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Filing 1040 Online

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Filing 1040 Online

Filing 1040 online 4. Filing 1040 online   How Income of Aliens Is Taxed Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Resident Aliens Nonresident AliensTrade or Business in the United States Effectively Connected Income The 30% Tax Income From Real Property Transportation Tax Interrupted Period of Residence Expatriation TaxExpatriation Before June 4, 2004 Expatriation After June 3, 2004, and Before June 17, 2008 Expatriation After June 16, 2008 Introduction Resident and nonresident aliens are taxed in different ways. Filing 1040 online Resident aliens are generally taxed in the same way as U. Filing 1040 online S. Filing 1040 online citizens. Filing 1040 online Nonresident aliens are taxed based on the source of their income and whether or not their income is effectively connected with a U. Filing 1040 online S. Filing 1040 online trade or business. Filing 1040 online The following discussions will help you determine if income you receive during the tax year is effectively connected with a U. Filing 1040 online S. Filing 1040 online trade or business and how it is taxed. Filing 1040 online Topics - This chapter discusses: Income that is effectively connected with a U. Filing 1040 online S. Filing 1040 online trade or business. Filing 1040 online Income that is not effectively connected with a U. Filing 1040 online S. Filing 1040 online trade or business. Filing 1040 online Interrupted period of residence. Filing 1040 online Expatriation tax. Filing 1040 online Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 1212 List of Original Issue Discount Instruments Form (and Instructions) 6251 Alternative Minimum Tax—Individuals Schedule D (Form 1040) Capital Gains and Losses See chapter 12 for information about getting these publications and forms. Filing 1040 online Resident Aliens Resident aliens are generally taxed in the same way as U. Filing 1040 online S. Filing 1040 online citizens. Filing 1040 online This means that their worldwide income is subject to U. Filing 1040 online S. Filing 1040 online tax and must be reported on their U. Filing 1040 online S. Filing 1040 online tax return. Filing 1040 online Income of resident aliens is subject to the graduated tax rates that apply to U. Filing 1040 online S. Filing 1040 online citizens. Filing 1040 online Resident aliens use the Tax Table or Tax Computation Worksheets located in the Form 1040 instructions, which apply to U. Filing 1040 online S. Filing 1040 online citizens. Filing 1040 online Nonresident Aliens A nonresident alien's income that is subject to U. Filing 1040 online S. Filing 1040 online income tax must be divided into two categories: Income that is effectively connected with a trade or business in the United States, and Income that is not effectively connected with a trade or business in the United States (discussed under The 30% Tax, later). Filing 1040 online The difference between these two categories is that effectively connected income, after allowable deductions, is taxed at graduated rates. Filing 1040 online These are the same rates that apply to U. Filing 1040 online S. Filing 1040 online citizens and residents. Filing 1040 online Income that is not effectively connected is taxed at a flat 30% (or lower treaty) rate. Filing 1040 online If you were formerly a U. Filing 1040 online S. Filing 1040 online citizen or resident alien, these rules may not apply. Filing 1040 online See Expatriation Tax, later, in this chapter. Filing 1040 online Trade or Business in the United States Generally, you must be engaged in a trade or business during the tax year to be able to treat income received in that year as effectively connected with that trade or business. Filing 1040 online Whether you are engaged in a trade or business in the United States depends on the nature of your activities. Filing 1040 online The discussions that follow will help you determine whether you are engaged in a trade or business in the United States. Filing 1040 online Personal Services If you perform personal services in the United States at any time during the tax year, you usually are considered engaged in a trade or business in the United States. Filing 1040 online Certain compensation paid to a nonresident alien by a foreign employer is not included in gross income. Filing 1040 online For more information, see Services Performed for Foreign Employer in chapter 3. Filing 1040 online Other Trade or Business Activities Other examples of being engaged in a trade or business in the United States follow. Filing 1040 online Students and trainees. Filing 1040 online   You are considered engaged in a trade or business in the United States if you are temporarily present in the United States as a nonimmigrant under an “F,” “J,” “M,” or “Q” visa. Filing 1040 online A nonresident alien temporarily present in the United States under a “J” visa includes a nonresident alien individual admitted to the United States as an exchange visitor under the Mutual Educational and Cultural Exchange Act of 1961. Filing 1040 online The taxable part of any scholarship or fellowship grant that is U. Filing 1040 online S. Filing 1040 online source income is treated as effectively connected with a trade or business in the United States. Filing 1040 online Business operations. Filing 1040 online   If you own and operate a business in the United States selling services, products, or merchandise, you are, with certain exceptions, engaged in a trade or business in the United States. Filing 1040 online Partnerships. Filing 1040 online   If you are a member of a partnership that at any time during the tax year is engaged in a trade or business in the United States, you are considered to be engaged in a trade or business in the United States. Filing 1040 online Beneficiary of an estate or trust. Filing 1040 online   If you are the beneficiary of an estate or trust that is engaged in a trade or business in the United States, you are treated as being engaged in the same trade or business. Filing 1040 online Trading in stocks, securities, and commodities. Filing 1040 online   If your only U. Filing 1040 online S. Filing 1040 online business activity is trading in stocks, securities, or commodities (including hedging transactions) through a U. Filing 1040 online S. Filing 1040 online resident broker or other agent, you are not engaged in a trade or business in the United States. Filing 1040 online   For transactions in stocks or securities, this applies to any nonresident alien, including a dealer or broker in stocks and securities. Filing 1040 online   For transactions in commodities, this applies to commodities that are usually traded on an organized commodity exchange and to transactions that are usually carried out at such an exchange. Filing 1040 online   This discussion does not apply if you have a U. Filing 1040 online S. Filing 1040 online office or other fixed place of business at any time during the tax year through which, or by the direction of which, you carry out your transactions in stocks, securities, or commodities. Filing 1040 online Trading for a nonresident alien's own account. Filing 1040 online   You are not engaged in a trade or business in the United States if trading for your own account in stocks, securities, or commodities is your only U. Filing 1040 online S. Filing 1040 online business activity. Filing 1040 online This applies even if the trading takes place while you are present in the United States or is done by your employee or your broker or other agent. Filing 1040 online   This does not apply to trading for your own account if you are a dealer in stocks, securities, or commodities. Filing 1040 online This does not necessarily mean, however, that as a dealer you are considered to be engaged in a trade or business in the United States. Filing 1040 online Determine that based on the facts and circumstances in each case or under the rules given above in Trading in stocks, securities, and commodities . Filing 1040 online Effectively Connected Income If you are engaged in a U. Filing 1040 online S. Filing 1040 online trade or business, all income, gain, or loss for the tax year that you get from sources within the United States (other than certain investment income) is treated as effectively connected income. Filing 1040 online This applies whether or not there is any connection between the income and the trade or business being carried on in the United States during the tax year. Filing 1040 online Two tests, described next under Investment Income, determine whether certain items of investment income (such as interest, dividends, and royalties) are treated as effectively connected with that business. Filing 1040 online In limited circumstances, some kinds of foreign source income may be treated as effectively connected with a trade or business in the United States. Filing 1040 online For a discussion of these rules, see Foreign Income , later. Filing 1040 online Investment Income Investment income from U. Filing 1040 online S. Filing 1040 online sources that may or may not be treated as effectively connected with a U. Filing 1040 online S. Filing 1040 online trade or business generally falls into the following three categories. Filing 1040 online Fixed or determinable income (interest, dividends, rents, royalties, premiums, annuities, etc. Filing 1040 online ). Filing 1040 online Gains (some of which are considered capital gains) from the sale or exchange of the following types of property. Filing 1040 online Timber, coal, or domestic iron ore with a retained economic interest. Filing 1040 online Patents, copyrights, and similar property on which you receive contingent payments after October 4, 1966. Filing 1040 online Patents transferred before October 5, 1966. Filing 1040 online Original issue discount obligations. Filing 1040 online Capital gains (and losses). Filing 1040 online Use the two tests, described next, to determine whether an item of U. Filing 1040 online S. Filing 1040 online source income falling in one of the three categories above and received during the tax year is effectively connected with your U. Filing 1040 online S. Filing 1040 online trade or business. Filing 1040 online If the tests indicate that the item of income is effectively connected, you must include it with your other effectively connected income. Filing 1040 online If the item of income is not effectively connected, include it with all other income discussed under The 30% Tax later, in this chapter. Filing 1040 online Asset-use test. Filing 1040 online   This test usually applies to income that is not directly produced by trade or business activities. Filing 1040 online Under this test, if an item of income is from assets (property) used in, or held for use in, the trade or business in the United States, it is considered effectively connected. Filing 1040 online   An asset is used in, or held for use in, the trade or business in the United States if the asset is: Held for the principal purpose of promoting the conduct of a trade or business in the United States, Acquired and held in the ordinary course of the trade or business conducted in the United States (for example, an account receivable or note receivable arising from that trade or business), or Otherwise held to meet the present needs of the trade or business in the United States and not its anticipated future needs. Filing 1040 online Generally, stock of a corporation is not treated as an asset used in, or held for use in, a trade or business in the United States. Filing 1040 online Business-activities test. Filing 1040 online   This test usually applies when income, gain, or loss comes directly from the active conduct of the trade or business. Filing 1040 online The business-activities test is most important when: Dividends or interest are received by a dealer in stocks or securities, Royalties are received in the trade or business of licensing patents or similar property, or Service fees are earned by a servicing business. Filing 1040 online Under this test, if the conduct of the U. Filing 1040 online S. Filing 1040 online trade or business was a material factor in producing the income, the income is considered effectively connected. Filing 1040 online Personal Service Income You usually are engaged in a U. Filing 1040 online S. Filing 1040 online trade or business when you perform personal services in the United States. Filing 1040 online Personal service income you receive in a tax year in which you are engaged in a U. Filing 1040 online S. Filing 1040 online trade or business is effectively connected with a U. Filing 1040 online S. Filing 1040 online trade or business. Filing 1040 online Income received in a year other than the year you performed the services is also effectively connected if it would have been effectively connected if received in the year you performed the services. Filing 1040 online Personal service income includes wages, salaries, commissions, fees, per diem allowances, and employee allowances and bonuses. Filing 1040 online The income may be paid to you in the form of cash, services, or property. Filing 1040 online If you are engaged in a U. Filing 1040 online S. Filing 1040 online trade or business only because you perform personal services in the United States during the tax year, income and gains from assets, and gains and losses from the sale or exchange of capital assets are generally not effectively connected with your trade or business. Filing 1040 online However, if there is a direct economic relationship between your holding of the asset and your trade or business of performing personal services, the income, gain, or loss is effectively connected. Filing 1040 online Pensions. Filing 1040 online   If you were a nonresident alien engaged in a U. Filing 1040 online S. Filing 1040 online trade or business after 1986 because you performed personal services in the United States, and you later receive a pension or retirement pay attributable to these services, such payments are effectively connected income in each year you receive them. Filing 1040 online This is true whether or not you are engaged in a U. Filing 1040 online S. Filing 1040 online trade or business in the year you receive the retirement pay. Filing 1040 online Transportation Income Transportation income (defined in chapter 2) is effectively connected if you meet both of the following conditions. Filing 1040 online You had a fixed place of business in the United States involved in earning the income. Filing 1040 online At least 90% of your U. Filing 1040 online S. Filing 1040 online source transportation income is attributable to regularly scheduled transportation. Filing 1040 online “Fixed place of business” generally means a place, site, structure, or other similar facility through which you engage in a trade or business. Filing 1040 online “Regularly scheduled transportation” means that a ship or aircraft follows a published schedule with repeated sailings or flights at regular intervals between the same points for voyages or flights that begin or end in the United States. Filing 1040 online This definition applies to both scheduled and chartered air transportation. Filing 1040 online If you do not meet the two conditions above, the income is not effectively connected and is taxed at a 4% rate. Filing 1040 online See Transportation Tax, later, in this chapter. Filing 1040 online Business Profits and Losses and Sales Transactions All profits or losses from U. Filing 1040 online S. Filing 1040 online sources that are from the operation of a business in the United States are effectively connected with a trade or business in the United States. Filing 1040 online For example, profit from the sale in the United States of inventory property purchased either in this country or in a foreign country is effectively connected trade or business income. Filing 1040 online A share of U. Filing 1040 online S. Filing 1040 online source profits or losses of a partnership that is engaged in a trade or business in the United States is also effectively connected with a trade or business in the United States. Filing 1040 online Real Property Gain or Loss Gains and losses from the sale or exchange of U. Filing 1040 online S. Filing 1040 online real property interests (whether or not they are capital assets) are taxed as if you are engaged in a trade or business in the United States. Filing 1040 online You must treat the gain or loss as effectively connected with that trade or business. Filing 1040 online U. Filing 1040 online S. Filing 1040 online real property interest. Filing 1040 online   This is any interest in real property located in the United States or the U. Filing 1040 online S. Filing 1040 online Virgin Islands or any interest (other than as a creditor) in a domestic corporation that is a U. Filing 1040 online S. Filing 1040 online real property holding corporation. Filing 1040 online Real property includes the following. Filing 1040 online Land and unsevered natural products of the land, such as growing crops and timber, and mines, wells, and other natural deposits. Filing 1040 online Improvements on land, including buildings, other permanent structures, and their structural components. Filing 1040 online Personal property associated with the use of real property, such as equipment used in farming, mining, forestry, or construction or property used in lodging facilities or rented office space, unless the personal property is: Disposed of more than one year before or after the disposition of the real property, or Separately sold to persons unrelated either to the seller or to the buyer of the real property. Filing 1040 online U. Filing 1040 online S. Filing 1040 online real property holding corporation. Filing 1040 online   A corporation is a U. Filing 1040 online S. Filing 1040 online real property holding corporation if the fair market value of the corporation's U. Filing 1040 online S. Filing 1040 online real property interests are at least 50% of the total fair market value of: The corporation's U. Filing 1040 online S. Filing 1040 online real property interests, plus The corporation's interests in real property located outside the United States, plus The corporation's other assets that are used in, or held for use in, a trade or business. Filing 1040 online   Gain or loss on the sale of the stock in any domestic corporation is taxed as if you are engaged in a U. Filing 1040 online S. Filing 1040 online trade or business unless you establish that the corporation is not a U. Filing 1040 online S. Filing 1040 online real property holding corporation. Filing 1040 online   A U. Filing 1040 online S. Filing 1040 online real property interest does not include a class of stock of a corporation that is regularly traded on an established securities market, unless you hold more than 5% of the fair market value of that class of stock. Filing 1040 online An interest in a foreign corporation owning U. Filing 1040 online S. Filing 1040 online real property generally is not a U. Filing 1040 online S. Filing 1040 online real property interest unless the corporation chooses to be treated as a domestic corporation. Filing 1040 online Qualified investment entities. Filing 1040 online   Special rules apply to qualified investment entities (QIEs). Filing 1040 online A QIE is any real estate investment trust (REIT) or any regulated investment company (RIC) that is a U. Filing 1040 online S. Filing 1040 online real property holding corporation. Filing 1040 online    Generally, any distribution from a QIE to a shareholder that is attributable to gain from the sale or exchange of a U. Filing 1040 online S. Filing 1040 online real property interest is treated as a U. Filing 1040 online S. Filing 1040 online real property gain by the shareholder receiving the distribution. Filing 1040 online A distribution by a QIE on stock regularly traded on an established securities market in the United States is not treated as gain from the sale or exchange of a U. Filing 1040 online S. Filing 1040 online real property interest if you did not own more than 5% of that stock at any time during the 1-year period ending on the date of the distribution. Filing 1040 online A distribution that you do not treat as gain from the sale or exchange of a U. Filing 1040 online S. Filing 1040 online real property interest is included in your gross income as a regular dividend. Filing 1040 online Note. Filing 1040 online Beginning January 1, 2014 (unless extended by legislation), a RIC that is a U. Filing 1040 online S. Filing 1040 online real property holding corporation will only be treated as a QIE for certain distributions from the RIC that are directly or indirectly attributable to distributions received by the RIC from a REIT. Filing 1040 online Domestically controlled QIE. Filing 1040 online   The sale of an interest in a domestically controlled QIE is not the sale of a U. Filing 1040 online S. Filing 1040 online real property interest. Filing 1040 online The entity is domestically controlled if at all times during the testing period less than 50% in value of its stock was held, directly or indirectly, by foreign persons. Filing 1040 online The testing period is the shorter of (a) the 5-year period ending on the date of disposition, or (b) the period during which the entity was in existence. Filing 1040 online Wash sale. Filing 1040 online    If you dispose of an interest in a domestically controlled QIE in an applicable wash sale transaction, special rules apply. Filing 1040 online An applicable wash sale transaction is one in which you: Dispose of an interest in the domestically controlled QIE during the 30-day period before the ex-dividend date of a distribution that you would (but for the disposition) have treated as gain from the sale or exchange of a U. Filing 1040 online S. Filing 1040 online real property interest, and Acquire, or enter into a contract or option to acquire, a substantially identical interest in that entity during the 61-day period that began on the first day of the 30-day period. Filing 1040 online If this occurs, you are treated as having gain from the sale or exchange of a U. Filing 1040 online S. Filing 1040 online real property interest in an amount equal to the distribution made after June 15, 2006, that would have been treated as such gain. Filing 1040 online This also applies to any substitute dividend payment. Filing 1040 online   A transaction is not treated as an applicable wash sale transaction if: You actually receive the distribution from the domestically controlled QIE related to the interest disposed of, or acquired, in the transaction, or You dispose of any class of stock in a QIE that is regularly traded on an established securities market in the United States but only if you did not own more than 5% of that class of stock at any time during the 1-year period ending on the date of the distribution. Filing 1040 online Alternative minimum tax. Filing 1040 online   There may be a minimum tax on your net gain from the disposition of U. Filing 1040 online S. Filing 1040 online real property interests. Filing 1040 online Figure the amount of this tax, if any, on Form 6251. Filing 1040 online Withholding of tax. Filing 1040 online   If you dispose of a U. Filing 1040 online S. Filing 1040 online real property interest, the buyer may have to withhold tax. Filing 1040 online See the discussion of Tax Withheld on Real Property Sales in chapter 8. Filing 1040 online Foreign Income You must treat three kinds of foreign source income as effectively connected with a trade or business in the United States if: You have an office or other fixed place of business in the United States to which the income can be attributed, That office or place of business is a material factor in producing the income, and The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. Filing 1040 online An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. Filing 1040 online The three kinds of foreign source income are listed below. Filing 1040 online Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the United States or from any interest in such property. Filing 1040 online Included are rents or royalties for the use, or for the privilege of using, outside the United States, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the United States. Filing 1040 online Dividends, interest, or amounts received for the provision of a guarantee of indebtedness issued after September 27, 2010, from the active conduct of a banking, financing, or similar business in the United States. Filing 1040 online A substitute dividend or interest payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts received on the transferred security. Filing 1040 online Income, gain, or loss from the sale outside the United States, through the U. Filing 1040 online S. Filing 1040 online office or other fixed place of business, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. Filing 1040 online Item (3) will not apply if you sold the property for use, consumption, or disposition outside the United States and an office or other fixed place of business in a foreign country was a material factor in the sale. Filing 1040 online Any foreign source income that is equivalent to any item of income described above is treated as effectively connected with a U. Filing 1040 online S. Filing 1040 online trade or business. Filing 1040 online For example, foreign source interest and dividend equivalents are treated as U. Filing 1040 online S. Filing 1040 online effectively connected income if the income is derived by a foreign person in the active conduct of a banking, financing, or similar business within the United States. Filing 1040 online Tax on Effectively Connected Income Income you receive during the tax year that is effectively connected with your trade or business in the United States is, after allowable deductions, taxed at the rates that apply to U. Filing 1040 online S. Filing 1040 online citizens and residents. Filing 1040 online Generally, you can receive effectively connected income only if you are a nonresident alien engaged in trade or business in the United States during the tax year. Filing 1040 online However, income you receive from the sale or exchange of property, the performance of services, or any other transaction in another tax year is treated as effectively connected in that year if it would have been effectively connected in the year the transaction took place or you performed the services. Filing 1040 online Example. Filing 1040 online Ted Richards, a nonresident alien, entered the United States in August 2012, to perform personal services in the U. Filing 1040 online S. Filing 1040 online office of his overseas employer. Filing 1040 online He worked in the U. Filing 1040 online S. Filing 1040 online office until December 25, 2012, but did not leave this country until January 11, 2013. Filing 1040 online On January 8, 2013, he received his final paycheck for services performed in the United States during 2012. Filing 1040 online All of Ted's income during his stay here is U. Filing 1040 online S. Filing 1040 online source income. Filing 1040 online During 2012, Ted was engaged in the trade or business of performing personal services in the United States. Filing 1040 online Therefore, all amounts paid to him in 2012 for services performed in the United States during 2012 are effectively connected with that trade or business during 2012. Filing 1040 online The salary payment Ted received in January 2013 is U. Filing 1040 online S. Filing 1040 online source income to him in 2013. Filing 1040 online It is effectively connected with a trade or business in the United States because he was engaged in a trade or business in the United States during 2012 when he performed the services that earned the income. Filing 1040 online Real property income. Filing 1040 online   You may be able to choose to treat all income from real property as effectively connected. Filing 1040 online See Income From Real Property , later, in this chapter. Filing 1040 online The 30% Tax Tax at a 30% (or lower treaty) rate applies to certain items of income or gains from U. Filing 1040 online S. Filing 1040 online sources but only if the items are not effectively connected with your U. Filing 1040 online S. Filing 1040 online trade or business. Filing 1040 online Fixed or Determinable Income The 30% (or lower treaty) rate applies to the gross amount of U. Filing 1040 online S. Filing 1040 online source fixed or determinable annual or periodic gains, profits, or income. Filing 1040 online Income is fixed when it is paid in amounts known ahead of time. Filing 1040 online Income is determinable whenever there is a basis for figuring the amount to be paid. Filing 1040 online Income can be periodic if it is paid from time to time. Filing 1040 online It does not have to be paid annually or at regular intervals. Filing 1040 online Income can be determinable or periodic even if the length of time during which the payments are made is increased or decreased. Filing 1040 online Items specifically included as fixed or determinable income are interest (other than original issue discount), dividends, dividend equivalent payments (defined in chapter 2), rents, premiums, annuities, salaries, wages, and other compensation. Filing 1040 online A substitute dividend or interest payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts received on the transferred security. Filing 1040 online Other items of income, such as royalties, also may be subject to the 30% tax. Filing 1040 online Some fixed or determinable income may be exempt from U. Filing 1040 online S. Filing 1040 online tax. Filing 1040 online See chapter 3 if you are not sure whether the income is taxable. Filing 1040 online Original issue discount (OID). Filing 1040 online   If you sold, exchanged, or received a payment on a bond or other debt instrument that was issued at a discount after March 31, 1972, all or part of the original issue discount (OID) (other than portfolio interest) may be subject to the 30% tax. Filing 1040 online The amount of OID is the difference between the stated redemption price at maturity and the issue price of the debt instrument. Filing 1040 online The 30% tax applies in the following circumstances. Filing 1040 online You received a payment on a debt instrument. Filing 1040 online In this case, the amount of OID subject to tax is the OID that accrued while you held the debt instrument minus the OID previously taken into account. Filing 1040 online But the tax on the OID cannot be more than the payment minus the tax on the interest payment on the debt instrument. Filing 1040 online You sold or exchanged the debt instrument. Filing 1040 online The amount of OID subject to tax is the OID that accrued while you held the debt instrument minus the amount already taxed in (1) above. Filing 1040 online   Report on your return the amount of OID shown on Form 1042-S, Foreign Person's U. Filing 1040 online S. Filing 1040 online Source Income Subject to Withholding, if you bought the debt instrument at original issue. Filing 1040 online However, you must recompute your proper share of OID shown on Form 1042-S if any of the following apply. Filing 1040 online You bought the debt instrument at a premium or paid an acquisition premium. Filing 1040 online The debt instrument is a stripped bond or a stripped coupon (including zero coupon instruments backed by U. Filing 1040 online S. Filing 1040 online Treasury securities). Filing 1040 online The debt instrument is a contingent payment or inflation-indexed debt instrument. Filing 1040 online For the definition of premium and acquisition premium and instructions on how to recompute OID, get Publication 1212. Filing 1040 online   If you held a bond or other debt instrument that was issued at a discount before April 1, 1972, contact the IRS for further information. Filing 1040 online See chapter 12. Filing 1040 online Gambling Winnings In general, nonresident aliens are subject to the 30% tax on the gross proceeds from gambling won in the United States if that income is not effectively connected with a U. Filing 1040 online S. Filing 1040 online trade or business and is not exempted by treaty. Filing 1040 online However, no tax is imposed on nonbusiness gambling income a nonresident alien wins playing blackjack, baccarat, craps, roulette, or big-6 wheel in the United States. Filing 1040 online Nonresident aliens are taxed at graduated rates on net gambling income won in the United States that is effectively connected with a U. Filing 1040 online S. Filing 1040 online trade or business. Filing 1040 online Social Security Benefits A nonresident alien must include 85% of any U. Filing 1040 online S. Filing 1040 online social security benefit (and the social security equivalent part of a tier 1 railroad retirement benefit) in U. Filing 1040 online S. Filing 1040 online source fixed or determinable annual or periodic income. Filing 1040 online Social security benefits include monthly retirement, survivor, and disability benefits. Filing 1040 online This income is exempt under some tax treaties. Filing 1040 online See Table 1 in Publication 901, U. Filing 1040 online S. Filing 1040 online Tax Treaties, for a list of tax treaties that exempt U. Filing 1040 online S. Filing 1040 online social security benefits from U. Filing 1040 online S. Filing 1040 online tax. Filing 1040 online Sales or Exchanges of Capital Assets These rules apply only to those capital gains and losses from sources in the United States that are not effectively connected with a trade or business in the United States. Filing 1040 online They apply even if you are engaged in a trade or business in the United States. Filing 1040 online These rules do not apply to the sale or exchange of a U. Filing 1040 online S. Filing 1040 online real property interest or to the sale of any property that is effectively connected with a trade or business in the United States. Filing 1040 online See Real Property Gain or Loss , earlier, under Effectively Connected Income. Filing 1040 online A capital asset is everything you own except: Inventory. Filing 1040 online Business accounts or notes receivable. Filing 1040 online Depreciable property used in a trade or business. Filing 1040 online Real property used in a trade or business. Filing 1040 online Supplies regularly used in a trade or business. Filing 1040 online Certain copyrights, literary or musical or artistic compositions, letters or memoranda, or similar property. Filing 1040 online Certain U. Filing 1040 online S. Filing 1040 online government publications. Filing 1040 online Certain commodities derivative financial instruments held by a commodities derivatives dealer. Filing 1040 online Hedging transactions. Filing 1040 online A capital gain is a gain on the sale or exchange of a capital asset. Filing 1040 online A capital loss is a loss on the sale or exchange of a capital asset. Filing 1040 online If the sale is in foreign currency, for the purpose of determining gain, the cost and selling price of the property should be expressed in U. Filing 1040 online S. Filing 1040 online currency at the rate of exchange prevailing as of the date of the purchase and date of the sale, respectively. Filing 1040 online You may want to read Publication 544. Filing 1040 online However, use Publication 544 only to determine what is a sale or exchange of a capital asset, or what is treated as such. Filing 1040 online Specific tax treatment that applies to U. Filing 1040 online S. Filing 1040 online citizens or residents generally does not apply to you. Filing 1040 online The following gains are subject to the 30% (or lower treaty) rate without regard to the 183-day rule, discussed later. Filing 1040 online Gains on the disposal of timber, coal, or domestic iron ore with a retained economic interest. Filing 1040 online Gains on contingent payments received from the sale or exchange of patents, copyrights, and similar property after October 4, 1966. Filing 1040 online Gains on certain transfers of all substantial rights to, or an undivided interest in, patents if the transfers were made before October 5, 1966. Filing 1040 online Gains on the sale or exchange of original issue discount obligations. Filing 1040 online Gains in (1) are not subject to the 30% (or lower treaty) rate if you choose to treat the gains as effectively connected with a U. Filing 1040 online S. Filing 1040 online trade or business. Filing 1040 online See Income From Real Property , later. Filing 1040 online 183-day rule. Filing 1040 online   If you were in the United States for 183 days or more during the tax year, your net gain from sales or exchanges of capital assets is taxed at a 30% (or lower treaty) rate. Filing 1040 online For purposes of the 30% (or lower treaty) rate, net gain is the excess of your capital gains from U. Filing 1040 online S. Filing 1040 online sources over your capital losses from U. Filing 1040 online S. Filing 1040 online sources. Filing 1040 online This rule applies even if any of the transactions occurred while you were not in the United States. Filing 1040 online   To determine your net gain, consider the amount of your gains and losses that would be recognized and taken into account only if, and to the extent that, they would be recognized and taken into account if you were in a U. Filing 1040 online S. Filing 1040 online trade or business during the year and the gains and losses were effectively connected with that trade or business during the tax year. Filing 1040 online   In arriving at your net gain, do not take the following into consideration. Filing 1040 online The four types of gains listed earlier. Filing 1040 online The deduction for a capital loss carryover. Filing 1040 online Capital losses in excess of capital gains. Filing 1040 online Exclusion for gain from the sale or exchange of qualified small business stock (section 1202 exclusion). Filing 1040 online Losses from the sale or exchange of property held for personal use. Filing 1040 online However, losses resulting from casualties or thefts may be deductible on Schedule A (Form 1040NR). Filing 1040 online See Itemized Deductions in chapter 5. Filing 1040 online   If you are not engaged in a trade or business in the United States and have not established a tax year for a prior period, your tax year will be the calendar year for purposes of the 183-day rule. Filing 1040 online Also, you must file your tax return on a calendar-year basis. Filing 1040 online   If you were in the United States for less than 183 days during the tax year, capital gains (other than gains listed earlier) are tax exempt unless they are effectively connected with a trade or business in the United States during your tax year. Filing 1040 online Reporting. Filing 1040 online   Report your gains and losses from the sales or exchanges of capital assets that are not effectively connected with a trade or business in the United States on page 4 of Form 1040NR. Filing 1040 online Report gains and losses from sales or exchanges of capital assets (including real property) that are effectively connected with a trade or business in the United States on a separate Schedule D (Form 1040), Form 4797, or both. Filing 1040 online Attach them to Form 1040NR. Filing 1040 online Income From Real Property If you have income from real property located in the United States that you own or have an interest in and hold for the production of income, you can choose to treat all income from that property as income effectively connected with a trade or business in the United States. Filing 1040 online The choice applies to all income from real property located in the United States and held for the production of income and to all income from any interest in such property. Filing 1040 online This includes income from rents, royalties from mines, oil or gas wells, or other natural resources. Filing 1040 online It also includes gains from the sale or exchange of timber, coal, or domestic iron ore with a retained economic interest. Filing 1040 online You can make this choice only for real property income that is not otherwise effectively connected with your U. Filing 1040 online S. Filing 1040 online trade or business. Filing 1040 online If you make the choice, you can claim deductions attributable to the real property income and only your net income from real property is taxed. Filing 1040 online This choice does not treat a nonresident alien, who is not otherwise engaged in a U. Filing 1040 online S. Filing 1040 online trade or business, as being engaged in a trade or business in the United States during the year. Filing 1040 online Example. Filing 1040 online You are a nonresident alien and are not engaged in a U. Filing 1040 online S. Filing 1040 online trade or business. Filing 1040 online You own a single-family house in the United States that you rent out. Filing 1040 online Your rental income for the year is $10,000. Filing 1040 online This is your only U. Filing 1040 online S. Filing 1040 online source income. Filing 1040 online As discussed earlier under The 30% Tax, the rental income is subject to a tax at a 30% (or lower treaty) rate. Filing 1040 online You received a Form 1042-S showing that your tenants properly withheld this tax from the rental income. Filing 1040 online You do not have to file a U. Filing 1040 online S. Filing 1040 online tax return (Form 1040NR) because your U. Filing 1040 online S. Filing 1040 online tax liability is satisfied by the withholding of tax. Filing 1040 online If you make the choice discussed earlier, you can offset the $10,000 income by certain rental expenses. Filing 1040 online (See Publication 527, Residential Rental Property, for information on rental expenses. Filing 1040 online ) Any resulting net income is taxed at graduated rates. Filing 1040 online If you make this choice, report the rental income and expenses on Schedule E (Form 1040) and attach the schedule to Form 1040NR. Filing 1040 online For the first year you make the choice, also attach the statement discussed next. Filing 1040 online Making the choice. Filing 1040 online   Make the initial choice by attaching a statement to your return, or amended return, for the year of the choice. Filing 1040 online Include the following in your statement. Filing 1040 online That you are making the choice. Filing 1040 online Whether the choice is under Internal Revenue Code section 871(d) (explained earlier) or a tax treaty. Filing 1040 online A complete list of all your real property, or any interest in real property, located in the United States. Filing 1040 online Give the legal identification of U. Filing 1040 online S. Filing 1040 online timber, coal, or iron ore in which you have an interest. Filing 1040 online The extent of your ownership in the property. Filing 1040 online The location of the property. Filing 1040 online A description of any major improvements to the property. Filing 1040 online The dates you owned the property. Filing 1040 online Your income from the property. Filing 1040 online Details of any previous choices and revocations of the real property income choice. Filing 1040 online   This choice stays in effect for all later tax years unless you revoke it. Filing 1040 online Revoking the choice. Filing 1040 online   You can revoke the choice without IRS approval by filing Form 1040X, Amended U. Filing 1040 online S. Filing 1040 online Individual Income Tax Return, for the year you made the choice and for later tax years. Filing 1040 online You must file Form 1040X within 3 years from the date your return was filed or 2 years from the time the tax was paid, whichever is later. Filing 1040 online If this time period has expired for the year of choice, you cannot revoke the choice for that year. Filing 1040 online However, you may revoke the choice for later tax years only if you have IRS approval. Filing 1040 online For information on how to get IRS approval, see Regulation section 1. Filing 1040 online 871-10(d)(2). Filing 1040 online Transportation Tax A 4% tax rate applies to transportation income that is not effectively connected because it does not meet the two conditions listed earlier under Transportation Income . Filing 1040 online If you receive transportation income subject to the 4% tax, you should figure the tax and show it on line 57 of Form 1040NR. Filing 1040 online Attach a statement to your return that includes the following information (if applicable). Filing 1040 online Your name, taxpayer identification number, and tax year. Filing 1040 online A description of the types of services performed (whether on or off board). Filing 1040 online Names of vessels or registration numbers of aircraft on which you performed the services. Filing 1040 online Amount of U. Filing 1040 online S. Filing 1040 online source transportation income derived from each type of service for each vessel or aircraft for the calendar year. Filing 1040 online Total amount of U. Filing 1040 online S. Filing 1040 online source transportation income derived from all types of services for the calendar year. Filing 1040 online This 4% tax applies to your U. Filing 1040 online S. Filing 1040 online source gross transportation income. Filing 1040 online This only includes transportation income that is treated as derived from sources in the United States if the transportation begins or ends in the United States. Filing 1040 online For transportation income from personal services, the transportation must be between the United States and a U. Filing 1040 online S. Filing 1040 online possession. Filing 1040 online For personal services of a nonresident alien, this only applies to income derived from, or in connection with, an aircraft. Filing 1040 online Interrupted Period of Residence You are subject to tax under a special rule if you interrupt your period of U. Filing 1040 online S. Filing 1040 online residence with a period of nonresidence. Filing 1040 online The special rule applies if you meet all of the following conditions. Filing 1040 online You were a U. Filing 1040 online S. Filing 1040 online resident for a period that includes at least 3 consecutive calendar years. Filing 1040 online You were a U. Filing 1040 online S. Filing 1040 online resident for at least 183 days in each of those years. Filing 1040 online You ceased to be treated as a U. Filing 1040 online S. Filing 1040 online resident. Filing 1040 online You then again became a U. Filing 1040 online S. Filing 1040 online resident before the end of the third calendar year after the end of the period described in (1) above. Filing 1040 online Under this special rule, you are subject to tax on your U. Filing 1040 online S. Filing 1040 online source gross income and gains on a net basis at the graduated rates applicable to individuals (with allowable deductions) for the period you were a nonresident alien, unless you would be subject to a higher tax under the 30% tax (discussed earlier) on income not connected with a U. Filing 1040 online S. Filing 1040 online trade or business. Filing 1040 online For information on how to figure the special tax, see How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) under Expatriation Tax , below. Filing 1040 online Example. Filing 1040 online John Willow, a citizen of New Zealand, entered the United States on April 1, 2008, as a lawful permanent resident. Filing 1040 online On August 1, 2010, John ceased to be a lawful permanent resident and returned to New Zealand. Filing 1040 online During his period of residence, he was present in the United States for at least 183 days in each of three consecutive years (2008, 2009, and 2010). Filing 1040 online He returned to the United States on October 5, 2013, as a lawful permanent resident. Filing 1040 online He became a resident before the close of the third calendar year (2013) beginning after the end of his first period of residence (August 1, 2010). Filing 1040 online Therefore, he is subject to tax under the special rule for the period of nonresidence (August 2, 2010, through October 4, 2013) if it is more than the tax that would normally apply to him as a nonresident alien. Filing 1040 online Reporting requirements. Filing 1040 online   If you are subject to this tax for any year in the period you were a nonresident alien, you must file Form 1040NR for that year. Filing 1040 online The return is due by the due date (including extensions) for filing your U. Filing 1040 online S. Filing 1040 online income tax return for the year that you again become a U. Filing 1040 online S. Filing 1040 online resident. Filing 1040 online If you already filed returns for that period, you must file amended returns. Filing 1040 online You must attach a statement to your return that identifies the source of all of your U. Filing 1040 online S. Filing 1040 online and foreign gross income and the items of income subject to this special rule. Filing 1040 online Expatriation Tax The expatriation tax provisions apply to U. Filing 1040 online S. Filing 1040 online citizens who have renounced their citizenship and long-term residents who have ended their residency. Filing 1040 online The rules that apply are based on the dates of expatriation, which are described in the following sections. Filing 1040 online Expatriation Before June 4, 2004. Filing 1040 online Expatriation After June 3, 2004, and Before June 17, 2008. Filing 1040 online Expatriation After June 16, 2008. Filing 1040 online Long-term resident defined. Filing 1040 online   You are a long-term resident if you were a lawful permanent resident of the United States in at least 8 of the last 15 tax years ending with the year your residency ends. Filing 1040 online In determining if you meet the 8-year requirement, do not count any year that you are treated as a resident of a foreign country under a tax treaty and do not waive treaty benefits. Filing 1040 online Expatriation Before June 4, 2004 If you expatriated before June 4, 2004, the expatriation rules apply if one of the principal purposes of the action is the avoidance of U. Filing 1040 online S. Filing 1040 online taxes. Filing 1040 online Unless you received a ruling from the IRS that you did not expatriate to avoid U. Filing 1040 online S. Filing 1040 online taxes, you are presumed to have tax avoidance as a principal purpose if: Your average annual net income tax for the last 5 tax years ending before the date of your action to relinquish your citizenship or terminate your residency was more than $100,000, or Your net worth on the date of your action was $500,000 or more. Filing 1040 online The amounts above are adjusted for inflation if your expatriation action is after 1997 (see Table 4-1). Filing 1040 online Table 4-1. Filing 1040 online Inflation-Adjusted Amounts for Expatriation Actions Before June 4, 2004 IF you expatriated during . Filing 1040 online . Filing 1040 online . Filing 1040 online   THEN the rules outlined on this page apply if . Filing 1040 online . Filing 1040 online . Filing 1040 online     Your 5-year average annual net income tax was more than . Filing 1040 online . Filing 1040 online . Filing 1040 online OR Your net worth equaled or exceeded . Filing 1040 online . Filing 1040 online . Filing 1040 online 1999   110,000   552,000 2000   112,000   562,000 2001   116,000   580,000 2002   120,000   599,000 2003   122,000   608,000 2004 (before June 4)*   124,000   622,000 *If you expatriated after June 3, 2004, see Expatriation After June 3, 2004, and Before June 17, 2008 or Expatriation After June 16, 2008. Filing 1040 online Reporting requirements. Filing 1040 online   If you lost your U. Filing 1040 online S. Filing 1040 online citizenship, you should have filed Form 8854 with a consular office or a federal court at the time of loss of citizenship. Filing 1040 online If you ended your long-term residency, you should have filed Form 8854 with the Internal Revenue Service when you filed your dual-status tax return for the year your residency ended. Filing 1040 online   Your U. Filing 1040 online S. Filing 1040 online residency is considered to have ended when you ceased to be a lawful permanent resident or you began to be treated as a resident of another country under a tax treaty and do not waive treaty benefits. Filing 1040 online Penalties. Filing 1040 online   If you failed to file Form 8854, you may have to pay a penalty equal to the greater of 5% of the expatriation tax or $1,000. Filing 1040 online The penalty will be assessed for each year of the 10-year period beginning on the date of expatriation during which your failure to file continues. Filing 1040 online The penalty will not be imposed if you can show that the failure is due to reasonable cause and not willful neglect. Filing 1040 online Expatriation tax. Filing 1040 online   The expatriation tax applies to the 10-year period following the date of expatriation or termination of residency. Filing 1040 online It is figured in the same way as for those expatriating after June 3, 2004, and before June 17, 2008. Filing 1040 online See How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) in the next section. Filing 1040 online Expatriation After June 3, 2004, and Before June 17, 2008 If you expatriated after June 3, 2004, and before June 17, 2008, the expatriation rules apply to you if any of the following statements apply. Filing 1040 online Your average annual net income tax for the 5 tax years ending before the date of expatriation or termination of residency is more than: $124,000 if you expatriated or terminated residency in 2004. Filing 1040 online $127,000 if you expatriated or terminated residency in 2005. Filing 1040 online $131,000 if you expatriated or terminated residency in 2006. Filing 1040 online $136,000 if you expatriated or terminated residency in 2007. Filing 1040 online $139,000 if you expatriated or terminated residency in 2008. Filing 1040 online Your net worth is $2 million or more on the date of your expatriation or termination of residency. Filing 1040 online You fail to certify on Form 8854 that you have complied with all U. Filing 1040 online S. Filing 1040 online federal tax obligations for the 5 tax years preceding the date of your expatriation or termination of residency. Filing 1040 online Exception for dual-citizens and certain minors. Filing 1040 online   Certain dual-citizens and certain minors (defined next) are not subject to the expatriation tax even if they meet (1) or (2) earlier. Filing 1040 online However, they still must provide the certification required in (3). Filing 1040 online Certain dual-citizens. Filing 1040 online   You may qualify for the exception described above if all of the following apply. Filing 1040 online You became at birth a U. Filing 1040 online S. Filing 1040 online citizen and a citizen of another country and you continue to be a citizen of that other country. Filing 1040 online You were never a resident alien of the United States (as defined in chapter 1). Filing 1040 online You never held a U. Filing 1040 online S. Filing 1040 online passport. Filing 1040 online You were present in the United States for no more than 30 days during any calendar year that is 1 of the 10 calendar years preceding your loss of U. Filing 1040 online S. Filing 1040 online citizenship. Filing 1040 online Certain minors. Filing 1040 online   You may qualify for the exception described above if you meet all of the following requirements. Filing 1040 online You became a U. Filing 1040 online S. Filing 1040 online citizen at birth. Filing 1040 online Neither of your parents was a U. Filing 1040 online S. Filing 1040 online citizen at the time of your birth. Filing 1040 online You expatriated before you were 18½. Filing 1040 online You were present in the United States for not more than 30 days during any calendar year that is 1 of the 10 calendar years preceding your expatriation. Filing 1040 online Tax consequences of presence in the United States. Filing 1040 online   The following rules apply if you do not meet the exception above for dual-citizens and certain minors and the expatriation rules would otherwise apply to you. Filing 1040 online   The expatriation tax does not apply to any tax year during the 10-year period if you are physically present in the United States for more than 30 days during the calendar year ending in that year. Filing 1040 online Instead, you are treated as a U. Filing 1040 online S. Filing 1040 online citizen or resident and taxed on your worldwide income for that tax year. Filing 1040 online You must file Form 1040, 1040A, or 1040EZ and figure your tax as prescribed in the instructions for those forms. Filing 1040 online   When counting the number of days of presence during a calendar year, count any day you were physically present in the United States at any time during the day. Filing 1040 online However, do not count any days (up to a limit of 30 days) on which you performed personal services in the United States for an employer who is not related to you if either of the following apply. Filing 1040 online You have ties with other countries. Filing 1040 online You have ties with other countries if: You became (within a reasonable period after your expatriation or termination of residency) a citizen or resident of the country in which you, your spouse, or either of your parents were born, and You became fully liable for income tax in that country. Filing 1040 online You were physically present in the United States for 30 days or less during each year in the 10-year period ending on the date of expatriation or termination of residency. Filing 1040 online Do not count any day you were an exempt individual or were unable to leave the United States because of a medical condition that arose while you were in the United States. Filing 1040 online See Exempt individual and Medical condition in chapter 1 under Substantial Presence Test, but disregard the information about Form 8843. Filing 1040 online Related employer. Filing 1040 online   If your employer in the United States is any of the following, then your employer is related to you. Filing 1040 online You must count any days you performed services in the United States for that employer as days of presence in the United States. Filing 1040 online Members of your family. Filing 1040 online This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. Filing 1040 online ), and lineal descendants (children, grandchildren, etc. Filing 1040 online ). Filing 1040 online A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. Filing 1040 online A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. Filing 1040 online (See Publication 550, chapter 4, Constructive ownership of stock, for how to determine whether you directly or indirectly own outstanding stock. Filing 1040 online ) A tax-exempt charitable or educational organization that is directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable. Filing 1040 online Date of tax expatriation. Filing 1040 online   For purposes of U. Filing 1040 online S. Filing 1040 online tax rules, the date of your expatriation or termination of residency is the later of the dates on which you perform the following actions. Filing 1040 online You notify either the Department of State or the Department of Homeland Security (whichever is appropriate) of your expatriating act or termination of residency. Filing 1040 online You file Form 8854 in accordance with the form instructions. Filing 1040 online Annual return. Filing 1040 online   If the expatriation tax applies to you, you must file Form 8854 each year during the 10-year period following the date of expatriation. Filing 1040 online You must file this form even if you owe no U. Filing 1040 online S. Filing 1040 online tax. Filing 1040 online Penalty. Filing 1040 online   If you fail to file Form 8854 for any tax year, fail to include all information required to be shown on the form, or include incorrect information, you may have to pay a penalty of $10,000. Filing 1040 online You will not have to pay a penalty if you show that the failure is due to reasonable cause and not to willful neglect. Filing 1040 online How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) If the expatriation tax applies to you, you are generally subject to tax on your U. Filing 1040 online S. Filing 1040 online source gross income and gains on a net basis at the graduated rates applicable to individuals (with allowable deductions) unless you would be subject to a higher tax under the 30% tax (discussed earlier) on income not connected with a U. Filing 1040 online S. Filing 1040 online trade or business. Filing 1040 online For this purpose, U. Filing 1040 online S. Filing 1040 online source gross income (defined in chapter 2) includes gains from the sale or exchange of: Property (other than stock or debt obligations) located in the United States, Stock issued by a U. Filing 1040 online S. Filing 1040 online domestic corporation, and Debt obligations of U. Filing 1040 online S. Filing 1040 online persons or of the United States, a state or political subdivision thereof, or the District of Columbia. Filing 1040 online U. Filing 1040 online S. Filing 1040 online source income also includes any income or gain derived from stock in certain controlled foreign corporations if you owned, or were considered to own, at any time during the 2-year period ending on the date of expatriation, more than 50% of: The total combined voting power of all classes of that corporation's stock, or The total value of the stock. Filing 1040 online The income or gain is considered U. Filing 1040 online S. Filing 1040 online source income only to the extent of your share of earnings and profits earned or accumulated before the date of expatriation and during the periods you met the ownership requirements discussed above. Filing 1040 online Any exchange of property is treated as a sale of the property at its fair market value on the date of the exchange and any gain is treated as U. Filing 1040 online S. Filing 1040 online source gross income in the tax year of the exchange unless you enter into a gain recognition agreement under Notice 97-19. Filing 1040 online Other information. Filing 1040 online   For more information on the expatriation tax provisions, including exceptions to the tax and special U. Filing 1040 online S. Filing 1040 online source rules, see section 877 of the Internal Revenue Code. Filing 1040 online Expatriation Tax Return If you expatriated or terminated your U. Filing 1040 online S. Filing 1040 online residency, or you are subject to the expatriation tax, you must file Form 8854, Initial and Annual Expatriation Statement. Filing 1040 online Attach it to Form 1040NR if you are required to file that form. Filing 1040 online If you are present in the United States following your expatriation and are subject to tax as a U. Filing 1040 online S. Filing 1040 online citizen or resident, file Form 8854 with Form 1040. Filing 1040 online Expatriation After June 16, 2008 If you expatriated after June 16, 2008, the expatriation rules apply to you if you meet any of the following conditions. Filing 1040 online Your average annual net income tax for the 5 years ending before the date of expatriation or termination of residency is more than: $139,000 if you expatriated or terminated residency in 2008. Filing 1040 online $145,000 if you expatriated or terminated residency in 2009 or 2010. Filing 1040 online $147,000 if you expatriated or terminated residency in 2011. Filing 1040 online $151,000 if you expatriated or terminated residency in 2012. Filing 1040 online $155,000 if you expatriated or terminated residency in 2013. Filing 1040 online Your net worth is $2 million or more on the date of your expatriation or termination of residency. Filing 1040 online You fail to certify on Form 8854 that you have complied with all U. Filing 1040 online S. Filing 1040 online federal tax obligations for the 5 years preceding the date of your expatriation or termination of residency. Filing 1040 online Exception for dual-citizens and certain minors. Filing 1040 online   Certain dual-citizens and certain minors (defined next) are not subject to the expatriation tax even if they meet (1) or (2) above. Filing 1040 online However, they still must provide the certification required in (3) above. Filing 1040 online Certain dual-citizens. Filing 1040 online   You may qualify for the exception described above if both of the following apply. Filing 1040 online You became at birth a U. Filing 1040 online S. Filing 1040 online citizen and a citizen of another country and you continue to be a citizen of, and are taxed as a resident of, that other country. Filing 1040 online You have been a resident of the United States for not more than 10 years during the 15-year tax period ending with the tax year during which the expatriation occurs. Filing 1040 online For the purpose of determining U. Filing 1040 online S. Filing 1040 online residency, use the substantial presence test described in chapter 1. Filing 1040 online Certain minors. Filing 1040 online   You may qualify for the exception described earlier if you meet both of the following requirements. Filing 1040 online You expatriated before you were 18½. Filing 1040 online You have been a resident of the United States for not more than 10 tax years before the expatriation occurs. Filing 1040 online For the purpose of determining U. Filing 1040 online S. Filing 1040 online residency, use the substantial presence test described in chapter 1. Filing 1040 online Expatriation date. Filing 1040 online   Your expatriation date is the date you relinquish U. Filing 1040 online S. Filing 1040 online citizenship (in the case of a former citizen) or terminate your long-term residency (in the case of a former U. Filing 1040 online S. Filing 1040 online resident). Filing 1040 online Former U. Filing 1040 online S. Filing 1040 online citizen. Filing 1040 online   You are considered to have relinquished your U. Filing 1040 online S. Filing 1040 online citizenship on the earliest of the following dates. Filing 1040 online The date you renounced U. Filing 1040 online S. Filing 1040 online citizenship before a diplomatic or consular officer of the United States (provided that the voluntary renouncement was later confirmed by the issuance of a certificate of loss of nationality). Filing 1040 online The date you furnished to the State Department a signed statement of voluntary relinquishment of U. Filing 1040 online S. Filing 1040 online nationality confirming the performance of an expatriating act (provided that the voluntary relinquishment was later confirmed by the issuance of a certificate of loss of nationality). Filing 1040 online The date the State Department issued a certificate of loss of nationality. Filing 1040 online The date that a U. Filing 1040 online S. Filing 1040 online court canceled your certificate of naturalization. Filing 1040 online Former long-term resident. Filing 1040 online   You are considered to have terminated your long-term residency on the earliest of the following dates. Filing 1040 online The date you voluntarily relinquished your lawful permanent resident status by filing Department of Homeland Security Form I-407 with a U. Filing 1040 online S. Filing 1040 online consular or immigration officer, and the Department of Homeland Security determined that you have, in fact, abandoned your lawful permanent resident status. Filing 1040 online The date you became subject to a final administrative order for your removal from the United States under the Immigration and Nationality Act and you actually left the United States as a result of that order. Filing 1040 online If you were a dual resident of the United States and a country with which the United States has an income tax treaty, the date you began to be treated as a resident of that country and you determined that, for purposes of the treaty, you are a resident of the treaty country and notify the IRS of that treatment on Forms 8833 and 8854. Filing 1040 online See Effect of Tax Treaties in chapter 1 for more information about dual residents. Filing 1040 online How To Figure the Expatriation Tax (If You Expatriate After June 16, 2008) In the year you expatriate, you are subject to income tax on the net unrealized gain (or loss) in your property as if the property had been sold for its fair market value on the day before your expatriation date (“mark-to-market tax”). Filing 1040 online This applies to most types of property interests you held on the date of relinquishment of citizenship or termination of residency. Filing 1040 online But see Exceptions , later. Filing 1040 online Gains arising from deemed sales must be taken into account for the tax year of the deemed sale without regard to other U. Filing 1040 online S. Filing 1040 online internal revenue laws. Filing 1040 online Losses from deemed sales must be taken into account to the extent otherwise provided under U. Filing 1040 online S. Filing 1040 online internal revenue laws. Filing 1040 online However, Internal Revenue Code section 1091 (relating to the disallowance of losses on wash sales of stock and securities) does not apply. Filing 1040 online The net gain that you otherwise must include in your income is reduced (but not below zero) by: $600,000 if you expatriated or terminated residency before January 1, 2009. Filing 1040 online $626,000 if you expatriated or terminated residency in 2009. Filing 1040 online $627,000 if you expatriated or terminated residency in 2010. Filing 1040 online $636,000 if you expatriated or terminated residency in 2011. Filing 1040 online $651,000 if you expatriated or terminated residency in 2012. Filing 1040 online $668,000 if you expatriated or terminated residency in 2013. Filing 1040 online Exceptions. Filing 1040 online   The mark-to-market tax does not apply to the following. Filing 1040 online Eligible deferred compensation items. Filing 1040 online Ineligible deferred compensation items. Filing 1040 online Interests in nongrantor trusts. Filing 1040 online Specified tax deferred accounts. Filing 1040 online Instead, items (1) and (3) may be subject to withholding at source. Filing 1040 online In the case of item (2), you are treated as receiving the present value of your accrued benefit as of the day before the expatriation date. Filing 1040 online In the case of item (4), you are treated as receiving a distribution of your entire interest in the account on the day before your expatriation date. Filing 1040 online See paragraphs (d), (e), and (f) of section 877A for more information. Filing 1040 online Expatriation Tax Return If you expatriated or terminated your U. Filing 1040 online S. Filing 1040 online residency, or you are subject to the expatriation rules (as discussed earlier in the first paragraph under Expatriation After June 16, 2008), you must file Form 8854. Filing 1040 online Attach it to Form 1040 or Form 1040NR if you are required to file either of those forms. Filing 1040 online Deferral of payment of mark-to-market tax. Filing 1040 online   You can make an irrevocable election to defer payment of the mark-to-market tax imposed on the deemed sale of property. Filing 1040 online If you make this election, the following rules apply. Filing 1040 online You can make the election on a property-by-property basis. Filing 1040 online The deferred tax attributable to a particular property is due on the return for the tax year in which you dispose of the property. Filing 1040 online Interest is charged for the period the tax is deferred. Filing 1040 online The due date for the payment of the deferred tax cannot be extended beyond the earlier of the following dates. Filing 1040 online The due date of the return required for the year of death. Filing 1040 online The time that the security provided for the property fails to be adequate. Filing 1040 online See item (6) below. Filing 1040 online You make the election on Form 8854. Filing 1040 online You must provide adequate security (such as a bond). Filing 1040 online You must make an irrevocable waiver of any right under any treaty of the United States which would preclude assessment or collection of the mark-to-market tax. Filing 1040 online   For more information about the deferral of payment, see the Instructions for Form 8854. Filing 1040 online Prev  Up  Next   Home   More Online Publications
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Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

Alabama Office of the Attorney General

Website: Alabama Office of the Attorney General

Address: Alabama Office of the Attorney General
Consumer Protection Section
501 Washington Ave.
Montgomery, AL 36104

Phone Number: 334-242-7335

Toll-free: 1-800-392-5658 (AL)

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

State Banking Department

Website: State Banking Department

Address: State Banking Department
PO Box 4600
Montgomery, AL 36103-4600

Phone Number: 334-242-3452

Toll-free: 1-866-465-2279

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Department of Insurance

Website: Department of Insurance

Address: Department of Insurance
PO Box 303351
Montgomery, AL 36130-3351

Phone Number: 334-241-4141 (Consumer Services) 334-269-3550 (Consumer Services)

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Securities Commission

Website: Securities Commission

Address: Securities Commission
PO Box 304700
Montgomery, AL 36130-4700

Phone Number: 334-242-2984

Toll-free: 1-800-222-1253 (AL)

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Public Service Commission

Website: Public Service Commission

Address: Public Service Commission
Consumer Services
PO Box 304260
Montgomery, AL 36130

Phone Number: 334-242-5218

Toll-free: 1-800-392-8050 (AL)

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The Filing 1040 Online

Filing 1040 online 25. Filing 1040 online   Nonbusiness Casualty and Theft Losses Table of Contents What's New Introduction Useful Items - You may want to see: CasualtyFamily pet. Filing 1040 online Progressive deterioration. Filing 1040 online Damage from corrosive drywall. Filing 1040 online Theft Loss on Deposits Proof of Loss Figuring a LossDecrease in Fair Market Value Adjusted Basis Insurance and Other Reimbursements Single Casualty on Multiple Properties Deduction Limits$100 Rule 10% Rule When To Report Gains and LossesDisaster Area Loss How To Report Gains and Losses What's New New Section C of Form 4684 for Ponzi-type investment schemes. Filing 1040 online  Section C of Form 4684 is new for 2013. Filing 1040 online You must complete Section C if you are claiming a theft loss deduction due to a Ponzi-type investment scheme and are using Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58. Filing 1040 online Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. Filing 1040 online You do not need to complete Appendix A. Filing 1040 online For details, see Losses from Ponzi-type investment schemes , in this chapter. Filing 1040 online Introduction This chapter explains the tax treatment of personal (not business or investment related) casualty losses, theft losses, and losses on deposits. Filing 1040 online The chapter also explains the following  topics. Filing 1040 online How to figure the amount of your loss. Filing 1040 online How to treat insurance and other reimbursements you receive. Filing 1040 online The deduction limits. Filing 1040 online When and how to report a casualty or theft. Filing 1040 online Forms to file. Filing 1040 online    When you have a casualty or theft, you have to file Form 4684. Filing 1040 online You will also have to file one or more of the following forms. Filing 1040 online Schedule A (Form 1040), Itemized Deductions Schedule D (Form 1040), Capital Gains and Losses Condemnations. Filing 1040 online   For information on condemnations of property, see Involuntary Conversions in chapter 1 of Publication 544, Sales and Other Disposition of Assets. Filing 1040 online Workbook for casualties and thefts. Filing 1040 online    Publication 584 is available to help you make a list of your stolen or damaged personal-use property and figure your loss. Filing 1040 online It includes schedules to help you figure the loss on your home, its contents, and your motor vehicles. Filing 1040 online Business or investment-related losses. Filing 1040 online   For information on a casualty or theft loss of business or income-producing property, see Publication 547, Casualties, Disasters, and Thefts. Filing 1040 online Useful Items - You may want to see: Publication 544 Sales and Other Dispositions  of Assets 547 Casualties, Disasters, and   Thefts 584 Casualty, Disaster, and Theft   Loss Workbook (Personal-Use  Property) Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule D (Form 1040) Capital Gains and Losses 4684 Casualties and Thefts Casualty A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Filing 1040 online A sudden event is one that is swift, not gradual or progressive. Filing 1040 online An unexpected event is one that is ordinarily unanticipated and unintended. Filing 1040 online An unusual event is one that is not a day-to-day occurrence and that is not typical of the activity in which you were engaged. Filing 1040 online Deductible losses. Filing 1040 online   Deductible casualty losses can result from a number of different causes, including the following. Filing 1040 online Car accidents (but see Nondeductible losses , next, for exceptions). Filing 1040 online Earthquakes. Filing 1040 online Fires (but see Nondeductible losses , next, for exceptions). Filing 1040 online Floods. Filing 1040 online Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster as discussed under Disaster Area Losses in Publication 547. Filing 1040 online Mine cave-ins. Filing 1040 online Shipwrecks. Filing 1040 online Sonic booms. Filing 1040 online Storms, including hurricanes and tornadoes. Filing 1040 online Terrorist attacks. Filing 1040 online Vandalism. Filing 1040 online Volcanic eruptions. Filing 1040 online Nondeductible losses. Filing 1040 online   A casualty loss is not deductible if the damage or destruction is caused by the following. Filing 1040 online Accidentally breaking articles such as glassware or china under normal conditions. Filing 1040 online A family pet (explained below). Filing 1040 online A fire if you willfully set it or pay someone else to set it. Filing 1040 online A car accident if your willful negligence or willful act caused it. Filing 1040 online The same is true if the willful act or willful negligence of someone acting for you caused the accident. Filing 1040 online Progressive deterioration (explained later). Filing 1040 online Family pet. Filing 1040 online   Loss of property due to damage by a family pet is not deductible as a casualty loss unless the requirements discussed earlier under Casualty are met. Filing 1040 online Example. Filing 1040 online Your antique oriental rug was damaged by your new puppy before it was housebroken. Filing 1040 online Because the damage was not unexpected and unusual, the loss is not deductible as a casualty loss. Filing 1040 online Progressive deterioration. Filing 1040 online    Loss of property due to progressive deterioration is not deductible as a casualty loss. Filing 1040 online This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. Filing 1040 online The following are examples of damage due to progressive deterioration. Filing 1040 online The steady weakening of a building due to normal wind and weather conditions. Filing 1040 online The deterioration and damage to a water heater that bursts. Filing 1040 online However, the rust and water damage to rugs and drapes caused by the bursting of a water heater does qualify as a casualty. Filing 1040 online Most losses of property caused by droughts. Filing 1040 online To be deductible, a drought-related loss generally must be incurred in a trade or business or in a transaction entered into for profit. Filing 1040 online Termite or moth damage. Filing 1040 online The damage or destruction of trees, shrubs, or other plants by a fungus, disease, insects, worms, or similar pests. Filing 1040 online However, a sudden destruction due to an unexpected or unusual infestation of beetles or other insects may result in a casualty loss. Filing 1040 online Damage from corrosive drywall. Filing 1040 online   Under a special procedure, you may be able to claim a casualty loss deduction for amounts you paid to repair damage to your home and household appliances that resulted from corrosive drywall. Filing 1040 online For details, see Publication 547. Filing 1040 online Theft A theft is the taking and removing of money or property with the intent to deprive the owner of it. Filing 1040 online The taking of property must be illegal under the laws of the state where it occurred and it must have been done with criminal intent. Filing 1040 online You do not need to show a conviction for theft. Filing 1040 online Theft includes the taking of money or property by the following means. Filing 1040 online Blackmail. Filing 1040 online Burglary. Filing 1040 online Embezzlement. Filing 1040 online Extortion. Filing 1040 online Kidnapping for ransom. Filing 1040 online Larceny. Filing 1040 online Robbery. Filing 1040 online The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. Filing 1040 online Decline in market value of stock. Filing 1040 online   You cannot deduct as a theft loss the decline in market value of stock acquired on the open market for investment if the decline is caused by disclosure of accounting fraud or other illegal misconduct by the officers or directors of the corporation that issued the stock. Filing 1040 online However, you can deduct as a capital loss the loss you sustain when you sell or exchange the stock or the stock becomes completely worthless. Filing 1040 online You report a capital loss on Schedule D (Form 1040). Filing 1040 online For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. Filing 1040 online Mislaid or lost property. Filing 1040 online   The simple disappearance of money or property is not a theft. Filing 1040 online 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. Filing 1040 online Sudden, unexpected, and unusual events are defined earlier. Filing 1040 online Example. Filing 1040 online A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Filing 1040 online The diamond falls from the ring and is never found. Filing 1040 online The loss of the diamond is a casualty. Filing 1040 online Losses from Ponzi-type investment schemes. Filing 1040 online   If you had a loss from a Ponzi-type investment scheme, see: Revenue Ruling 2009-9, 2009-14 I. Filing 1040 online R. Filing 1040 online B. Filing 1040 online 735 (available at www. Filing 1040 online irs. Filing 1040 online gov/irb/2009-14_IRB/ar07. Filing 1040 online html). Filing 1040 online Revenue Procedure 2009-20, 2009-14 I. Filing 1040 online R. Filing 1040 online B. Filing 1040 online 749 (available at www. Filing 1040 online irs. Filing 1040 online gov/irb/2009-14_IRB/ar11. Filing 1040 online html). Filing 1040 online Revenue Procedure 2011-58, 2011-50 I. Filing 1040 online R. Filing 1040 online B. Filing 1040 online 849 (available at www. Filing 1040 online irs. Filing 1040 online gov/irb/2011-50_IRB/ar11. Filing 1040 online html). Filing 1040 online 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, first fill out Section C of Form 4684 to determine the amount to enter on Section B, line 28. Filing 1040 online Skip lines 19 to 27. Filing 1040 online Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. Filing 1040 online You do not need to complete Appendix A. Filing 1040 online For more information, see the above revenue ruling and revenue procedures, and the Instructions for Form 4684. Filing 1040 online   If you choose not to use the procedures in Revenue Procedure 2009-20, you may claim your theft loss by filling out Section B, lines 19 to 39, as appropriate. Filing 1040 online Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. Filing 1040 online If you incurred this type of loss, you can choose one of the following ways to deduct the loss. Filing 1040 online As a casualty loss. Filing 1040 online As an ordinary loss. Filing 1040 online As a nonbusiness bad debt. Filing 1040 online Casualty loss or ordinary loss. Filing 1040 online   You can choose to deduct a loss on deposits as a casualty loss or as an ordinary loss for any year in which you can reasonably estimate how much of your deposits you have lost in an insolvent or bankrupt financial institution. Filing 1040 online The choice is generally made on the return you file for that year and applies to all your losses on deposits for the year in that particular financial institution. Filing 1040 online If you treat the loss as a casualty or ordinary loss, you cannot treat the same amount of the loss as a nonbusiness bad debt when it actually becomes worthless. Filing 1040 online However, you can take a nonbusiness bad debt deduction for any amount of loss that is more than the estimated amount you deducted as a casualty or ordinary loss. Filing 1040 online Once you make this choice, you cannot change it without permission from the Internal Revenue Service. Filing 1040 online   If you claim an ordinary loss, report it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. Filing 1040 online The maximum amount you can claim is $20,000 ($10,000 if you are married filing separately) reduced by any expected state insurance proceeds. Filing 1040 online Your loss is subject to the 2%-of-adjusted-gross-income limit. Filing 1040 online You cannot choose to claim an ordinary loss if any part of the deposit is federally insured. Filing 1040 online Nonbusiness bad debt. Filing 1040 online   If you do not choose to deduct the loss as a casualty loss or as an ordinary loss, you must wait until the year the actual loss is determined and deduct the loss as a nonbusiness bad debt in that year. Filing 1040 online How to report. Filing 1040 online   The kind of deduction you choose for your loss on deposits determines how you report your loss. Filing 1040 online If you choose: Casualty loss — report it on Form 4684 first and then on Schedule A (Form 1040). Filing 1040 online Ordinary loss — report it on Schedule A (Form 1040) as a miscellaneous itemized deduction. Filing 1040 online Nonbusiness bad debt — report it on Form 8949 first and then on Schedule D (Form 1040). Filing 1040 online More information. Filing 1040 online   For more information, see Special Treatment for Losses on Deposits in Insolvent or Bankrupt Financial Institutions in the Instructions for Form 4684 or Deposit in Insolvent or Bankrupt Financial Institution in Publication 550. Filing 1040 online Proof of Loss To deduct a casualty or theft loss, you must be able to prove that you had a casualty or theft. Filing 1040 online You also must be able to support the amount you take as a deduction. Filing 1040 online Casualty loss proof. Filing 1040 online   For a casualty loss, your records should show all the following. Filing 1040 online The type of casualty (car accident, fire, storm, etc. Filing 1040 online ) and when it occurred. Filing 1040 online That the loss was a direct result of the casualty. Filing 1040 online That you were the owner of the property or, if you leased the property from someone else, that you were contractually liable to the owner for the damage. Filing 1040 online Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Filing 1040 online Theft loss proof. Filing 1040 online   For a theft loss, your records should show all the following. Filing 1040 online When you discovered that your property was missing. Filing 1040 online That your property was stolen. Filing 1040 online That you were the owner of the property. Filing 1040 online Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Filing 1040 online It is important that you have records that will prove your deduction. Filing 1040 online If you do not have the actual records to support your deduction, you can use other satisfactory evidence to support it. Filing 1040 online Figuring a Loss Figure the amount of your loss using the following steps. Filing 1040 online Determine your adjusted basis in the property before the casualty or theft. Filing 1040 online Determine the decrease in fair market value of the property as a result of the casualty or theft. Filing 1040 online From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received or expect to receive. Filing 1040 online For personal-use property and property used in performing services as an employee, apply the deduction limits, discussed later, to determine the amount of your deductible loss. Filing 1040 online Gain from reimbursement. Filing 1040 online   If your reimbursement is more than your adjusted basis in the property, you have a gain. Filing 1040 online This is true even if the decrease in the FMV of the property is smaller than your adjusted basis. Filing 1040 online If you have a gain, you may have to pay tax on it, or you may be able to postpone reporting the gain. Filing 1040 online See Publication 547 for more information on how to treat a gain from a reimbursement for a casualty or theft. Filing 1040 online Leased property. Filing 1040 online   If you are liable for casualty damage to property you lease, your loss is the amount you must pay to repair the property minus any insurance or other reimbursement you receive or expect to receive. Filing 1040 online Decrease in Fair Market Value Fair market value (FMV) is the price for which you could sell your property to a willing buyer when neither of you has to sell or buy and both of you know all the relevant facts. Filing 1040 online The decrease in FMV used to figure the amount of a casualty or theft loss is the difference between the property's fair market value immediately before and immediately after the casualty or theft. Filing 1040 online FMV of stolen property. Filing 1040 online   The FMV of property immediately after a theft is considered to be zero, since you no longer have the property. Filing 1040 online Example. Filing 1040 online Several years ago, you purchased silver dollars at face value for $150. Filing 1040 online This is your adjusted basis in the property. Filing 1040 online Your silver dollars were stolen this year. Filing 1040 online The FMV of the coins was $1,000 just before they were stolen, and insurance did not cover them. Filing 1040 online Your theft loss is $150. Filing 1040 online Recovered stolen property. Filing 1040 online   Recovered stolen property is your property that was stolen and later returned to you. Filing 1040 online If you recovered property after you had already taken a theft loss deduction, you must refigure your loss using the smaller of the property's adjusted basis (explained later) or the decrease in FMV from the time just before it was stolen until the time it was recovered. Filing 1040 online Use this amount to refigure your total loss for the year in which the loss was deducted. Filing 1040 online   If your refigured loss is less than the loss you deducted, you generally have to report the difference as income in the recovery year. Filing 1040 online But report the difference only up to the amount of the loss that reduced your tax. Filing 1040 online For more information on the amount to report, see Recoveries in chapter 12. Filing 1040 online Figuring Decrease in FMV— Items To Consider To figure the decrease in FMV because of a casualty or theft, you generally need a competent appraisal. Filing 1040 online However, other measures can also be used to establish certain decreases. Filing 1040 online Appraisal. Filing 1040 online   An appraisal to determine the difference between the FMV of the property immediately before a casualty or theft and immediately afterward should be made by a competent appraiser. Filing 1040 online The appraiser must recognize the effects of any general market decline that may occur along with the casualty. Filing 1040 online This information is needed to limit any deduction to the actual loss resulting from damage to the property. Filing 1040 online   Several factors are important in evaluating the accuracy of an appraisal, including the following. Filing 1040 online The appraiser's familiarity with your property before and after the casualty or theft. Filing 1040 online The appraiser's knowledge of sales of comparable property in the area. Filing 1040 online The appraiser's knowledge of conditions in the area of the casualty. Filing 1040 online The appraiser's method of appraisal. Filing 1040 online    You may be able to use an appraisal that you used to get a federal loan (or a federal loan guarantee) as the result of a federally declared disaster to establish the amount of your disaster loss. Filing 1040 online For more information on disasters, see Disaster Area Losses, in Pub. Filing 1040 online 547. Filing 1040 online Cost of cleaning up or making repairs. Filing 1040 online   The cost of repairing damaged property is not part of a casualty loss. Filing 1040 online Neither is the cost of cleaning up after a casualty. Filing 1040 online But you can use the cost of cleaning up or making repairs after a casualty as a measure of the decrease in FMV if you meet all the following conditions. Filing 1040 online The repairs are actually made. Filing 1040 online The repairs are necessary to bring the property back to its condition before the casualty. Filing 1040 online The amount spent for repairs is not excessive. Filing 1040 online The repairs take care of the damage only. Filing 1040 online The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. Filing 1040 online Landscaping. Filing 1040 online   The cost of restoring landscaping to its original condition after a casualty may indicate the decrease in FMV. Filing 1040 online You may be able to measure your loss by what you spend on the following. Filing 1040 online Removing destroyed or damaged trees and shrubs minus any salvage you receive. Filing 1040 online Pruning and other measures taken to preserve damaged trees and shrubs. Filing 1040 online Replanting necessary to restore the property to its approximate value before the casualty. Filing 1040 online Car value. Filing 1040 online    Books issued by various automobile organizations that list your car may be useful in figuring the value of your car. Filing 1040 online You can use the book's retail values and modify them by such factors as mileage and the condition of your car to figure its value. Filing 1040 online The prices are not official, but they may be useful in determining value and suggesting relative prices for comparison with current sales and offerings in your area. Filing 1040 online If your car is not listed in the books, determine its value from other sources. Filing 1040 online A dealer's offer for your car as a trade-in on a new car is not usually a measure of its true value. Filing 1040 online Figuring Decrease in FMV— Items Not To Consider You generally should not consider the following items when attempting to establish the decrease in FMV of your property. Filing 1040 online Cost of protection. Filing 1040 online   The cost of protecting your property against a casualty or theft is not part of a casualty or theft loss. Filing 1040 online The amount you spend on insurance or to board up your house against a storm is not part of your loss. Filing 1040 online   If you make permanent improvements to your property to protect it against a casualty or theft, add the cost of these improvements to your basis in the property. Filing 1040 online An example would be the cost of a dike to prevent flooding. Filing 1040 online Exception. Filing 1040 online   You cannot increase your basis in the property by, or deduct as a business expense, any expenditures you made with respect to qualified disaster mitigation payments. Filing 1040 online See Disaster Area Losses in Publication 547. Filing 1040 online Incidental expenses. Filing 1040 online   Any incidental expenses you have due to a casualty or theft, such as expenses for the treatment of personal injuries, for temporary housing, or for a rental car, are not part of your casualty or theft loss. Filing 1040 online Replacement cost. Filing 1040 online   The cost of replacing stolen or destroyed property is not part of a casualty or theft loss. Filing 1040 online Sentimental value. Filing 1040 online   Do not consider sentimental value when determining your loss. Filing 1040 online If a family portrait, heirloom, or keepsake is damaged, destroyed, or stolen, you must base your loss on its FMV, as limited by your adjusted basis in the property. Filing 1040 online Decline in market value of property in or near casualty area. Filing 1040 online   A decrease in the value of your property because it is in or near an area that suffered a casualty, or that might again suffer a casualty, is not to be taken into consideration. Filing 1040 online You have a loss only for actual casualty damage to your property. Filing 1040 online However, if your home is in a federally declared disaster area, see Disaster Area Losses in Publication 547. Filing 1040 online Costs of photographs and appraisals. Filing 1040 online    Photographs taken after a casualty will be helpful in establishing the condition and value of the property after it was damaged. Filing 1040 online Photographs showing the condition of the property after it was repaired, restored, or replaced may also be helpful. Filing 1040 online    Appraisals are used to figure the decrease in FMV because of a casualty or theft. Filing 1040 online See Appraisal , earlier, under Figuring Decrease in FMV — Items To Consider, for information about appraisals. Filing 1040 online   The costs of photographs and appraisals used as evidence of the value and condition of property damaged as a result of a casualty are not a part of the loss. Filing 1040 online You can claim these costs as a miscellaneous itemized deduction subject to the 2%-of-adjusted-gross-income limit on Schedule A (Form 1040). Filing 1040 online For information about miscellaneous deductions, see chapter 28. Filing 1040 online Adjusted Basis Adjusted basis is your basis in the property (usually cost) increased or decreased by various events, such as improvements and casualty losses. Filing 1040 online For more information, see chapter 13. Filing 1040 online Insurance and Other Reimbursements If you receive an insurance payment or other type of reimbursement, you must subtract the reimbursement when you figure your loss. Filing 1040 online You do not have a casualty or theft loss to the extent you are reimbursed. Filing 1040 online If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. Filing 1040 online You must reduce your loss even if you do not receive payment until a later tax year. Filing 1040 online See Reimbursement Received After Deducting Loss , later. Filing 1040 online Failure to file a claim for reimbursement. Filing 1040 online   If your property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss. Filing 1040 online Otherwise, you cannot deduct this loss as a casualty or theft loss. Filing 1040 online However, this rule does not apply to the portion of the loss not covered by insurance (for example, a deductible). Filing 1040 online Example. Filing 1040 online You have a car insurance policy with a $1,000 deductible. Filing 1040 online Because your insurance did not cover the first $1,000 of an auto collision, the $1,000 would be deductible (subject to the deduction limits discussed later). Filing 1040 online This is true even if you do not file an insurance claim, because your insurance policy would never have reimbursed you for the deductible. Filing 1040 online Types of Reimbursements The most common type of reimbursement is an insurance payment for your stolen or damaged property. Filing 1040 online Other types of reimbursements are discussed next. Filing 1040 online Also see the Instructions for Form 4684. Filing 1040 online Employer's emergency disaster fund. Filing 1040 online   If you receive money from your employer's emergency disaster fund and you must use that money to rehabilitate or replace property on which you are claiming a casualty loss deduction, you must take that money into consideration in computing the casualty loss deduction. Filing 1040 online Take into consideration only the amount you used to replace your destroyed or damaged property. Filing 1040 online Example. Filing 1040 online Your home was extensively damaged by a tornado. Filing 1040 online Your loss after reimbursement from your insurance company was $10,000. Filing 1040 online Your employer set up a disaster relief fund for its employees. Filing 1040 online Employees receiving money from the fund had to use it to rehabilitate or replace their damaged or destroyed property. Filing 1040 online You received $4,000 from the fund and spent the entire amount on repairs to your home. Filing 1040 online In figuring your casualty loss, you must reduce your unreimbursed loss ($10,000) by the $4,000 you received from your employer's fund. Filing 1040 online Your casualty loss before applying the deduction limits discussed later is $6,000. Filing 1040 online Cash gifts. Filing 1040 online   If you receive excludable cash gifts as a disaster victim and there are no limits on how you can use the money, you do not reduce your casualty loss by these excludable cash gifts. Filing 1040 online This applies even if you use the money to pay for repairs to property damaged in the disaster. Filing 1040 online Example. Filing 1040 online Your home was damaged by a hurricane. Filing 1040 online Relatives and neighbors made cash gifts to you that were excludable from your income. Filing 1040 online You used part of the cash gifts to pay for repairs to your home. Filing 1040 online There were no limits or restrictions on how you could use the cash gifts. Filing 1040 online Because it was an excludable gift, the money you received and used to pay for repairs to your home does not reduce your casualty loss on the damaged home. Filing 1040 online Insurance payments for living expenses. Filing 1040 online   You do not reduce your casualty loss by insurance payments you receive to cover living expenses in either of the following situations. Filing 1040 online You lose the use of your main home because of a casualty. Filing 1040 online Government authorities do not allow you access to your main home because of a casualty or threat of one. Filing 1040 online Inclusion in income. Filing 1040 online   If these insurance payments are more than the temporary increase in your living expenses, you must include the excess in your income. Filing 1040 online Report this amount on Form 1040, line 21. Filing 1040 online However, if the casualty occurs in a federally declared disaster area, none of the insurance payments are taxable. Filing 1040 online See Qualified disaster relief payments, under Disaster Area Losses in Publication 547. Filing 1040 online   A temporary increase in your living expenses is the difference between the actual living expenses you and your family incurred during the period you could not use your home and your normal living expenses for that period. Filing 1040 online Actual living expenses are the reasonable and necessary expenses incurred because of the loss of your main home. Filing 1040 online Generally, these expenses include the amounts you pay for the following. Filing 1040 online Rent for suitable housing. Filing 1040 online Transportation. Filing 1040 online Food. Filing 1040 online Utilities. Filing 1040 online Miscellaneous services. Filing 1040 online Normal living expenses consist of these same expenses that you would have incurred but did not because of the casualty or the threat of one. Filing 1040 online Example. Filing 1040 online As a result of a fire, you vacated your apartment for a month and moved to a motel. Filing 1040 online You normally pay $525 a month for rent. Filing 1040 online None was charged for the month the apartment was vacated. Filing 1040 online Your motel rent for this month was $1,200. Filing 1040 online You normally pay $200 a month for food. Filing 1040 online Your food expenses for the month you lived in the motel were $400. Filing 1040 online You received $1,100 from your insurance company to cover your living expenses. Filing 1040 online You determine the payment you must include in income as follows. Filing 1040 online 1) Insurance payment for living expenses $1,100 2) Actual expenses during the month you are unable to use your home because of fire 1,600   3) Normal living expenses 725   4) Temporary increase in living  expenses: Subtract line 3 from line 2 875 5) Amount of payment includible  in income: Subtract line 4  from line 1 $ 225 Tax year of inclusion. Filing 1040 online   You include the taxable part of the insurance payment in income for the year you regain the use of your main home or, if later, for the year you receive the taxable part of the insurance payment. Filing 1040 online Example. Filing 1040 online Your main home was destroyed by a tornado in August 2011. Filing 1040 online You regained use of your home in November 2012. Filing 1040 online The insurance payments you received in 2011 and 2012 were $1,500 more than the temporary increase in your living expenses during those years. Filing 1040 online You include this amount in income on your 2012 Form 1040. Filing 1040 online If, in 2013, you receive further payments to cover the living expenses you had in 2011 and 2012, you must include those payments in income on your 2013 Form 1040. Filing 1040 online Disaster relief. Filing 1040 online   Food, medical supplies, and other forms of assistance you receive do not reduce your casualty loss unless they are replacements for lost or destroyed property. Filing 1040 online Qualified disaster relief payments you receive for expenses you incurred as a result of a federally declared disaster are not taxable income to you. Filing 1040 online For more information, see Disaster Area Losses in Publication 547. Filing 1040 online Disaster unemployment assistance payments are unemployment benefits that are taxable. Filing 1040 online Generally, disaster relief grants and qualified disaster mitigation payments made under the Robert T. Filing 1040 online Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act (as in effect on April 15, 2005) are not includible in your income. Filing 1040 online See Disaster Area Losses in Publication 547. Filing 1040 online Reimbursement Received After Deducting Loss If you figured your casualty or theft loss using your expected reimbursement, you may have to adjust your tax return for the tax year in which you receive your actual reimbursement. Filing 1040 online This section explains the adjustment you may have to make. Filing 1040 online Actual reimbursement less than expected. Filing 1040 online   If you later receive less reimbursement than you expected, include that difference as a loss with your other losses (if any) on your return for the year in which you can reasonably expect no more reimbursement. Filing 1040 online Example. Filing 1040 online Your personal car had an FMV of $2,000 when it was destroyed in a collision with another car in 2012. Filing 1040 online The accident was due to the negligence of the other driver. Filing 1040 online At the end of 2012, there was a reasonable prospect that the owner of the other car would reimburse you in full. Filing 1040 online You did not have a deductible loss in 2012. Filing 1040 online In January 2013, the court awarded you a judgment of $2,000. Filing 1040 online However, in July it became apparent that you will be unable to collect any amount from the other driver. Filing 1040 online You can deduct the loss in 2013 subject to the limits discussed later. Filing 1040 online Actual reimbursement more than expected. Filing 1040 online   If you later receive more reimbursement than you expected after you claimed a deduction for the loss, you may have to include the extra reimbursement in your income for the year you receive it. Filing 1040 online However, if any part of the original deduction did not reduce your tax for the earlier year, do not include that part of the reimbursement in your income. Filing 1040 online You do not refigure your tax for the year you claimed the deduction. Filing 1040 online For more information, see Recoveries in chapter 12. Filing 1040 online If the total of all the reimbursements you receive is more than your adjusted basis in the destroyed or stolen property, you will have a gain on the casualty or theft. Filing 1040 online If you have already taken a deduction for a loss and you receive the reimbursement in a later year, you may have to include the gain in your income for the later year. Filing 1040 online Include the gain as ordinary income up to the amount of your deduction that reduced your tax for the earlier year. Filing 1040 online See Figuring a Gain in Publication 547 for more information on how to treat a gain from the reimbursement of a casualty or theft. Filing 1040 online Actual reimbursement same as expected. Filing 1040 online   If you receive exactly the reimbursement you expected to receive, you do not have to include any of the reimbursement in your income and you cannot deduct any additional loss. Filing 1040 online Example. Filing 1040 online In December 2013, you had a collision while driving your personal car. Filing 1040 online Repairs to the car cost $950. Filing 1040 online You had $100 deductible collision insurance. Filing 1040 online Your insurance company agreed to reimburse you for the rest of the damage. Filing 1040 online Because you expected a reimbursement from the insurance company, you did not have a casualty loss deduction in 2013. Filing 1040 online Due to the $100 rule (discussed later under Deduction Limits ), you cannot deduct the $100 you paid as the deductible. Filing 1040 online When you receive the $850 from the insurance company in 2014, do not report it as income. Filing 1040 online Single Casualty on Multiple Properties Personal property. Filing 1040 online   Personal property is any property that is not real property. Filing 1040 online If your personal property is stolen or is damaged or destroyed by a casualty, you must figure your loss separately for each item of property. Filing 1040 online Then combine these separate losses to figure the total loss from that casualty or theft. Filing 1040 online Example. Filing 1040 online A fire in your home destroyed an upholstered chair, an oriental rug, and an antique table. Filing 1040 online You did not have fire insurance to cover your loss. Filing 1040 online (This was the only casualty or theft you had during the year. Filing 1040 online ) You paid $750 for the chair and you established that it had an FMV of $500 just before the fire. Filing 1040 online The rug cost $3,000 and had an FMV of $2,500 just before the fire. Filing 1040 online You bought the table at an auction for $100 before discovering it was an antique. Filing 1040 online It had been appraised at $900 before the fire. Filing 1040 online You figure your loss on each of these items as follows:     Chair Rug Table 1) Basis (cost) $750 $3,000 $100 2) FMV before fire $500 $2,500 $900 3) FMV after fire –0– –0– –0– 4) Decrease in FMV $500 $2,500 $900 5) Loss (smaller of (1) or  (4)) $500 $2,500 $100           6) Total loss     $3,100 Real property. Filing 1040 online   In figuring a casualty loss on personal-use real property, treat the entire property (including any improvements, such as buildings, trees, and shrubs) as one item. Filing 1040 online Figure the loss using the smaller of the adjusted basis or the decrease in FMV of the entire property. Filing 1040 online Example. Filing 1040 online You bought your home a few years ago. Filing 1040 online You paid $160,000 ($20,000 for the land and $140,000 for the house). Filing 1040 online You also spent $2,000 for landscaping. Filing 1040 online This year a fire destroyed your home. Filing 1040 online The fire also damaged the shrubbery and trees in your yard. Filing 1040 online The fire was your only casualty or theft loss this year. Filing 1040 online Competent appraisers valued the property as a whole at $200,000 before the fire, but only $30,000 after the fire. Filing 1040 online (The loss to your household furnishings is not shown in this example. Filing 1040 online It would be figured separately on each item, as explained earlier under Personal property . Filing 1040 online ) Shortly after the fire, the insurance company paid you $155,000 for the loss. Filing 1040 online You figure your casualty loss as follows: 1) Adjusted basis of the entire property (land, building, and landscaping) $162,000 2) FMV of entire property before fire $200,000 3) FMV of entire property after fire 30,000 4) Decrease in FMV of entire  property $170,000 5) Loss (smaller of (1) or (4)) $162,000 6) Subtract insurance 155,000 7) Amount of loss after reimbursement $7,000 Deduction Limits After you have figured your casualty or theft loss, you must figure how much of the loss you can deduct. Filing 1040 online If the loss was to property for your personal use or your family's use, there are two limits on the amount you can deduct for your casualty or theft loss. Filing 1040 online You must reduce each casualty or theft loss by $100 ($100 rule). Filing 1040 online You must further reduce the total of all your casualty or theft losses by 10% of your adjusted gross income (10% rule). Filing 1040 online You make these reductions on Form 4684. Filing 1040 online These rules are explained next and Table 25-1 summarizes how to apply the $100 rule and the 10% rule in various situations. Filing 1040 online For more detailed explanations and examples, see Publication 547. Filing 1040 online Table 25-1. Filing 1040 online How To Apply the Deduction Limits for Personal-Use Property   $100 Rule 10% Rule General Application You must reduce each casualty or theft loss by $100 when figuring your deduction. Filing 1040 online Apply this rule after you have figured the amount of your loss. Filing 1040 online You must reduce your total casualty or theft loss by 10% of your adjusted gross income. Filing 1040 online Apply this rule after you reduce each loss by $100 (the $100 rule). Filing 1040 online Single Event Apply this rule only once, even if many pieces of property are affected. Filing 1040 online Apply this rule only once, even if many pieces of property are affected. Filing 1040 online More Than One Event Apply to the loss from each event. Filing 1040 online Apply to the total of all your losses from all events. Filing 1040 online More Than One Person— With Loss From the Same Event (other than a married couple filing jointly) Apply separately to each person. Filing 1040 online Apply separately to each person. Filing 1040 online Married Couple—With Loss From the Same Event Filing Jointly Apply as if you were one person. Filing 1040 online Apply as if you were one person. Filing 1040 online Filing Separately Apply separately to each spouse. Filing 1040 online Apply separately to each spouse. Filing 1040 online More Than One Owner (other than a married couple filing jointly) Apply separately to each owner of jointly owned property. Filing 1040 online Apply separately to each owner of jointly owned property. Filing 1040 online Property used partly for business and partly for personal purposes. Filing 1040 online   When property is used partly for personal purposes and partly for business or income-producing purposes, the casualty or theft loss deduction must be figured separately for the personal-use part and for the business or income-producing part. Filing 1040 online You must figure each loss separately because the $100 rule and the 10% rule apply only to the loss on the personal-use part of the property. Filing 1040 online $100 Rule After you have figured your casualty or theft loss on personal-use property, you must reduce that loss by $100. Filing 1040 online This reduction applies to each total casualty or theft loss. Filing 1040 online It does not matter how many pieces of property are involved in an event. Filing 1040 online Only a single $100 reduction applies. Filing 1040 online Example. Filing 1040 online A hailstorm damages your home and your car. Filing 1040 online Determine the amount of loss, as discussed earlier, for each of these items. Filing 1040 online Since the losses are due to a single event, you combine the losses and reduce the combined amount by $100. Filing 1040 online Single event. Filing 1040 online   Generally, events closely related in origin cause a single casualty. Filing 1040 online It is a single casualty when the damage is from two or more closely related causes, such as wind and flood damage caused by the same storm. Filing 1040 online 10% Rule You must reduce the total of all your casualty or theft losses on personal-use property by 10% of your adjusted gross income. Filing 1040 online Apply this rule after you reduce each loss by $100. Filing 1040 online For more information, see the Form 4684 instructions. Filing 1040 online If you have both gains and losses from casualties or thefts, see Gains and losses , later in this discussion. Filing 1040 online Example 1. Filing 1040 online In June, you discovered that your house had been burglarized. Filing 1040 online Your loss after insurance reimbursement was $2,000. Filing 1040 online Your adjusted gross income for the year you discovered the theft is $29,500. Filing 1040 online You first apply the $100 rule and then the 10% rule. Filing 1040 online Figure your theft loss deduction as follows. Filing 1040 online 1) Loss after insurance $2,000 2) Subtract $100 100 3) Loss after $100 rule $1,900 4) Subtract 10% × $29,500 AGI 2,950 5) Theft loss deduction –0– You do not have a theft loss deduction because your loss after you apply the $100 rule ($1,900) is less than 10% of your adjusted gross income ($2,950). Filing 1040 online Example 2. Filing 1040 online In March, you had a car accident that totally destroyed your car. Filing 1040 online You did not have collision insurance on your car, so you did not receive any insurance reimbursement. Filing 1040 online Your loss on the car was $1,800. Filing 1040 online In November, a fire damaged your basement and totally destroyed the furniture, washer, dryer, and other items stored there. Filing 1040 online Your loss on the basement items after reimbursement was $2,100. Filing 1040 online Your adjusted gross income for the year that the accident and fire occurred is $25,000. Filing 1040 online You figure your casualty loss deduction as follows. Filing 1040 online       Base-     Car ment 1) Loss $1,800 $2,100 2) Subtract $100 per incident 100 100 3) Loss after $100 rule $1,700 $2,000 4) Total loss $3,700 5) Subtract 10% × $25,000 AGI 2,500 6) Casualty loss deduction $1,200 Gains and losses. Filing 1040 online   If you had both gains and losses from casualties or thefts to personal-use property, you must compare your total gains to your total losses. Filing 1040 online Do this after you have reduced each loss by any reimbursements and by $100, but before you have reduced the losses by 10% of your adjusted gross income. Filing 1040 online Casualty or theft gains do not include gains you choose to postpone. Filing 1040 online See Publication 547 for information on the postponement of gain. Filing 1040 online Losses more than gains. Filing 1040 online   If your losses are more than your recognized gains, subtract your gains from your losses and reduce the result by 10% of your adjusted gross income. Filing 1040 online The rest, if any, is your deductible loss from personal-use property. Filing 1040 online Gains more than losses. Filing 1040 online   If your recognized gains are more than your losses, subtract your losses from your gains. Filing 1040 online The difference is treated as capital gain and must be reported on Schedule D (Form 1040). Filing 1040 online The 10% rule does not apply to your gains. Filing 1040 online When To Report Gains and Losses Gains. Filing 1040 online   If you receive an insurance or other reimbursement that is more than your adjusted basis in the destroyed or stolen property, you have a gain from the casualty or theft. Filing 1040 online You must include this gain in your income in the year you receive the reimbursement, unless you choose to postpone reporting the gain as explained in Publication 547. Filing 1040 online If you have a loss, see Table 25-2 . Filing 1040 online Table 25-2. Filing 1040 online When To Deduct a Loss IF you have a loss. Filing 1040 online . Filing 1040 online . Filing 1040 online THEN deduct it in the year. Filing 1040 online . Filing 1040 online . Filing 1040 online from a casualty, the loss occurred. Filing 1040 online in a federally declared disaster area, the disaster occurred or the year immediately before the disaster. Filing 1040 online from a theft, the theft was discovered. Filing 1040 online on a deposit treated as a:   • casualty or any ordinary loss, a reasonable estimate can be made. Filing 1040 online • bad debt, deposits are totally worthless. Filing 1040 online Losses. Filing 1040 online   Generally, you can deduct a casualty loss that is not reimbursable only in the tax year in which the casualty occurred. Filing 1040 online This is true even if you do not repair or replace the damaged property until a later year. Filing 1040 online   You can deduct theft losses that are not reimbursable only in the year you discover your property was stolen. Filing 1040 online   If you are not sure whether part of your casualty or theft loss will be reimbursed, do not deduct that part until the tax year when you become reasonably certain that it will not be reimbursed. Filing 1040 online Loss on deposits. Filing 1040 online   If your loss is a loss on deposits in an insolvent or bankrupt financial institution, see Loss on Deposits , earlier. Filing 1040 online Disaster Area Loss You generally must deduct a casualty loss in the year it occurred. Filing 1040 online However, if you have a casualty loss from a federally declared disaster that occurred in an area warranting public or individual assistance (or both), you can choose to deduct the loss on your tax return or amended return for either of the following years. Filing 1040 online The year the disaster occurred. Filing 1040 online The year immediately preceding the year the disaster occurred. Filing 1040 online Gains. Filing 1040 online    Special rules apply if you choose to postpone reporting gain on property damaged or destroyed in a federally declared disaster area. Filing 1040 online For those special rules, see Publication 547. Filing 1040 online Postponed tax deadlines. Filing 1040 online   The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a federally declared disaster. Filing 1040 online The tax deadlines the IRS may postpone include those for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA. Filing 1040 online   If any tax deadline is postponed, the IRS will publicize the postponement in your area by publishing a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). Filing 1040 online Go to www. Filing 1040 online irs. Filing 1040 online gov/uac/Tax-Relief-in-Disaster-Situations to find out if a tax deadline has been postponed for your area. Filing 1040 online Who is eligible. Filing 1040 online   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. Filing 1040 online Any individual whose main home is located in a covered disaster area (defined next). Filing 1040 online Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. Filing 1040 online Any individual who is a relief worker affiliated with a recognized government or philanthropic organization who is assisting in a covered disaster area. Filing 1040 online Any individual, business entity, or sole proprietorship whose records are needed to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. Filing 1040 online The main home or principal place of business does not have to be located in the covered disaster area. Filing 1040 online Any estate or trust that has tax records necessary to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. Filing 1040 online The spouse on a joint return with a taxpayer who is eligible for postponements. Filing 1040 online Any individual, business entity, or sole proprietorship not located in a covered disaster area, but whose records necessary to meet a postponed tax deadline are located in the covered disaster area. Filing 1040 online Any individual visiting the covered disaster area who was killed or injured as a result of the disaster. Filing 1040 online Any other person determined by the IRS to be affected by a federally declared disaster. Filing 1040 online Covered disaster area. Filing 1040 online   This is an area of a federally declared disaster in which the IRS has decided to postpone tax deadlines for up to 1 year. Filing 1040 online Abatement of interest and penalties. Filing 1040 online   The IRS may abate the interest and penalties on underpaid income tax for the length of any postponement of tax deadlines. Filing 1040 online More information. Filing 1040 online   For more information, see Disaster Area Losses in Publication 547. Filing 1040 online How To Report Gains and Losses Use Form 4684 to report a gain or a deductible loss from a casualty or theft. Filing 1040 online If you have more than one casualty or theft, use a separate Form 4684 to determine your gain or loss for each event. Filing 1040 online Combine the gains and losses on one Form 4684. Filing 1040 online Follow the form instructions as to which lines to fill out. Filing 1040 online In addition, you must use the appropriate schedule to report a gain or loss. Filing 1040 online The schedule you use depends on whether you have a gain or loss. Filing 1040 online If you have a: Report it on: Gain Schedule D (Form 1040) Loss Schedule A (Form 1040) Adjustments to basis. Filing 1040 online   If you have a casualty or theft loss, you must decrease your basis in the property by any insurance or other reimbursement you receive, and by any deductible loss. Filing 1040 online Amounts you spend to restore your property after a casualty increase your adjusted basis. Filing 1040 online See Adjusted Basis in chapter 13 for more information. Filing 1040 online Net operating loss (NOL). Filing 1040 online    If your casualty or theft loss deduction causes your deductions for the year to be more than your income for the year, you may have an NOL. Filing 1040 online You can use an NOL to lower your tax in an earlier year, allowing you to get a refund for tax you have already paid. Filing 1040 online Or, you can use it to lower your tax in a later year. Filing 1040 online You do not have to be in business to have an NOL from a casualty or theft loss. Filing 1040 online For more information, see Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. Filing 1040 online Prev  Up  Next   Home   More Online Publications