Taxes For Free

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File 2010 Taxes For Free

File 2010 taxes for free 2. File 2010 taxes for free   Tax Shelters and Other Reportable Transactions Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Abusive Tax SheltersRules To Curb Abusive Tax Shelters Investor Reporting Penalties Whether To Invest Introduction Investments that yield tax benefits are sometimes called “tax shelters. File 2010 taxes for free ” In some cases, Congress has concluded that the loss of revenue is an acceptable side effect of special tax provisions designed to encourage taxpayers to make certain types of investments. File 2010 taxes for free In many cases, however, losses from tax shelters produce little or no benefit to society, or the tax benefits are exaggerated beyond those intended. File 2010 taxes for free Those cases are called “abusive tax shelters. File 2010 taxes for free ” An investment that is considered a tax shelter is subject to restrictions, including the requirement that it be disclosed, as discussed later. File 2010 taxes for free Topics - This chapter discusses: Abusive Tax Shelters , Rules To Curb Abusive Tax Shelters , Investor Reporting , Penalties , and Whether To Invest . File 2010 taxes for free Useful Items - You may want to see: Publication 538 Accounting Periods and Methods 556 Examination of Returns, Appeal Rights, and Claims for Refund 561 Determining the Value of Donated Property 925 Passive Activity and At-Risk Rules Form (and Instructions) 8275 Disclosure Statement 8275-R Regulation Disclosure Statement 8283 Noncash Charitable Contributions 8886 Reportable Transaction Disclosure Statement See chapter 5, How To Get Tax Help , for information about getting these publications and forms. File 2010 taxes for free Abusive Tax Shelters Abusive tax shelters are marketing schemes involving artificial transactions with little or no economic reality. File 2010 taxes for free They often make use of unrealistic allocations, inflated appraisals, losses in connection with nonrecourse loans, mismatching of income and deductions, financing techniques that do not conform to standard commercial business practices, or mischaracterization of the substance of the transaction. File 2010 taxes for free Despite appearances to the contrary, the taxpayer generally risks little. File 2010 taxes for free Abusive tax shelters commonly involve package deals designed from the start to generate losses, deductions, or credits that will be far more than present or future investment. File 2010 taxes for free Or, they may promise investors from the start that future inflated appraisals will enable them, for example, to reap charitable contribution deductions based on those appraisals. File 2010 taxes for free (But see the appraisal requirements discussed under Rules To Curb Abusive Tax Shelters , later. File 2010 taxes for free ) They are commonly marketed in terms of the ratio of tax deductions allegedly available to each dollar invested. File 2010 taxes for free This ratio (or “write-off”) is frequently said to be several times greater than one-to-one. File 2010 taxes for free Because there are many abusive tax shelters, it is not possible to list all the factors you should consider in determining whether an offering is an abusive tax shelter. File 2010 taxes for free However, you should ask the following questions, which might provide a clue to the abusive nature of the plan. File 2010 taxes for free Do the tax benefits far outweigh the economic benefits? Is this a transaction you would seriously consider, apart from the tax benefits, if you hoped to make a profit? Do shelter assets really exist and, if so, are they insured for less than their purchase price? Is there a nontax justification for the way profits and losses are allocated to partners? Do the facts and supporting documents make economic sense? In that connection, are there sales and resales of the tax shelter property at ever increasing prices? Does the investment plan involve a gimmick, device, or sham to hide the economic reality of the transaction? Does the promoter offer to backdate documents after the close of the year? Are you instructed to backdate checks covering your investment? Is your debt a real debt or are you assured by the promoter that you will never have to pay it? Does this transaction involve laundering United States source income through foreign corporations incorporated in a tax haven and owned by United States shareholders? Rules To Curb Abusive Tax Shelters Congress has enacted a series of income tax laws designed to halt the growth of abusive tax shelters. File 2010 taxes for free These provisions include the following. File 2010 taxes for free Disclosure of reportable transactions. File 2010 taxes for free   You must disclose information for each reportable transaction in which you participate. File 2010 taxes for free See Reportable Transaction Disclosure Statement , later. File 2010 taxes for free   Material advisors with respect to any reportable transaction must disclose information about the transaction on Form 8918, Material Advisor Disclosure Statement. File 2010 taxes for free To determine whether you are a material advisor to a transaction, see the Instructions for Form 8918. File 2010 taxes for free   Material advisors will receive a reportable transaction number for the disclosed reportable transaction. File 2010 taxes for free They must provide this number to all persons to whom they acted as a material advisor. File 2010 taxes for free They must provide the number at the time the transaction is entered into. File 2010 taxes for free If they do not have the number at that time, they must provide it within 60 days from the date the number is mailed to them. File 2010 taxes for free For information on penalties for failure to disclose and failure to maintain lists, see Internal Revenue Code sections 6707, 6707A, and 6708. File 2010 taxes for free Requirement to maintain list. File 2010 taxes for free   Material advisors must maintain a list of persons to whom they provide material aid, assistance, or advice on any reportable transaction. File 2010 taxes for free The list must be available for inspection by the IRS, and the information required to be included on the list generally must be kept for 7 years. File 2010 taxes for free See Regulations section 301. File 2010 taxes for free 6112-1 for more information (including what information is required to be included on the list). File 2010 taxes for free Confidentiality privilege. File 2010 taxes for free   The confidentiality privilege between you and a federally authorized tax practitioner does not apply to written communications made after October 21, 2004, regarding the promotion of your direct or indirect participation in any tax shelter. File 2010 taxes for free Appraisal requirement for donated property. File 2010 taxes for free   If you claim a deduction of more than $5,000 for an item or group of similar items of donated property, you generally must get a qualified appraisal from a qualified appraiser and complete and attach section B of Form 8283 to your return. File 2010 taxes for free If you claim a deduction of more than $500,000 for the donated property, you generally must attach the qualified appraisal to your return. File 2010 taxes for free If you file electronically, see Form 8453, U. File 2010 taxes for free S. File 2010 taxes for free Individual Income Tax Transmittal for an IRS e-file Return, and its instructions. File 2010 taxes for free For more information about appraisals, including exceptions, see Publication 561. File 2010 taxes for free Passive activity loss and credit limits. File 2010 taxes for free   The passive activity loss and credit rules limit the amount of losses and credits that can be claimed from passive activities and limit the amount that can offset nonpassive income, such as certain portfolio income from investments. File 2010 taxes for free For more detailed information about determining and reporting income, losses, and credits from passive activities, see Publication 925. File 2010 taxes for free Interest on penalties. File 2010 taxes for free   If you are assessed an accuracy-related or civil fraud penalty (as discussed under Penalties , later), interest will be imposed on the amount of the penalty from the due date of the return (including any extensions) to the date you pay the penalty. File 2010 taxes for free Accounting method restriction. File 2010 taxes for free   Tax shelters generally cannot use the cash method of accounting. File 2010 taxes for free Uniform capitalization rules. File 2010 taxes for free   The uniform capitalization rules generally apply to producing property or acquiring it for resale. File 2010 taxes for free Under those rules, the direct cost and part of the indirect cost of the property must be capitalized or included in inventory. File 2010 taxes for free For more information, see Publication 538. File 2010 taxes for free Denial of deduction for interest on an underpayment due to a reportable transaction. File 2010 taxes for free   You cannot deduct any interest you paid or accrued on any part of an underpayment of tax due to an understatement arising from a reportable transaction (discussed later) if the relevant facts affecting the tax treatment of the item are not adequately disclosed. File 2010 taxes for free This rule applies to reportable transactions entered into in tax years beginning after October 22, 2004. File 2010 taxes for free Authority for Disallowance of Tax Benefits The IRS has published guidance concluding that the claimed tax benefits of various abusive tax shelters should be disallowed. File 2010 taxes for free The guidance is the conclusion of the IRS on how the law is applied to a particular set of facts. File 2010 taxes for free Guidance is published in the Internal Revenue Bulletin for taxpayers' information and also for use by IRS officials. File 2010 taxes for free So, if your return is examined and an abusive tax shelter is identified and challenged, published guidance dealing with that type of shelter, which disallows certain claimed tax shelter benefits, could serve as the basis for the examining official's challenge of the tax benefits you claimed. File 2010 taxes for free In such a case, the examiner will not compromise even if you or your representative believes you have authority for the positions taken on your tax return. File 2010 taxes for free The courts have generally been unsympathetic to taxpayers involved in abusive tax shelter schemes and have ruled in favor of the IRS in the majority of the cases in which these shelters have been challenged. File 2010 taxes for free Investor Reporting You may be required to file a reportable transaction disclosure statement. File 2010 taxes for free Reportable Transaction Disclosure Statement Use Form 8886 to disclose information for each reportable transaction (discussed later) in which you participated. File 2010 taxes for free Generally, you must attach Form 8886 to your return for each tax year in which you participated in the transaction. File 2010 taxes for free Under certain circumstances, a transaction must be disclosed within 90 days of the transaction being identified as a listed transaction or a transaction of interest (discussed later). File 2010 taxes for free In addition, for the first year Form 8886 is attached to your return, you must send a copy of the form to: Internal Revenue Service OTSA Mail Stop 4915 1973 North Rulon White Blvd. File 2010 taxes for free  Ogden, UT 84404 If you file your return electronically, the copy sent to OTSA must show exactly the same information, word for word, provided with the electronically filed return and it must be provided on the official IRS Form 8886 or an exact copy of the form. File 2010 taxes for free If you use a computer-generated or substitute Form 8886, it must be an exact copy of the official IRS form. File 2010 taxes for free If you fail to file Form 8886 as required or fail to include any required information on the form, you may have to pay a penalty. File 2010 taxes for free See Penalty for failure to disclose a reportable transaction , later under Penalties. File 2010 taxes for free The following discussion briefly describes reportable transactions. File 2010 taxes for free For more details, see the Instructions for Form 8886. File 2010 taxes for free Reportable transaction. File 2010 taxes for free   A reportable transaction is any of the following. File 2010 taxes for free A listed transaction. File 2010 taxes for free A confidential transaction. File 2010 taxes for free A transaction with contractual protection. File 2010 taxes for free A loss transaction. File 2010 taxes for free A transaction of interest entered into after November 1, 2006. File 2010 taxes for free Note. File 2010 taxes for free Transactions with a brief asset holding period were removed from the definition of reportable transaction for transactions entered into after August 2, 2007. File 2010 taxes for free Listed transaction. File 2010 taxes for free   A listed transaction is the same as, or substantially similar to, one of the types of transactions the IRS has determined to be a tax-avoidance transaction. File 2010 taxes for free These transactions have been identified in notices, regulations, and other published guidance issued by the IRS. File 2010 taxes for free For a list of existing guidance, see Notice 2009-59 in Internal Revenue Bulletin 2009-31, available at www. File 2010 taxes for free irs. File 2010 taxes for free gov/irb/2009-31_IRB/ar07. File 2010 taxes for free html. File 2010 taxes for free Confidential transaction. File 2010 taxes for free   A confidential transaction is offered to you under conditions of confidentiality and for which you have paid an advisor a minimum fee. File 2010 taxes for free A transaction is offered under conditions of confidentiality if the advisor who is paid the fee places a limit on your disclosure of the tax treatment or tax structure of the transaction and the limit protects the confidentiality of the advisor's tax strategies. File 2010 taxes for free The transaction is treated as confidential even if the conditions of confidentiality are not legally binding on you. File 2010 taxes for free Transaction with contractual protection. File 2010 taxes for free   Generally, a transaction with contractual protection is one in which you or a related party has the right to a full or partial refund of fees if all or part of the intended tax consequences of the transaction are not sustained, or a transaction for which the fees are contingent on your realizing the tax benefits from the transaction. File 2010 taxes for free For information on exceptions, see Revenue Procedure 2007-20 in Internal Revenue Bulletin 2007-7, available at www. File 2010 taxes for free irs. File 2010 taxes for free gov/irb/2007-07_IRB/ar15. File 2010 taxes for free html. File 2010 taxes for free Loss transaction. File 2010 taxes for free   For individuals, a loss transaction is one that results in a deductible loss if the gross amount of the loss is at least $2 million in a single tax year or $4 million in any combination of tax years. File 2010 taxes for free A loss from a foreign currency transaction under Internal Revenue Code section 988 is a loss transaction if the gross amount of the loss is at least $50,000 in a single tax year, whether or not the loss flows through from an S corporation or partnership. File 2010 taxes for free   Certain losses (such as losses from casualties, thefts, and condemnations) are excepted from this category and do not have to be reported on Form 8886. File 2010 taxes for free For information on other exceptions, see Revenue Procedure 2004-66 in Internal Revenue Bulletin 2004-50, as modified and superseded by Revenue Procedure 2013-11, (or future published guidance) available at www. File 2010 taxes for free irs. File 2010 taxes for free gov/irb/2004-50_IRB/ar11. File 2010 taxes for free html. File 2010 taxes for free Transaction of interest. File 2010 taxes for free   A transaction of interest is a transaction entered into after November 1, 2006, that is the same as, or substantially similar to, one of the types of transactions that the IRS has identified by notice, regulation, or other form of published guidance as a transaction of interest. File 2010 taxes for free The IRS has identified the following transactions of interest. File 2010 taxes for free “Toggling” grantor trusts as described in Notice 2007-73, 2007-36 I. File 2010 taxes for free R. File 2010 taxes for free B. File 2010 taxes for free 545, available at www. File 2010 taxes for free irs. File 2010 taxes for free gov/irb/2007-36_IRB/ar20. File 2010 taxes for free html. File 2010 taxes for free Certain transactions involving contributions of a successor member interest in a limited liability company as described in Notice 2007-72, 2007-36 I. File 2010 taxes for free R. File 2010 taxes for free B. File 2010 taxes for free 544, available at www. File 2010 taxes for free irs. File 2010 taxes for free gov/irb/2007-36_IRB/ar19. File 2010 taxes for free html. File 2010 taxes for free Certain transactions involving the sale or other disposition of all interests in a charitable remainder trust and claiming little or no taxable gain as described in Notice 2008-99, 2008-47 I. File 2010 taxes for free R. File 2010 taxes for free B. File 2010 taxes for free 1194, available at www. File 2010 taxes for free irs. File 2010 taxes for free gov/irb/2008-47_IRB/ar11. File 2010 taxes for free html. File 2010 taxes for free Certain transactions involving a U. File 2010 taxes for free S. File 2010 taxes for free taxpayer owning controlled foreign corporations (CFCs) that hold stock of a lower-tier CFC through a domestic partnership to avoid reporting income as described in Notice 2009-7, 2009-3 I. File 2010 taxes for free R. File 2010 taxes for free B. File 2010 taxes for free 312, available at www. File 2010 taxes for free irs. File 2010 taxes for free gov/irb/2009-03_IRB/ar10. File 2010 taxes for free html. File 2010 taxes for free   For updates to this list, go to www. File 2010 taxes for free irs. File 2010 taxes for free gov/Businesses/Corporations/Abusive-Tax-Shelters-and-Transactions. File 2010 taxes for free Penalties Investing in an abusive tax shelter may lead to substantial expenses. File 2010 taxes for free First, the promoter generally charges a substantial fee. File 2010 taxes for free If your return is examined by the IRS and a tax deficiency is determined, you will be faced with payment of more tax, interest on the underpayment, possibly a 20%, 30%, or even 40% accuracy-related penalty, or a 75% civil fraud penalty. File 2010 taxes for free You may also be subject to the penalty for failure to pay tax. File 2010 taxes for free These penalties are explained in the following paragraphs. File 2010 taxes for free Accuracy-related penalties. File 2010 taxes for free   An accuracy-related penalty of 20% can be imposed for underpayments of tax due to: Negligence or disregard of rules or regulations, Substantial understatement of tax, Substantial valuation misstatement (increased to 40% for gross valuation misstatement), Transaction lacking economic substance (increased to 40% for undisclosed transaction lacking economic substance), or Undisclosed foreign financial asset understatement (40% in all cases). File 2010 taxes for free Except for a transaction lacking economic substance, this penalty will not be imposed if you can show you had reasonable cause for any understatement of tax and that you acted in good faith. File 2010 taxes for free Your failure to disclose a reportable transaction is a strong indication that you failed to act in good faith. File 2010 taxes for free   If you are charged an accuracy-related penalty, interest will be imposed on the amount of the penalty from the due date of the return (including extensions) to the date you pay the penalty. File 2010 taxes for free   The 20% penalties do not apply to any underpayment attributable to a reportable transaction understatement subject to an accuracy-related penalty (discussed later). File 2010 taxes for free Negligence or disregard of rules or regulations. File 2010 taxes for free   The penalty for negligence or disregard of rules or regulations is imposed only on the part of the underpayment due to negligence or disregard of rules or regulations. File 2010 taxes for free The penalty will not be charged if you can show you had reasonable cause for understating your tax and that you acted in good faith. File 2010 taxes for free    Negligence includes any failure to make a reasonable attempt to comply with the provisions of the Internal Revenue Code. File 2010 taxes for free It also includes any failure to keep adequate books and records. File 2010 taxes for free A return position that has a reasonable basis is not negligence. File 2010 taxes for free   Disregard includes any careless, reckless, or intentional disregard of rules or regulations. File 2010 taxes for free   The penalty for disregard of rules and regulations can be avoided if all the following are true. File 2010 taxes for free You keep adequate books and records. File 2010 taxes for free You have a reasonable basis for your position on the tax issue. File 2010 taxes for free You make an adequate disclosure of your position. File 2010 taxes for free Use Form 8275 to make your disclosure and attach it to your return. File 2010 taxes for free To disclose a position contrary to a regulation, use Form 8275-R. File 2010 taxes for free Use Form 8886 to disclose a reportable transaction (discussed earlier). File 2010 taxes for free Substantial understatement of tax. File 2010 taxes for free   An understatement is considered to be substantial if it is more than the greater of: 10% of the tax required to be shown on the return, or $5,000. File 2010 taxes for free An “understatement” is the amount of tax required to be shown on your return for a tax year minus the amount of tax shown on the return, reduced by any rebates. File 2010 taxes for free The term “rebate” generally means a decrease in the tax shown on your original return as the result of your filing an amended return or claim for refund. File 2010 taxes for free   For items other than tax shelters, you can file Form 8275 or Form 8275-R to disclose items that could cause a substantial understatement of income tax. File 2010 taxes for free In that way, you can avoid the substantial understatement penalty if you have a reasonable basis for your position on the tax issue. File 2010 taxes for free Disclosure of the tax shelter item on a tax return does not reduce the amount of the understatement. File 2010 taxes for free   Also, the understatement penalty will not be imposed if you can show there was reasonable cause for the underpayment caused by the understatement and that you acted in good faith. File 2010 taxes for free An important factor in establishing reasonable cause and good faith will be the extent of your effort to determine your proper tax liability under the law. File 2010 taxes for free Substantial valuation misstatement. File 2010 taxes for free   In general, you are liable for a 20% penalty for a substantial valuation misstatement if all the following are true. File 2010 taxes for free The value or adjusted basis of any property claimed on the return is 150% or more of the correct amount. File 2010 taxes for free You underpaid your tax by more than $5,000 because of the misstatement. File 2010 taxes for free You cannot establish that you had reasonable cause for the underpayment and that you acted in good faith. File 2010 taxes for free   You may be assessed a penalty of 40% for a gross valuation misstatement. File 2010 taxes for free If you misstate the value or the adjusted basis of property by 200% or more of the amount determined to be correct, you will be assessed a penalty of 40%, instead of 20%, of the amount you underpaid because of the gross valuation misstatement. File 2010 taxes for free The penalty rate is also 40% if the property's correct value or adjusted basis is zero. File 2010 taxes for free Transaction lacking economic substance. File 2010 taxes for free   The economic substance doctrine only applies to an individual that entered into a transaction in connection with a trade or business or an activity engaged in for the production of income. File 2010 taxes for free For transactions entered into after March 30, 2010, a transaction has economic substance for you as an individual taxpayer only if: The transaction changes your economic position in a meaningful way (apart from federal income tax effects), or You have a substantial purpose (apart from federal income tax effects) for entering into the transaction. File 2010 taxes for free   For purposes of determining whether economic substance exists, a transaction's profit potential will only be taken into account if the present value of the reasonably expected pre-tax profit from the transaction is substantial compared to the present value of the expected net tax benefits that would be allowed if the transaction were respected. File 2010 taxes for free   If any part of your underpayment is due to any disallowance of claimed tax benefits by reason of a transaction lacking economic substance or failing to meet the requirements of any similar rule of law, that part of your underpayment will be subject to the 20% accuracy-related penalty even if you had a reasonable cause and acted in good faith concerning that part. File 2010 taxes for free   Additionally, the penalty increases to 40% if you do not adequately disclose on your return or in a statement attached to your return the relevant facts affecting the tax treatment of a transaction that lacks economic substance. File 2010 taxes for free Relevant facts include any facts affecting the tax treatment of the transaction. File 2010 taxes for free    Any excessive amount of an erroneous claim for an income tax refund or credit (other than a refund or credit related to the earned income credit) that results from a transaction found to be lacking economic substance will not be treated as having a reasonable basis and could be subject to a 20% penalty. File 2010 taxes for free Undisclosed foreign financial asset understatement. File 2010 taxes for free   For tax years beginning after March 18, 2010, you may be liable for a 40% penalty for an understatement of your tax liability due to an undisclosed foreign financial asset. File 2010 taxes for free An undisclosed foreign financial asset is any asset for which an information return, required to be provided under Internal Revenue Code section 6038, 6038B, 6038D, 6046A, or 6048 for any taxable year, is not provided. File 2010 taxes for free The penalty applies to any part of an underpayment related to the following undisclosed foreign financial assets. File 2010 taxes for free Any foreign business you control, reportable on Form 5471, Information Return of U. File 2010 taxes for free S. File 2010 taxes for free Persons With Respect To Certain Foreign Corporations, or Form 8865, Return of U. File 2010 taxes for free S. File 2010 taxes for free Persons With Respect to Certain Foreign Partnerships. File 2010 taxes for free Certain transfers of property to a foreign corporation or partnership, reportable on Form 926, Return by a U. File 2010 taxes for free S. File 2010 taxes for free Transferor of Property to a Foreign Corporation, or certain distributions to a foreign person, reportable on Form 8865. File 2010 taxes for free Your ownership interest in certain foreign financial assets, temporarily reportable on Form 8275 or 8275-R. File 2010 taxes for free    Instead of, or in addition to, Form 8275 or 8275-R, you may have to file Form 8938, Statement of Specified Foreign Financial Assets, with your tax return. File 2010 taxes for free See the Instructions for Form 8938 for details. File 2010 taxes for free    Your acquisition, disposition, or substantial change in ownership interest in a foreign partnership, reportable on Form 8865. File 2010 taxes for free Creation or transfer of money or property to certain foreign trusts, reportable on Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. File 2010 taxes for free Penalty for incorrect appraisals. File 2010 taxes for free   The person who prepares an appraisal of the value of property may have to pay a penalty if: He or she knows, or reasonably should have known, that the appraisal would be used in connection with a return or claim for refund; and The claimed value of the property on a return or claim for refund based on that appraisal results in a substantial valuation misstatement or a gross valuation misstatement as discussed earlier. File 2010 taxes for free For details on the penalty amount and exceptions, see Publication 561. File 2010 taxes for free Penalty for failure to disclose a reportable transaction. File 2010 taxes for free   If you fail to include any required information regarding a reportable transaction (discussed earlier) on a return or statement, you may have to pay a penalty of 75% of the decrease in tax shown on your return as a result of such transaction (or that would have resulted if the transaction were respected for federal tax purposes). File 2010 taxes for free For an individual, the minimum penalty is $5,000 and the maximum is $10,000 (or $100,000 for a listed transaction). File 2010 taxes for free This penalty is in addition to any other penalty that may be imposed. File 2010 taxes for free   The IRS may rescind or abate the penalty for failing to disclose a reportable transaction under certain limited circumstances but cannot rescind the penalty for failing to disclose a listed transaction. File 2010 taxes for free For information on rescission, see Revenue Procedure 2007-21 in Internal Revenue Bulletin 2007-9 available at www. File 2010 taxes for free irs. File 2010 taxes for free gov/irb/2007-09_IRB/ar12. File 2010 taxes for free html. File 2010 taxes for free Accuracy-related penalty for a reportable transaction understatement. File 2010 taxes for free   If you have a reportable transaction understatement, you may have to pay a penalty equal to 20% of the amount of that understatement. File 2010 taxes for free This applies to any item due to a listed transaction or other reportable transaction with a significant purpose of avoiding or evading federal income tax. File 2010 taxes for free The penalty is 30% rather than 20% for the part of any reportable transaction understatement if the transaction was not properly disclosed. File 2010 taxes for free You may not have to pay the 20% penalty if you meet the strengthened reasonable cause and good faith exception. File 2010 taxes for free The reasonable cause and good faith exception does not apply to any part of a reportable transaction understatement attributable to one or more transactions that lack economic substance. File 2010 taxes for free   This penalty does not apply to the part of an understatement on which the fraud penalty, gross valuation misstatement penalty, or penalty for nondisclosure of noneconomic substance transactions is imposed. File 2010 taxes for free Civil fraud penalty. File 2010 taxes for free   If any underpayment of tax on your return is due to fraud, a penalty of 75% of the underpayment will be added to your tax. File 2010 taxes for free Joint return. File 2010 taxes for free   The fraud penalty on a joint return applies to a spouse only if some part of the underpayment is due to the fraud of that spouse. File 2010 taxes for free Failure to pay tax. File 2010 taxes for free   If a deficiency is assessed and is not paid within 10 days of the demand for payment, an investor can be penalized with up to a 25% addition to tax if the failure to pay continues. File 2010 taxes for free Whether To Invest In light of the adverse tax consequences and the substantial amount of penalties and interest that will result if the claimed tax benefits are disallowed, you should consider tax shelter investments carefully and seek competent legal and financial advice. File 2010 taxes for free Prev  Up  Next   Home   More Online Publications
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The File 2010 Taxes For Free

File 2010 taxes for free 7. File 2010 taxes for free   Costs You Can Deduct or Capitalize Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Carrying Charges Research and Experimental CostsProduct. File 2010 taxes for free Costs not included. File 2010 taxes for free Intangible Drilling Costs Exploration CostsPartnerships and S corporations. File 2010 taxes for free Development Costs Circulation Costs Business Start-Up and Organizational Costs Reforestation Costs Retired Asset Removal Costs Barrier Removal CostsOther barrier removals. File 2010 taxes for free Film and Television Production Costs What's New Film and television productions costs. File 2010 taxes for free  The election to expense film and television production costs does not apply to productions that begin after December 31, 2013. File 2010 taxes for free See Film and Television Production Costs , later. File 2010 taxes for free Introduction This chapter discusses costs you can elect to deduct or capitalize. File 2010 taxes for free You generally deduct a cost as a current business expense by subtracting it from your income in either the year you incur it or the year you pay it. File 2010 taxes for free If you capitalize a cost, you may be able to recover it over a period of years through periodic deductions for amortization, depletion, or depreciation. File 2010 taxes for free When you capitalize a cost, you add it to the basis of property to which it relates. File 2010 taxes for free A partnership, corporation, estate, or trust makes the election to deduct or capitalize the costs discussed in this chapter except for exploration costs for mineral deposits. File 2010 taxes for free Each individual partner, shareholder, or beneficiary elects whether to deduct or capitalize exploration costs. File 2010 taxes for free You may be subject to the alternative minimum tax (AMT) if you deduct research and experimental, intangible drilling, exploration, development, circulation, or business organizational costs. File 2010 taxes for free For more information on the alternative minimum tax, see the instructions for the following forms. File 2010 taxes for free Form 6251, Alternative Minimum Tax—Individuals. File 2010 taxes for free Form 4626, Alternative Minimum Tax—Corporations. File 2010 taxes for free Topics - This chapter discusses: Carrying charges Research and experimental costs Intangible drilling costs Exploration costs Development costs Circulation costs Qualified disaster expenses Business start-up and organizational costs Reforestation costs Retired asset removal costs Barrier removal costs Film and television production costs Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 3468 Investment Credit 8826 Disabled Access Credit See chapter 12 for information about getting publications and forms. File 2010 taxes for free Carrying Charges Carrying charges include the taxes and interest you pay to carry or develop real property or to carry, transport, or install personal property. File 2010 taxes for free Certain carrying charges must be capitalized under the uniform capitalization rules. File 2010 taxes for free (For information on capitalization of interest, see chapter 4 . File 2010 taxes for free ) You can elect to capitalize carrying charges not subject to the uniform capitalization rules, but only if they are otherwise deductible. File 2010 taxes for free You can elect to capitalize carrying charges separately for each project you have and for each type of carrying charge. File 2010 taxes for free For unimproved and unproductive real property, your election is good for only 1 year. File 2010 taxes for free You must decide whether to capitalize carrying charges each year the property remains unimproved and unproductive. File 2010 taxes for free For other real property, your election to capitalize carrying charges remains in effect until construction or development is completed. File 2010 taxes for free For personal property, your election is effective until the date you install or first use it, whichever is later. File 2010 taxes for free How to make the election. File 2010 taxes for free   To make the election to capitalize a carrying charge, attach a statement to your original tax return for the year the election is to be effective indicating which charges you are electing to capitalize. File 2010 taxes for free However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). File 2010 taxes for free Attach the statement to the amended return and write “Filed pursuant to section 301. File 2010 taxes for free 9100-2” on the statement. File 2010 taxes for free File the amended return at the same address you filed the original return. File 2010 taxes for free Research and Experimental Costs The costs of research and experimentation are generally capital expenses. File 2010 taxes for free However, you can elect to deduct these costs as a current business expense. File 2010 taxes for free Your election to deduct these costs is binding for the year it is made and for all later years unless you get IRS approval to make a change. File 2010 taxes for free If you meet certain requirements, you may elect to defer and amortize research and experimental costs. File 2010 taxes for free For information on electing to defer and amortize these costs, see Research and Experimental Costs in chapter 8. File 2010 taxes for free Research and experimental costs defined. File 2010 taxes for free   Research and experimental costs are reasonable costs you incur in your trade or business for activities intended to provide information that would eliminate uncertainty about the development or improvement of a product. File 2010 taxes for free Uncertainty exists if the information available to you does not establish how to develop or improve a product or the appropriate design of a product. File 2010 taxes for free Whether costs qualify as research and experimental costs depends on the nature of the activity to which the costs relate rather than on the nature of the product or improvement being developed or the level of technological advancement. File 2010 taxes for free      The costs of obtaining a patent, including attorneys' fees paid or incurred in making and perfecting a patent application, are research and experimental costs. File 2010 taxes for free However, costs paid or incurred to obtain another's patent are not research and experimental costs. File 2010 taxes for free Product. File 2010 taxes for free   The term “product” includes any of the following items. File 2010 taxes for free Formula. File 2010 taxes for free Invention. File 2010 taxes for free Patent. File 2010 taxes for free Pilot model. File 2010 taxes for free Process. File 2010 taxes for free Technique. File 2010 taxes for free Property similar to the items listed above. File 2010 taxes for free It also includes products used by you in your trade or business or held for sale, lease, or license. File 2010 taxes for free Costs not included. File 2010 taxes for free   Research and experimental costs do not include expenses for any of the following activities. File 2010 taxes for free Advertising or promotions. File 2010 taxes for free Consumer surveys. File 2010 taxes for free Efficiency surveys. File 2010 taxes for free Management studies. File 2010 taxes for free Quality control testing. File 2010 taxes for free Research in connection with literary, historical, or similar projects. File 2010 taxes for free The acquisition of another's patent, model, production, or process. File 2010 taxes for free When and how to elect. File 2010 taxes for free   You make the election to deduct research and experimental costs by deducting them on your tax return for the year in which you first pay or incur research and experimental costs. File 2010 taxes for free If you do not make the election to deduct research and experimental costs in the first year in which you pay or incur the costs, you can deduct the costs in a later year only with approval from the IRS. File 2010 taxes for free Deducting or Amortizing Research and Experimentation Costs IF you . File 2010 taxes for free . File 2010 taxes for free . File 2010 taxes for free THEN . File 2010 taxes for free . File 2010 taxes for free . File 2010 taxes for free Elect to deduct research and experimental costs as a current business expense Deduct all research and experimental costs in the first year you pay or incur the costs and all later years. File 2010 taxes for free Do not deduct research and experimental costs as a current business expense If you meet the requirements, amortize them over at least 60 months, starting with the month you first receive an economic benefit from the research. File 2010 taxes for free See Research and Experimental Costs in chapter 8. File 2010 taxes for free Research credit. File 2010 taxes for free   If you pay or incur qualified research expenses, you may be able to take the research credit. File 2010 taxes for free For more information see Form 6765, Credit for Increasing Research Activities and its instructions. File 2010 taxes for free Intangible Drilling Costs The costs of developing oil, gas, or geothermal wells are ordinarily capital expenditures. File 2010 taxes for free You can usually recover them through depreciation or depletion. File 2010 taxes for free However, you can elect to deduct intangible drilling costs (IDCs) as a current business expense. File 2010 taxes for free These are certain drilling and development costs for wells in the United States in which you hold an operating or working interest. File 2010 taxes for free You can deduct only costs for drilling or preparing a well for the production of oil, gas, or geothermal steam or hot water. File 2010 taxes for free You can elect to deduct only the costs of items with no salvage value. File 2010 taxes for free These include wages, fuel, repairs, hauling, and supplies related to drilling wells and preparing them for production. File 2010 taxes for free Your cost for any drilling or development work done by contractors under any form of contract is also an IDC. File 2010 taxes for free However, see Amounts paid to contractor that must be capitalized , later. File 2010 taxes for free You can also elect to deduct the cost of drilling exploratory bore holes to determine the location and delineation of offshore hydrocarbon deposits if the shaft is capable of conducting hydrocarbons to the surface on completion. File 2010 taxes for free It does not matter whether there is any intent to produce hydrocarbons. File 2010 taxes for free If you do not elect to deduct your IDCs as a current business expense, you can elect to deduct them over the 60-month period beginning with the month they were paid or incurred. File 2010 taxes for free Amounts paid to contractor that must be capitalized. File 2010 taxes for free   Amounts paid to a contractor must be capitalized if they are either: Amounts properly allocable to the cost of depreciable property, or Amounts paid only out of production or proceeds from production if these amounts are depletable income to the recipient. File 2010 taxes for free How to make the election. File 2010 taxes for free   You elect to deduct IDCs as a current business expense by taking the deduction on your income tax return for the first tax year you have eligible costs. File 2010 taxes for free No formal statement is required. File 2010 taxes for free If you file Schedule C (Form 1040), enter these costs under “Other expenses. File 2010 taxes for free ”   For oil and gas wells, your election is binding for the year it is made and for all later years. File 2010 taxes for free For geothermal wells, your election can be revoked by the filing of an amended return on which you do not take the deduction. File 2010 taxes for free You can file the amended return for the year up to the normal time of expiration for filing a claim for credit or refund, generally, within 3 years after the date you filed the original return or within 2 years after the date you paid the tax, whichever is later. File 2010 taxes for free Energy credit for costs of geothermal wells. File 2010 taxes for free   If you capitalize the drilling and development costs of geothermal wells that you place in service during the tax year, you may be able to claim a business energy credit. File 2010 taxes for free See the Instructions for Form 3468 for more information. File 2010 taxes for free Nonproductive well. File 2010 taxes for free   If you capitalize your IDCs, you have another option if the well is nonproductive. File 2010 taxes for free You can deduct the IDCs of the nonproductive well as an ordinary loss. File 2010 taxes for free You must indicate and clearly state your election on your tax return for the year the well is completed. File 2010 taxes for free Once made, the election for oil and gas wells is binding for all later years. File 2010 taxes for free You can revoke your election for a geothermal well by filing an amended return that does not claim the loss. File 2010 taxes for free Costs incurred outside the United States. File 2010 taxes for free   You cannot deduct as a current business expense all the IDCs paid or incurred for an oil, gas, or geothermal well located outside the United States. File 2010 taxes for free However, you can elect to include the costs in the adjusted basis of the well to figure depletion or depreciation. File 2010 taxes for free If you do not make this election, you can deduct the costs over the 10-year period beginning with the tax year in which you paid or incurred them. File 2010 taxes for free These rules do not apply to a nonproductive well. File 2010 taxes for free Exploration Costs The costs of determining the existence, location, extent, or quality of any mineral deposit are ordinarily capital expenditures if the costs lead to the development of a mine. File 2010 taxes for free You recover these costs through depletion as the mineral is removed from the ground. File 2010 taxes for free However, you can elect to deduct domestic exploration costs paid or incurred before the beginning of the development stage of the mine (except those for oil and gas wells). File 2010 taxes for free How to make the election. File 2010 taxes for free   You elect to deduct exploration costs by taking the deduction on your income tax return, or on an amended income tax return, for the first tax year for which you wish to deduct the costs paid or incurred during the tax year. File 2010 taxes for free Your return must adequately describe and identify each property or mine, and clearly state how much is being deducted for each one. File 2010 taxes for free The election applies to the tax year you make this election and all later tax years. File 2010 taxes for free Partnerships and S corporations. File 2010 taxes for free   Each partner, not the partnership, elects whether to capitalize or to deduct that partner's share of exploration costs. File 2010 taxes for free Each shareholder, not the S corporation, elects whether to capitalize or to deduct that shareholder's share of exploration costs. File 2010 taxes for free Reduced corporate deductions for exploration costs. File 2010 taxes for free   A corporation (other than an S corporation) can deduct only 70% of its domestic exploration costs. File 2010 taxes for free It must capitalize the remaining 30% of costs and amortize them over the 60-month period starting with the month the exploration costs are paid or incurred. File 2010 taxes for free A corporation may also elect to capitalize and amortize mining exploration costs over a 10-year period. File 2010 taxes for free For more information on this method of amortization, see Internal Revenue Code section 59(e). File 2010 taxes for free   The 30% the corporation capitalizes cannot be added to its basis in the property to figure cost depletion. File 2010 taxes for free However, the amount amortized is treated as additional depreciation and is subject to recapture as ordinary income on a disposition of the property. File 2010 taxes for free See Section 1250 Property under Depreciation Recapture in chapter 3 of Publication 544. File 2010 taxes for free   These rules also apply to the deduction of development costs by corporations. File 2010 taxes for free See Development Costs , later. File 2010 taxes for free Recapture of exploration expenses. File 2010 taxes for free   When your mine reaches the producing stage, you must recapture any exploration costs you elected to deduct. File 2010 taxes for free Use either of the following methods. File 2010 taxes for free Method 1—Include the deducted costs in gross income for the tax year the mine reaches the producing stage. File 2010 taxes for free Your election must be clearly indicated on the return. File 2010 taxes for free Increase your adjusted basis in the mine by the amount included in income. File 2010 taxes for free Generally, you must elect this recapture method by the due date (including extensions) of your return. File 2010 taxes for free However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). File 2010 taxes for free Make the election on your amended return and write “Filed pursuant to section 301. File 2010 taxes for free 9100-2” on the form where you are including the income. File 2010 taxes for free File the amended return at the same address you filed the original return. File 2010 taxes for free Method 2—Do not claim any depletion deduction for the tax year the mine reaches the producing stage and any later tax years until the depletion you would have deducted equals the exploration costs you deducted. File 2010 taxes for free   You also must recapture deducted exploration costs if you receive a bonus or royalty from mine property before it reaches the producing stage. File 2010 taxes for free Do not claim any depletion deduction for the tax year you receive the bonus or royalty and any later tax years until the depletion you would have deducted equals the exploration costs you deducted. File 2010 taxes for free   Generally, if you dispose of the mine before you have fully recaptured the exploration costs you deducted, recapture the balance by treating all or part of your gain as ordinary income. File 2010 taxes for free Under these circumstances, you generally treat as ordinary income all of your gain if it is less than your adjusted exploration costs with respect to the mine. File 2010 taxes for free If your gain is more than your adjusted exploration costs, treat as ordinary income only a part of your gain, up to the amount of your adjusted exploration costs. File 2010 taxes for free Foreign exploration costs. File 2010 taxes for free   If you pay or incur exploration costs for a mine or other natural deposit located outside the United States, you cannot deduct all the costs in the current year. File 2010 taxes for free You can elect to include the costs (other than for an oil, gas, or geothermal well) in the adjusted basis of the mineral property to figure cost depletion. File 2010 taxes for free (Cost depletion is discussed in chapter 9 . File 2010 taxes for free ) If you do not make this election, you must deduct the costs over the 10-year period beginning with the tax year in which you pay or incur them. File 2010 taxes for free These rules also apply to foreign development costs. File 2010 taxes for free Development Costs You can deduct costs paid or incurred during the tax year for developing a mine or any other natural deposit (other than an oil or gas well) located in the United States. File 2010 taxes for free These costs must be paid or incurred after the discovery of ores or minerals in commercially marketable quantities. File 2010 taxes for free Development costs also include depreciation on improvements used in the development of ores or minerals and costs incurred for you by a contractor. File 2010 taxes for free Development costs do not include the costs for the acquisition or improvement of depreciable property. File 2010 taxes for free Instead of deducting development costs in the year paid or incurred, you can elect to treat the cost as deferred expenses and deduct them ratably as the units of produced ores or minerals benefited by the expenses are sold. File 2010 taxes for free This election applies each tax year to expenses paid or incurred in that year. File 2010 taxes for free Once made, the election is binding for the year and cannot be revoked for any reason. File 2010 taxes for free How to make the election. File 2010 taxes for free   The election to deduct development costs ratably as the ores or minerals are sold must be made for each mine or other natural deposit by a clear indication on your return or by a statement filed with the IRS office where you file your return. File 2010 taxes for free Generally, you must make the election by the due date of the return (including extensions). File 2010 taxes for free However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). File 2010 taxes for free Clearly indicate the election on your amended return and write “Filed pursuant to section 301. File 2010 taxes for free 9100-2. File 2010 taxes for free ” File the amended return at the same address you filed the original return. File 2010 taxes for free Foreign development costs. File 2010 taxes for free   The rules discussed earlier for foreign exploration costs apply to foreign development costs. File 2010 taxes for free Reduced corporate deductions for development costs. File 2010 taxes for free   The rules discussed earlier for reduced corporate deductions for exploration costs also apply to corporate deductions for development costs. File 2010 taxes for free Circulation Costs A publisher can deduct as a current business expense the costs of establishing, maintaining, or increasing the circulation of a newspaper, magazine, or other periodical. File 2010 taxes for free For example, a publisher can deduct the cost of hiring extra employees for a limited time to get new subscriptions through telephone calls. File 2010 taxes for free Circulation costs are deductible even if they normally would be capitalized. File 2010 taxes for free This rule does not apply to the following costs that must be capitalized. File 2010 taxes for free The purchase of land or depreciable property. File 2010 taxes for free The acquisition of circulation through the purchase of any part of the business of another publisher of a newspaper, magazine, or other periodical, including the purchase of another publisher's list of subscribers. File 2010 taxes for free Other treatment of circulation costs. File 2010 taxes for free   If you do not want to deduct circulation costs as a current business expense, you can elect one of the following ways to recover these costs. File 2010 taxes for free Capitalize all circulation costs that are properly chargeable to a capital account (see chapter 1 ). File 2010 taxes for free Amortize circulation costs over the 3-year period beginning with the tax year they were paid or incurred. File 2010 taxes for free How to make the election. File 2010 taxes for free   You elect to capitalize circulation costs by attaching a statement to your return for the first tax year the election applies. File 2010 taxes for free Your election is binding for the year it is made and for all later years, unless you get IRS approval to revoke it. File 2010 taxes for free Business Start-Up and Organizational Costs Business start-up and organizational costs are generally capital expenditures. File 2010 taxes for free However, you can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs paid or incurred after October 22, 2004. File 2010 taxes for free The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. File 2010 taxes for free Any remaining costs must be amortized. File 2010 taxes for free For information about amortizing start-up and organizational costs, see chapter 8 . File 2010 taxes for free Start-up costs include any amounts paid or incurred in connection with creating an active trade or business or investigating the creation or acquisition of an active trade or business. File 2010 taxes for free Organizational costs include the costs of creating a corporation. File 2010 taxes for free For more information on start-up and organizational costs, see chapter 8 . File 2010 taxes for free How to make the election. File 2010 taxes for free   You elect to deduct the start-up or organizational costs by claiming the deduction on your income tax return (filed by the due date including extensions) for the tax year in which the active trade or business begins. File 2010 taxes for free However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). File 2010 taxes for free Clearly indicate the election on your amended return and write “Filed pursuant to section 301. File 2010 taxes for free 9100-2. File 2010 taxes for free ” File the amended return at the same address you filed the original return. File 2010 taxes for free The election applies when computing taxable income for the current tax year and all subsequent years. File 2010 taxes for free Reforestation Costs Reforestation costs are generally capital expenditures. File 2010 taxes for free However, you can elect to deduct up to $10,000 ($5,000 if married filing separately; $0 for a trust) of qualifying reforestation costs paid or incurred after October 22, 2004, for each qualified timber property. File 2010 taxes for free The remaining costs can be amortized over an 84-month period. File 2010 taxes for free For information about amortizing reforestation costs, see chapter 8 . File 2010 taxes for free Qualifying reforestation costs are the direct costs of planting or seeding for forestation or reforestation. File 2010 taxes for free Qualified timber property is property that contains trees in significant commercial quantities. File 2010 taxes for free See chapter 8 for more information on qualifying reforestation costs and qualified timber property. File 2010 taxes for free If you elect to deduct qualified reforestation costs, create and maintain separate timber accounts for each qualified timber property and include all reforestation costs and the dates each was applied. File 2010 taxes for free Do not include this qualified timber property in any account (for example, depletion block) for which depletion is allowed. File 2010 taxes for free How to make the election. File 2010 taxes for free   You elect to deduct qualifying reforestation costs by claiming the deduction on your timely filed income tax return (including extensions) for the tax year the expenses were paid or incurred. File 2010 taxes for free If Form T (Timber), Forest Activities Schedule, is required, complete Part IV of Form T. File 2010 taxes for free If Form T is not required, attach a statement containing the following information for each qualified timber property for which an election is being made. File 2010 taxes for free The unique stand identification numbers. File 2010 taxes for free The total number of acres reforested during the tax year. File 2010 taxes for free The nature of the reforestation treatments. File 2010 taxes for free The total amounts of qualified reforestation expenditures eligible to be amortized or deducted. File 2010 taxes for free   If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). File 2010 taxes for free Clearly indicate the election on your amended return and write “Filed pursuant to section 301. File 2010 taxes for free 9100-2. File 2010 taxes for free ” File the amended return at the same address you filed the original return. File 2010 taxes for free The election applies when computing taxable income for the current tax year and all subsequent years. File 2010 taxes for free   For additional information on reforestation costs, see chapter 8 . File 2010 taxes for free Recapture. File 2010 taxes for free   This deduction may have to be recaptured as ordinary income under section 1245 when you sell or otherwise dispose of the property that would have received an addition to basis if you had not elected to deduct the expenditure. File 2010 taxes for free For more information on recapturing the deduction, see Depreciation Recapture in Publication 544. File 2010 taxes for free Retired Asset Removal Costs If you retire and remove a depreciable asset in connection with the installation or production of a replacement asset, you can deduct the costs of removing the retired asset. File 2010 taxes for free However, if you replace a component (part) of a depreciable asset, capitalize the removal costs if the replacement is an improvement and deduct the costs if the replacement is a repair. File 2010 taxes for free Barrier Removal Costs The cost of an improvement to a business asset is normally a capital expense. File 2010 taxes for free However, you can elect to deduct the costs of making a facility or public transportation vehicle more accessible to and usable by those who are disabled or elderly. File 2010 taxes for free You must own or lease the facility or vehicle for use in connection with your trade or business. File 2010 taxes for free A facility is all or any part of buildings, structures, equipment, roads, walks, parking lots, or similar real or personal property. File 2010 taxes for free A public transportation vehicle is a vehicle, such as a bus or railroad car, that provides transportation service to the public (including service for your customers, even if you are not in the business of providing transportation services). File 2010 taxes for free You cannot deduct any costs that you paid or incurred to completely renovate or build a facility or public transportation vehicle or to replace depreciable property in the normal course of business. File 2010 taxes for free Deduction limit. File 2010 taxes for free   The most you can deduct as a cost of removing barriers to the disabled and the elderly for any tax year is $15,000. File 2010 taxes for free However, you can add any costs over this limit to the basis of the property and depreciate these excess costs. File 2010 taxes for free Partners and partnerships. File 2010 taxes for free   The $15,000 limit applies to a partnership and also to each partner in the partnership. File 2010 taxes for free A partner can allocate the $15,000 limit in any manner among the partner's individually incurred costs and the partner's distributive share of partnership costs. File 2010 taxes for free If the partner cannot deduct the entire share of partnership costs, the partnership can add any costs not deducted to the basis of the improved property. File 2010 taxes for free   A partnership must be able to show that any amount added to basis was not deducted by the partner and that it was over a partner's $15,000 limit (as determined by the partner). File 2010 taxes for free If the partnership cannot show this, it is presumed that the partner was able to deduct the distributive share of the partnership's costs in full. File 2010 taxes for free Example. File 2010 taxes for free Emilio Azul's distributive share of ABC partnership's deductible expenses for the removal of architectural barriers was $14,000. File 2010 taxes for free Emilio had $12,000 of similar expenses in his sole proprietorship. File 2010 taxes for free He elected to deduct $7,000 of them. File 2010 taxes for free Emilio allocated the remaining $8,000 of the $15,000 limit to his share of ABC's expenses. File 2010 taxes for free Emilio can add the excess $5,000 of his own expenses to the basis of the property used in his business. File 2010 taxes for free Also, if ABC can show that Emilio could not deduct $6,000 ($14,000 – $8,000) of his share of the partnership's expenses because of how Emilio applied the limit, ABC can add $6,000 to the basis of its property. File 2010 taxes for free Qualification standards. File 2010 taxes for free   You can deduct your costs as a current expense only if the barrier removal meets the guidelines and requirements issued by the Architectural and Transportation Barriers Compliance Board under the Americans with Disabilities Act (ADA) of 1990. File 2010 taxes for free You can view the Americans with Disabilities Act at www. File 2010 taxes for free ada. File 2010 taxes for free gov/pubs/ada. File 2010 taxes for free htm. File 2010 taxes for free   The following is a list of some architectural barrier removal costs that can be deducted. File 2010 taxes for free Ground and floor surfaces. File 2010 taxes for free Walks. File 2010 taxes for free Parking lots. File 2010 taxes for free Ramps. File 2010 taxes for free Entrances. File 2010 taxes for free Doors and doorways. File 2010 taxes for free Stairs. File 2010 taxes for free Floors. File 2010 taxes for free Toilet rooms. File 2010 taxes for free Water fountains. File 2010 taxes for free Public telephones. File 2010 taxes for free Elevators. File 2010 taxes for free Controls. File 2010 taxes for free Signage. File 2010 taxes for free Alarms. File 2010 taxes for free Protruding objects. File 2010 taxes for free Symbols of accessibility. File 2010 taxes for free You can find the ADA guidelines and requirements for architectural barrier removal at www. File 2010 taxes for free usdoj. File 2010 taxes for free gov/crt/ada/reg3a. File 2010 taxes for free html. File 2010 taxes for free   The costs for removal of transportation barriers from rail facilities, buses, and rapid and light rail vehicles are deductible. File 2010 taxes for free You can find the guidelines and requirements for transportation barrier removal at www. File 2010 taxes for free fta. File 2010 taxes for free dot. File 2010 taxes for free gov. File 2010 taxes for free   Also, you can access the ADA website at www. File 2010 taxes for free ada. File 2010 taxes for free gov for additional information. File 2010 taxes for free Other barrier removals. File 2010 taxes for free   To be deductible, expenses of removing any barrier not covered by the above standards must meet all three of the following tests. File 2010 taxes for free The removed barrier must be a substantial barrier to access or use of a facility or public transportation vehicle by persons who have a disability or are elderly. File 2010 taxes for free The removed barrier must have been a barrier for at least one major group of persons who have a disability or are elderly (such as people who are blind, deaf, or wheelchair users). File 2010 taxes for free The barrier must be removed without creating any new barrier that significantly impairs access to or use of the facility or vehicle by a major group of persons who have a disability or are elderly. File 2010 taxes for free How to make the election. File 2010 taxes for free   If you elect to deduct your costs for removing barriers to the disabled or the elderly, claim the deduction on your income tax return (partnership return for partnerships) for the tax year the expenses were paid or incurred. File 2010 taxes for free Identify the deduction as a separate item. File 2010 taxes for free The election applies to all the qualifying costs you have during the year, up to the $15,000 limit. File 2010 taxes for free If you make this election, you must maintain adequate records to support your deduction. File 2010 taxes for free   For your election to be valid, you generally must file your return by its due date, including extensions. File 2010 taxes for free However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). File 2010 taxes for free Clearly indicate the election on your amended return and write “Filed pursuant to section 301. File 2010 taxes for free 9100-2. File 2010 taxes for free ” File the amended return at the same address you filed the original return. File 2010 taxes for free Your election is irrevocable after the due date, including extensions, of your return. File 2010 taxes for free Disabled access credit. File 2010 taxes for free   If you make your business accessible to persons with disabilities and your business is an eligible small business, you may be able to claim the disabled access credit. File 2010 taxes for free If you choose to claim the credit, you must reduce the amount you deduct or capitalize by the amount of the credit. File 2010 taxes for free   For more information, see Form 8826, Disabled Access Credit. File 2010 taxes for free Film and Television Production Costs Film and television production costs are generally capital expenses. File 2010 taxes for free However, you can elect to deduct costs paid or incurred for certain productions commencing before January 1, 2014. File 2010 taxes for free For more information, see section 181 of the Internal Revenue Code and the related Treasury Regulations. File 2010 taxes for free Prev  Up  Next   Home   More Online Publications