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Filing An Amendment To Taxes

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Filing An Amendment To Taxes

Filing an amendment to taxes 8. Filing an amendment to taxes   Amortization Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: How To Deduct Amortization Starting a BusinessBusiness Start-Up Costs Costs of Organizing a Corporation Costs of Organizing a Partnership How To Amortize Getting a Lease Section 197 IntangiblesSection 197 Intangibles Defined Assets That Are Not Section 197 Intangibles Safe Harbor for Creative Property Costs Anti-Churning Rules Incorrect Amount of Amortization Deducted Disposition of Section 197 Intangibles Reforestation Costs Geological and Geophysical Costs Pollution Control FacilitiesNew identifiable treatment facility. Filing an amendment to taxes Research and Experimental Costs Optional Write-off of Certain Tax Preferences Introduction Amortization is a method of recovering (deducting) certain capital costs over a fixed period of time. Filing an amendment to taxes It is similar to the straight line method of depreciation. Filing an amendment to taxes The various amortizable costs covered in this chapter are included in the list below. Filing an amendment to taxes However, this chapter does not discuss amortization of bond premium. Filing an amendment to taxes For information on that topic, see chapter 3 of Publication 550, Investment Income and Expenses. Filing an amendment to taxes Topics - This chapter discusses: Deducting amortization Amortizing costs of starting a business Amortizing costs of getting a lease Amortizing costs of section 197 intangibles Amortizing reforestation costs Amortizing costs of geological and geophysical costs Amortizing costs of pollution control facilities Amortizing costs of research and experimentation Amortizing costs of certain tax preferences Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 946 How To Depreciate Property Form (and Instructions) 4562 Depreciation and Amortization 4626 Alternative Minimum Tax—Corporations 6251 Alternative Minimum Tax—Individuals See chapter 12 for information about getting publications and forms. Filing an amendment to taxes How To Deduct Amortization To deduct amortization that begins during the current tax year, complete Part VI of Form 4562 and attach it to your income tax return. Filing an amendment to taxes To report amortization from previous years, in addition to amortization that begins in the current year, list on Form 4562 each item separately. Filing an amendment to taxes For example, in 2012, you began to amortize a lease. Filing an amendment to taxes In 2013, you began to amortize a second lease. Filing an amendment to taxes Report amortization from the new lease on line 42 of your 2013 Form 4562. Filing an amendment to taxes Report amortization from the 2012 lease on line 43 of your 2013 Form 4562. Filing an amendment to taxes If you do not have any new amortizable expenses for the current year, you are not required to complete Form 4562 (unless you are claiming depreciation). Filing an amendment to taxes Report the current year's deduction for amortization that began in a prior year directly on the “Other deduction” or “Other expense line” of your return. Filing an amendment to taxes Starting a Business When you start a business, treat all eligible costs you incur before you begin operating the business as capital expenditures which are part of your basis in the business. Filing an amendment to taxes Generally, you recover costs for particular assets through depreciation deductions. Filing an amendment to taxes However, you generally cannot recover other costs until you sell the business or otherwise go out of business. Filing an amendment to taxes For a discussion on how to treat these costs, see If your attempt to go into business is unsuccessful under Capital Expenses in chapter 1. Filing an amendment to taxes For costs paid or incurred after September 8, 2008, you can deduct a limited amount of start-up and organizational costs. Filing an amendment to taxes The costs that are not deducted currently can be amortized ratably over a 180-month period. Filing an amendment to taxes The amortization period starts with the month you begin operating your active trade or business. Filing an amendment to taxes You are not required to attach a statement to make this election. Filing an amendment to taxes You can choose to forgo this election by affirmatively electing to capitalize your start-up costs on your income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. Filing an amendment to taxes Once made, the election to either amortize or capitalize start-up costs is irrevocable and applies to all start-up costs that are related to your trade or business. Filing an amendment to taxes See Regulations sections 1. Filing an amendment to taxes 195-1, 1. Filing an amendment to taxes 248-1, and 1. Filing an amendment to taxes 709-1. Filing an amendment to taxes For costs paid or incurred after October 22, 2004, and before September 9, 2008, you can elect to deduct a limited amount of business start-up and organizational costs in the year your active trade or business begins. Filing an amendment to taxes Any costs not deducted can be amortized ratably over a 180-month period, beginning with the month you begin business. Filing an amendment to taxes If the election is made, you must attach any statement required by Regulations sections 1. Filing an amendment to taxes 195-1(b), 1. Filing an amendment to taxes 248-1(c), and 1. Filing an amendment to taxes 709-1(c), as in effect before September 9, 2008. Filing an amendment to taxes Note. Filing an amendment to taxes You can apply the provisions of Regulations sections 1. Filing an amendment to taxes 195-1, 1. Filing an amendment to taxes 248-1, and 1. Filing an amendment to taxes 709-1 to all business start-up and organizational costs paid or incurred after October 22, 2004, provided the period of limitations on assessment has not expired for the year of the election. Filing an amendment to taxes Otherwise, the provisions under Regulations sections 1. Filing an amendment to taxes 195-1(b), 1. Filing an amendment to taxes 248-1(c), and 1. Filing an amendment to taxes 709-1(c), as in effect before September 9, 2008, will apply. Filing an amendment to taxes For costs paid or incurred before October 23, 2004, you can elect to amortize business start-up and organization costs over an amortization period of 60 months or more. Filing an amendment to taxes See How To Make the Election , later. Filing an amendment to taxes The cost must qualify as one of the following. Filing an amendment to taxes A business start-up cost. Filing an amendment to taxes An organizational cost for a corporation. Filing an amendment to taxes An organizational cost for a partnership. Filing an amendment to taxes Business Start-Up Costs Start-up costs are amounts paid or incurred for: (a) creating an active trade or business; or (b) investigating the creation or acquisition of an active trade or business. Filing an amendment to taxes Start-up costs include amounts paid or incurred in connection with an existing activity engaged in for profit; and for the production of income in anticipation of the activity becoming an active trade or business. Filing an amendment to taxes Qualifying costs. Filing an amendment to taxes   A start-up cost is amortizable if it meets both of the following tests. Filing an amendment to taxes It is a cost you could deduct if you paid or incurred it to operate an existing active trade or business (in the same field as the one you entered into). Filing an amendment to taxes It is a cost you pay or incur before the day your active trade or business begins. Filing an amendment to taxes   Start-up costs include amounts paid for the following: An analysis or survey of potential markets, products, labor supply, transportation facilities, etc. Filing an amendment to taxes Advertisements for the opening of the business. Filing an amendment to taxes Salaries and wages for employees who are being trained and their instructors. Filing an amendment to taxes Travel and other necessary costs for securing prospective distributors, suppliers, or customers. Filing an amendment to taxes Salaries and fees for executives and consultants, or for similar professional services. Filing an amendment to taxes Nonqualifying costs. Filing an amendment to taxes   Start-up costs do not include deductible interest, taxes, or research and experimental costs. Filing an amendment to taxes See Research and Experimental Costs , later. Filing an amendment to taxes Purchasing an active trade or business. Filing an amendment to taxes   Amortizable start-up costs for purchasing an active trade or business include only investigative costs incurred in the course of a general search for or preliminary investigation of the business. Filing an amendment to taxes These are costs that help you decide whether to purchase a business. Filing an amendment to taxes Costs you incur in an attempt to purchase a specific business are capital expenses that you cannot amortize. Filing an amendment to taxes Example. Filing an amendment to taxes On June 1st, you hired an accounting firm and a law firm to assist you in the potential purchase of XYZ, Inc. Filing an amendment to taxes They researched XYZ's industry and analyzed the financial projections of XYZ, Inc. Filing an amendment to taxes In September, the law firm prepared and submitted a letter of intent to XYZ, Inc. Filing an amendment to taxes The letter stated that a binding commitment would result only after a purchase agreement was signed. Filing an amendment to taxes The law firm and accounting firm continued to provide services including a review of XYZ's books and records and the preparation of a purchase agreement. Filing an amendment to taxes On October 22nd, you signed a purchase agreement with XYZ, Inc. Filing an amendment to taxes All amounts paid or incurred to investigate the business before October 22nd are amortizable investigative costs. Filing an amendment to taxes Amounts paid on or after that date relate to the attempt to purchase the business and therefore must be capitalized. Filing an amendment to taxes Disposition of business. Filing an amendment to taxes   If you completely dispose of your business before the end of the amortization period, you can deduct any remaining deferred start-up costs. Filing an amendment to taxes However, you can deduct these deferred start-up costs only to the extent they qualify as a loss from a business. Filing an amendment to taxes Costs of Organizing a Corporation Amounts paid to organize a corporation are the direct costs of creating the corporation. Filing an amendment to taxes Qualifying costs. Filing an amendment to taxes   To qualify as an organizational cost, it must be: For the creation of the corporation, Chargeable to a capital account (see chapter 1), Amortized over the life of the corporation if the corporation had a fixed life, and Incurred before the end of the first tax year in which the corporation is in business. Filing an amendment to taxes   A corporation using the cash method of accounting can amortize organizational costs incurred within the first tax year, even if it does not pay them in that year. Filing an amendment to taxes   Examples of organizational costs include: The cost of temporary directors. Filing an amendment to taxes The cost of organizational meetings. Filing an amendment to taxes State incorporation fees. Filing an amendment to taxes The cost of legal services. Filing an amendment to taxes Nonqualifying costs. Filing an amendment to taxes   The following items are capital expenses that cannot be amortized: Costs for issuing and selling stock or securities, such as commissions, professional fees, and printing costs. Filing an amendment to taxes Costs associated with the transfer of assets to the corporation. Filing an amendment to taxes Costs of Organizing a Partnership The costs to organize a partnership are the direct costs of creating the partnership. Filing an amendment to taxes Qualifying costs. Filing an amendment to taxes   A partnership can amortize an organizational cost only if it meets all the following tests. Filing an amendment to taxes It is for the creation of the partnership and not for starting or operating the partnership trade or business. Filing an amendment to taxes It is chargeable to a capital account (see chapter 1). Filing an amendment to taxes It could be amortized over the life of the partnership if the partnership had a fixed life. Filing an amendment to taxes It is incurred by the due date of the partnership return (excluding extensions) for the first tax year in which the partnership is in business. Filing an amendment to taxes However, if the partnership uses the cash method of accounting and pays the cost after the end of its first tax year, see Cash method partnership under How To Amortize, later. Filing an amendment to taxes It is for a type of item normally expected to benefit the partnership throughout its entire life. Filing an amendment to taxes   Organizational costs include the following fees. Filing an amendment to taxes Legal fees for services incident to the organization of the partnership, such as negotiation and preparation of the partnership agreement. Filing an amendment to taxes Accounting fees for services incident to the organization of the partnership. Filing an amendment to taxes Filing fees. Filing an amendment to taxes Nonqualifying costs. Filing an amendment to taxes   The following costs cannot be amortized. Filing an amendment to taxes The cost of acquiring assets for the partnership or transferring assets to the partnership. Filing an amendment to taxes The cost of admitting or removing partners, other than at the time the partnership is first organized. Filing an amendment to taxes The cost of making a contract concerning the operation of the partnership trade or business including a contract between a partner and the partnership. Filing an amendment to taxes The costs for issuing and marketing interests in the partnership such as brokerage, registration, and legal fees and printing costs. Filing an amendment to taxes These “syndication fees” are capital expenses that cannot be depreciated or amortized. Filing an amendment to taxes Liquidation of partnership. Filing an amendment to taxes   If a partnership is liquidated before the end of the amortization period, the unamortized amount of qualifying organizational costs can be deducted in the partnership's final tax year. Filing an amendment to taxes However, these costs can be deducted only to the extent they qualify as a loss from a business. Filing an amendment to taxes How To Amortize Deduct start-up and organizational costs in equal amounts over the applicable amortization period (discussed earlier). Filing an amendment to taxes You can choose an amortization period for start-up costs that is different from the period you choose for organizational costs, as long as both are not less than the applicable amortization period. Filing an amendment to taxes Once you choose an amortization period, you cannot change it. Filing an amendment to taxes To figure your deduction, divide your total start-up or organizational costs by the months in the amortization period. Filing an amendment to taxes The result is the amount you can deduct for each month. Filing an amendment to taxes Cash method partnership. Filing an amendment to taxes   A partnership using the cash method of accounting can deduct an organizational cost only if it has been paid by the end of the tax year. Filing an amendment to taxes However, any cost the partnership could have deducted as an organizational cost in an earlier tax year (if it had been paid that year) can be deducted in the tax year of payment. Filing an amendment to taxes How To Make the Election To elect to amortize start-up or organizational costs, you must complete and attach Form 4562 to your return for the first tax year you are in business. Filing an amendment to taxes You may also be required to attach an accompanying statement (described later) to your return. Filing an amendment to taxes For start-up or organizational costs paid or incurred after September 8, 2008, an accompanying statement is not required. Filing an amendment to taxes Generally, for start-up or organizational costs paid or incurred before September 9, 2008, and after October 22, 2004, unless you choose to apply Regulations sections 1. Filing an amendment to taxes 195-1, 1. Filing an amendment to taxes 248-1, and 1. Filing an amendment to taxes 709-1, you must also attach an accompanying statement to elect to amortize the costs. Filing an amendment to taxes If you have both start-up and organizational costs, attach a separate statement (if required) to your return for each type of cost. Filing an amendment to taxes See Starting a Business , earlier, for more information. Filing an amendment to taxes Generally, you must file the return by the due date (including any extensions). Filing an amendment to taxes However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Filing an amendment to taxes For more information, see the instructions for Part VI of Form 4562. Filing an amendment to taxes You can choose to forgo the election to amortize by affirmatively electing to capitalize your start-up or organizational costs on your income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. Filing an amendment to taxes Note. Filing an amendment to taxes The election to either amortize or capitalize start-up or organizational costs is irrevocable and applies to all start-up and organizational costs that are related to the trade or business. Filing an amendment to taxes If your business is organized as a corporation or partnership, only the corporation or partnership can elect to amortize its start-up or organizational costs. Filing an amendment to taxes A shareholder or partner cannot make this election. Filing an amendment to taxes You, as a shareholder or partner, cannot amortize any costs you incur in setting up your corporation or partnership. Filing an amendment to taxes Only the corporation or partnership can amortize these costs. Filing an amendment to taxes However, you, as an individual, can elect to amortize costs you incur to investigate an interest in an existing partnership. Filing an amendment to taxes These costs qualify as business start-up costs if you acquire the partnership interest. Filing an amendment to taxes Start-up costs election statement. Filing an amendment to taxes   If you elect to amortize your start-up costs, attach a separate statement (if required) that contains the following information. Filing an amendment to taxes A description of the business to which the start-up costs relate. Filing an amendment to taxes A description of each start-up cost incurred. Filing an amendment to taxes The month your active business began (or was acquired). Filing an amendment to taxes The number of months in your amortization period (which is generally 180 months). Filing an amendment to taxes Filing the statement early. Filing an amendment to taxes   You can elect to amortize your start-up costs by filing the statement with a return for any tax year before the year your active business begins. Filing an amendment to taxes If you file the statement early, the election becomes effective in the month of the tax year your active business begins. Filing an amendment to taxes Revised statement. Filing an amendment to taxes   You can file a revised statement to include any start-up costs not included in your original statement. Filing an amendment to taxes However, you cannot include on the revised statement any cost you previously treated on your return as a cost other than a start-up cost. Filing an amendment to taxes You can file the revised statement with a return filed after the return on which you elected to amortize your start-up costs. Filing an amendment to taxes Organizational costs election statement. Filing an amendment to taxes   If you elect to amortize your corporation's or partnership's organizational costs, attach a separate statement (if required) that contains the following information. Filing an amendment to taxes A description of each cost. Filing an amendment to taxes The amount of each cost. Filing an amendment to taxes The date each cost was incurred. Filing an amendment to taxes The month your corporation or partnership began active business (or acquired the business). Filing an amendment to taxes The number of months in your amortization period (which is generally 180 months). Filing an amendment to taxes Partnerships. Filing an amendment to taxes   The statement prepared for a cash basis partnership must also indicate the amount paid before the end of the year for each cost. Filing an amendment to taxes   You do not need to separately list any partnership organizational cost that is less than $10. Filing an amendment to taxes Instead, you can list the total amount of these costs with the dates the first and last costs were incurred. Filing an amendment to taxes   After a partnership makes the election to amortize organizational costs, it can later file an amended return to include additional organizational costs not included in the partnership's original return and statement. Filing an amendment to taxes Getting a Lease If you get a lease for business property, you may recover the cost of acquiring the lease by amortizing it over the term of the lease. Filing an amendment to taxes The term of the lease for amortization purposes generally includes all renewal options (and any other period for which you and the lessor reasonably expect the lease to be renewed). Filing an amendment to taxes However, renewal periods are not included if 75% or more of the cost of acquiring the lease is for the term of the lease remaining on the acquisition date (not including any period for which you may choose to renew, extend, or continue the lease). Filing an amendment to taxes For more information on the costs of getting a lease, see Cost of Getting a Lease in  chapter 3. Filing an amendment to taxes How to amortize. Filing an amendment to taxes   Enter your deduction in Part VI of Form 4562 if you are deducting amortization that begins during the current year, or on the appropriate line of your tax return if you are not otherwise required to file Form 4562. Filing an amendment to taxes Section 197 Intangibles Generally, you may amortize the capitalized costs of “section 197 intangibles” (defined later) ratably over a 15-year period. Filing an amendment to taxes You must amortize these costs if you hold the section 197 intangibles in connection with your trade or business or in an activity engaged in for the production of income. Filing an amendment to taxes You may not be able to amortize section 197 intangibles acquired in a transaction that did not result in a significant change in ownership or use. Filing an amendment to taxes See Anti-Churning Rules, later. Filing an amendment to taxes Your amortization deduction each year is the applicable part of the intangible's adjusted basis (for purposes of determining gain), figured by amortizing it ratably over 15 years (180 months). Filing an amendment to taxes The 15-year period begins with the later of: The month the intangible is acquired, or The month the trade or business or activity engaged in for the production of income begins. Filing an amendment to taxes You cannot deduct amortization for the month you dispose of the intangible. Filing an amendment to taxes If you pay or incur an amount that increases the basis of an amortizable section 197 intangible after the 15-year period begins, amortize it over the remainder of the 15-year period beginning with the month the basis increase occurs. Filing an amendment to taxes You are not allowed any other depreciation or amortization deduction for an amortizable section 197 intangible. Filing an amendment to taxes Tax-exempt use property subject to a lease. Filing an amendment to taxes   The amortization period for any section 197 intangible leased under a lease agreement entered into after March 12, 2004, to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership), shall not be less than 125 percent of the lease term. Filing an amendment to taxes Cost attributable to other property. Filing an amendment to taxes   The rules for section 197 intangibles do not apply to any amount that is included in determining the cost of property that is not a section 197 intangible. Filing an amendment to taxes For example, if the cost of computer software is not separately stated from the cost of hardware or other tangible property and you consistently treat it as part of the cost of the hardware or other tangible property, these rules do not apply. Filing an amendment to taxes Similarly, none of the cost of acquiring real property held for the production of rental income is considered the cost of goodwill, going concern value, or any other section 197 intangible. Filing an amendment to taxes Section 197 Intangibles Defined The following assets are section 197 intangibles and must be amortized over 180 months: Goodwill; Going concern value; Workforce in place; Business books and records, operating systems, or any other information base, including lists or other information concerning current or prospective customers; A patent, copyright, formula, process, design, pattern, know-how, format, or similar item; A customer-based intangible; A supplier-based intangible; Any item similar to items (3) through (7); A license, permit, or other right granted by a governmental unit or agency (including issuances and renewals); A covenant not to compete entered into in connection with the acquisition of an interest in a trade or business; Any franchise, trademark, or trade name; and A contract for the use of, or a term interest in, any item in this list. Filing an amendment to taxes You cannot amortize any of the intangibles listed in items (1) through (8) that you created rather than acquired unless you created them in acquiring assets that make up a trade or business or a substantial part of a trade or business. Filing an amendment to taxes Goodwill. Filing an amendment to taxes   This is the value of a trade or business based on expected continued customer patronage due to its name, reputation, or any other factor. Filing an amendment to taxes Going concern value. Filing an amendment to taxes   This is the additional value of a trade or business that attaches to property because the property is an integral part of an ongoing business activity. Filing an amendment to taxes It includes value based on the ability of a business to continue to function and generate income even though there is a change in ownership (but does not include any other section 197 intangible). Filing an amendment to taxes It also includes value based on the immediate use or availability of an acquired trade or business, such as the use of earnings during any period in which the business would not otherwise be available or operational. Filing an amendment to taxes Workforce in place, etc. Filing an amendment to taxes   This includes the composition of a workforce (for example, its experience, education, or training). Filing an amendment to taxes It also includes the terms and conditions of employment, whether contractual or otherwise, and any other value placed on employees or any of their attributes. Filing an amendment to taxes   For example, you must amortize the part of the purchase price of a business that is for the existence of a highly skilled workforce. Filing an amendment to taxes Also, you must amortize the cost of acquiring an existing employment contract or relationship with employees or consultants. Filing an amendment to taxes Business books and records, etc. Filing an amendment to taxes   This includes the intangible value of technical manuals, training manuals or programs, data files, and accounting or inventory control systems. Filing an amendment to taxes It also includes the cost of customer lists, subscription lists, insurance expirations, patient or client files, and lists of newspaper, magazine, radio, and television advertisers. Filing an amendment to taxes Patents, copyrights, etc. Filing an amendment to taxes   This includes package design, computer software, and any interest in a film, sound recording, videotape, book, or other similar property, except as discussed later under Assets That Are Not Section 197 Intangibles . Filing an amendment to taxes Customer-based intangible. Filing an amendment to taxes   This is the composition of market, market share, and any other value resulting from the future provision of goods or services because of relationships with customers in the ordinary course of business. Filing an amendment to taxes For example, you must amortize the part of the purchase price of a business that is for the existence of the following intangibles. Filing an amendment to taxes A customer base. Filing an amendment to taxes A circulation base. Filing an amendment to taxes An undeveloped market or market growth. Filing an amendment to taxes Insurance in force. Filing an amendment to taxes A mortgage servicing contract. Filing an amendment to taxes An investment management contract. Filing an amendment to taxes Any other relationship with customers involving the future provision of goods or services. Filing an amendment to taxes   Accounts receivable or other similar rights to income for goods or services provided to customers before the acquisition of a trade or business are not section 197 intangibles. Filing an amendment to taxes Supplier-based intangible. Filing an amendment to taxes   A supplier-based intangible is the value resulting from the future acquisitions, (through contract or other relationships with suppliers in the ordinary course of business) of goods or services that you will sell or use. Filing an amendment to taxes The amount you pay or incur for supplier-based intangibles includes, for example, any portion of the purchase price of an acquired trade or business that is attributable to the existence of a favorable relationship with persons providing distribution services (such as a favorable shelf or display space or a retail outlet), or the existence of favorable supply contracts. Filing an amendment to taxes Do not include any amount required to be paid for the goods or services to honor the terms of the agreement or other relationship. Filing an amendment to taxes Also, see Assets That Are Not Section 197 Intangibles below. Filing an amendment to taxes Government-granted license, permit, etc. Filing an amendment to taxes   This is any right granted by a governmental unit or an agency or instrumentality of a governmental unit. Filing an amendment to taxes For example, you must amortize the capitalized costs of acquiring (including issuing or renewing) a liquor license, a taxicab medallion or license, or a television or radio broadcasting license. Filing an amendment to taxes Covenant not to compete. Filing an amendment to taxes   Section 197 intangibles include a covenant not to compete (or similar arrangement) entered into in connection with the acquisition of an interest in a trade or business, or a substantial portion of a trade or business. Filing an amendment to taxes An interest in a trade or business includes an interest in a partnership or a corporation engaged in a trade or business. Filing an amendment to taxes   An arrangement that requires the former owner to perform services (or to provide property or the use of property) is not similar to a covenant not to compete to the extent the amount paid under the arrangement represents reasonable compensation for those services or for that property or its use. Filing an amendment to taxes Franchise, trademark, or trade name. Filing an amendment to taxes   A franchise, trademark, or trade name is a section 197 intangible. Filing an amendment to taxes You must amortize its purchase or renewal costs, other than certain contingent payments that you can deduct currently. Filing an amendment to taxes For information on currently deductible contingent payments, see chapter 11. Filing an amendment to taxes Professional sports franchise. Filing an amendment to taxes   A franchise engaged in professional sports and any intangible assets acquired in connection with acquiring the franchise (including player contracts) is a section 197 intangible amortizable over a 15-year period. Filing an amendment to taxes Contract for the use of, or a term interest in, a section 197 intangible. Filing an amendment to taxes   Section 197 intangibles include any right under a license, contract, or other arrangement providing for the use of any section 197 intangible. Filing an amendment to taxes It also includes any term interest in any section 197 intangible, whether the interest is outright or in trust. Filing an amendment to taxes Assets That Are Not Section 197 Intangibles The following assets are not section 197 intangibles. Filing an amendment to taxes Any interest in a corporation, partnership, trust, or estate. Filing an amendment to taxes Any interest under an existing futures contract, foreign currency contract, notional principal contract, interest rate swap, or similar financial contract. Filing an amendment to taxes Any interest in land. Filing an amendment to taxes Most computer software. Filing an amendment to taxes (See Computer software , later. Filing an amendment to taxes ) Any of the following assets not acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. Filing an amendment to taxes An interest in a film, sound recording, video tape, book, or similar property. Filing an amendment to taxes A right to receive tangible property or services under a contract or from a governmental agency. Filing an amendment to taxes An interest in a patent or copyright. Filing an amendment to taxes Certain rights that have a fixed duration or amount. Filing an amendment to taxes (See Rights of fixed duration or amount , later. Filing an amendment to taxes ) An interest under either of the following. Filing an amendment to taxes An existing lease or sublease of tangible property. Filing an amendment to taxes A debt that was in existence when the interest was acquired. Filing an amendment to taxes A right to service residential mortgages unless the right is acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. Filing an amendment to taxes Certain transaction costs incurred by parties to a corporate organization or reorganization in which any part of a gain or loss is not recognized. Filing an amendment to taxes Intangible property that is not amortizable under the rules for section 197 intangibles can be depreciated if it meets certain requirements. Filing an amendment to taxes You generally must use the straight line method over its useful life. Filing an amendment to taxes For certain intangibles, the depreciation period is specified in the law and regulations. Filing an amendment to taxes For example, the depreciation period for computer software that is not a section 197 intangible is generally 36 months. Filing an amendment to taxes For more information on depreciating intangible property, see Intangible Property under What Method Can You Use To Depreciate Your Property? in chapter 1 of Publication 946. Filing an amendment to taxes Computer software. Filing an amendment to taxes   Section 197 intangibles do not include the following types of computer software. Filing an amendment to taxes Software that meets all the following requirements. Filing an amendment to taxes It is, or has been, readily available for purchase by the general public. Filing an amendment to taxes It is subject to a nonexclusive license. Filing an amendment to taxes It has not been substantially modified. Filing an amendment to taxes This requirement is considered met if the cost of all modifications is not more than the greater of 25% of the price of the publicly available unmodified software or $2,000. Filing an amendment to taxes Software that is not acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. Filing an amendment to taxes Computer software defined. Filing an amendment to taxes   Computer software includes all programs designed to cause a computer to perform a desired function. Filing an amendment to taxes It also includes any database or similar item that is in the public domain and is incidental to the operation of qualifying software. Filing an amendment to taxes Rights of fixed duration or amount. Filing an amendment to taxes   Section 197 intangibles do not include any right under a contract or from a governmental agency if the right is acquired in the ordinary course of a trade or business (or in an activity engaged in for the production of income) but not as part of a purchase of a trade or business and either: Has a fixed life of less than 15 years, or Is of a fixed amount that, except for the rules for section 197 intangibles, would be recovered under a method similar to the unit-of-production method of cost recovery. Filing an amendment to taxes However, this does not apply to the following intangibles. Filing an amendment to taxes Goodwill. Filing an amendment to taxes Going concern value. Filing an amendment to taxes A covenant not to compete. Filing an amendment to taxes A franchise, trademark, or trade name. Filing an amendment to taxes A customer-related information base, customer-based intangible, or similar item. Filing an amendment to taxes Safe Harbor for Creative Property Costs If you are engaged in the trade or business of film production, you may be able to amortize the creative property costs for properties not set for production within 3 years of the first capitalized transaction. Filing an amendment to taxes You may amortize these costs ratably over a 15-year period beginning on the first day of the second half of the tax year in which you properly write off the costs for financial accounting purposes. Filing an amendment to taxes If, during the 15-year period, you dispose of the creative property rights, you must continue to amortize the costs over the remainder of the 15-year period. Filing an amendment to taxes Creative property costs include costs paid or incurred to acquire and develop screenplays, scripts, story outlines, motion picture production rights to books and plays, and other similar properties for purposes of potential future film development, production, and exploitation. Filing an amendment to taxes Amortize these costs using the rules of Revenue Procedure 2004-36. Filing an amendment to taxes For more information, see Revenue Procedure 2004-36, 2004-24 I. Filing an amendment to taxes R. Filing an amendment to taxes B. Filing an amendment to taxes 1063, available at  www. Filing an amendment to taxes irs. Filing an amendment to taxes gov/irb/2004-24_IRB/ar16. Filing an amendment to taxes html. Filing an amendment to taxes A change in the treatment of creative property costs is a change in method of accounting. Filing an amendment to taxes Anti-Churning Rules Anti-churning rules prevent you from amortizing most section 197 intangibles if the transaction in which you acquired them did not result in a significant change in ownership or use. Filing an amendment to taxes These rules apply to goodwill and going concern value, and to any other section 197 intangible that is not otherwise depreciable or amortizable. Filing an amendment to taxes Under the anti-churning rules, you cannot use 15-year amortization for the intangible if any of the following conditions apply. Filing an amendment to taxes You or a related person (defined later) held or used the intangible at any time from July 25, 1991, through August 10, 1993. Filing an amendment to taxes You acquired the intangible from a person who held it at any time during the period in (1) and, as part of the transaction, the user did not change. Filing an amendment to taxes You granted the right to use the intangible to a person (or a person related to that person) who held or used it at any time during the period in (1). Filing an amendment to taxes This applies only if the transaction in which you granted the right and the transaction in which you acquired the intangible are part of a series of related transactions. Filing an amendment to taxes See Related person , later, for more information. Filing an amendment to taxes Exceptions. Filing an amendment to taxes   The anti-churning rules do not apply in the following situations. Filing an amendment to taxes You acquired the intangible from a decedent and its basis was stepped up to its fair market value. Filing an amendment to taxes The intangible was amortizable as a section 197 intangible by the seller or transferor you acquired it from. Filing an amendment to taxes This exception does not apply if the transaction in which you acquired the intangible and the transaction in which the seller or transferor acquired it are part of a series of related transactions. Filing an amendment to taxes The gain-recognition exception, discussed later, applies. Filing an amendment to taxes Related person. Filing an amendment to taxes   For purposes of the anti-churning rules, the following are related persons. Filing an amendment to taxes An individual and his or her brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. Filing an amendment to taxes ), and lineal descendants (children, grandchildren, etc. Filing an amendment to taxes ). Filing an amendment to taxes A corporation and an individual who owns, directly or indirectly, more than 20% of the value of the corporation's outstanding stock. Filing an amendment to taxes Two corporations that are members of the same controlled group as defined in section 1563(a) of the Internal Revenue Code, except that “more than 20%” is substituted for “at least 80%” in that definition and the determination is made without regard to subsections (a)(4) and (e)(3)(C) of section 1563. Filing an amendment to taxes (For an exception, see section 1. Filing an amendment to taxes 197-2(h)(6)(iv) of the regulations. Filing an amendment to taxes ) A trust fiduciary and a corporation if more than 20% of the value of the corporation's outstanding stock is owned, directly or indirectly, by or for the trust or grantor of the trust. Filing an amendment to taxes The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. Filing an amendment to taxes The fiduciaries of two different trusts, and the fiduciaries and beneficiaries of two different trusts, if the same person is the grantor of both trusts. Filing an amendment to taxes The executor and beneficiary of an estate. Filing an amendment to taxes A tax-exempt educational or charitable organization and a person who directly or indirectly controls the organization (or whose family members control it). Filing an amendment to taxes A corporation and a partnership if the same persons own more than 20% of the value of the outstanding stock of the corporation and more than 20% of the capital or profits interest in the partnership. Filing an amendment to taxes Two S corporations, and an S corporation and a regular corporation, if the same persons own more than 20% of the value of the outstanding stock of each corporation. Filing an amendment to taxes Two partnerships if the same persons own, directly or indirectly, more than 20% of the capital or profits interests in both partnerships. Filing an amendment to taxes A partnership and a person who owns, directly or indirectly, more than 20% of the capital or profits interests in the partnership. Filing an amendment to taxes Two persons who are engaged in trades or businesses under common control (as described in section 41(f)(1) of the Internal Revenue Code). Filing an amendment to taxes When to determine relationship. Filing an amendment to taxes   Persons are treated as related if the relationship existed at the following time. Filing an amendment to taxes In the case of a single transaction, immediately before or immediately after the transaction in which the intangible was acquired. Filing an amendment to taxes In the case of a series of related transactions (or a series of transactions that comprise a qualified stock purchase under section 338(d)(3) of the Internal Revenue Code), immediately before the earliest transaction or immediately after the last transaction. Filing an amendment to taxes Ownership of stock. Filing an amendment to taxes   In determining whether an individual directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. Filing an amendment to taxes Rule 1. Filing an amendment to taxes   Stock directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. Filing an amendment to taxes Rule 2. Filing an amendment to taxes   An individual is considered to own the stock directly or indirectly owned by or for his or her family. Filing an amendment to taxes Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. Filing an amendment to taxes Rule 3. Filing an amendment to taxes   An individual owning (other than by applying Rule 2) any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. Filing an amendment to taxes Rule 4. Filing an amendment to taxes   For purposes of applying Rule 1, 2, or 3, treat stock constructively owned by a person under Rule 1 as actually owned by that person. Filing an amendment to taxes Do not treat stock constructively owned by an individual under Rule 2 or 3 as owned by the individual for reapplying Rule 2 or 3 to make another person the constructive owner of the stock. Filing an amendment to taxes Gain-recognition exception. Filing an amendment to taxes   This exception to the anti-churning rules applies if the person you acquired the intangible from (the transferor) meets both of the following requirements. Filing an amendment to taxes That person would not be related to you (as described under Related person , earlier) if the 20% test for ownership of stock and partnership interests were replaced by a 50% test. Filing an amendment to taxes That person chose to recognize gain on the disposition of the intangible and pay income tax on the gain at the highest tax rate. Filing an amendment to taxes See chapter 2 in Publication 544 for information on making this choice. Filing an amendment to taxes   If this exception applies, the anti-churning rules apply only to the amount of your adjusted basis in the intangible that is more than the gain recognized by the transferor. Filing an amendment to taxes Notification. Filing an amendment to taxes   If the person you acquired the intangible from chooses to recognize gain under the rules for this exception, that person must notify you in writing by the due date of the return on which the choice is made. Filing an amendment to taxes Anti-abuse rule. Filing an amendment to taxes   You cannot amortize any section 197 intangible acquired in a transaction for which the principal purpose was either of the following. Filing an amendment to taxes To avoid the requirement that the intangible be acquired after August 10, 1993. Filing an amendment to taxes To avoid any of the anti-churning rules. Filing an amendment to taxes More information. Filing an amendment to taxes   For more information about the anti-churning rules, including additional rules for partnerships, see Regulations section 1. Filing an amendment to taxes 197-2(h). Filing an amendment to taxes Incorrect Amount of Amortization Deducted If you later discover that you deducted an incorrect amount for amortization for a section 197 intangible in any year, you may be able to make a correction for that year by filing an amended return. Filing an amendment to taxes See Amended Return , next. Filing an amendment to taxes If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amortization. Filing an amendment to taxes See Changing Your Accounting Method , later. Filing an amendment to taxes Amended Return If you deducted an incorrect amount for amortization, you can file an amended return to correct the following. Filing an amendment to taxes A mathematical error made in any year. Filing an amendment to taxes A posting error made in any year. Filing an amendment to taxes An amortization deduction for a section 197 intangible for which you have not adopted a method of accounting. Filing an amendment to taxes When to file. Filing an amendment to taxes   If an amended return is allowed, you must file it by the later of the following dates. Filing an amendment to taxes 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. Filing an amendment to taxes (A return filed early is considered filed on the due date. Filing an amendment to taxes ) 2 years from the time you paid your tax for that year. Filing an amendment to taxes Changing Your Accounting Method Generally, you must get IRS approval to change your method of accounting. Filing an amendment to taxes File Form 3115, Application for Change in Accounting Method, to request a change to a permissible method of accounting for amortization. Filing an amendment to taxes The following are examples of a change in method of accounting for amortization. Filing an amendment to taxes A change in the amortization method, period of recovery, or convention of an amortizable asset. Filing an amendment to taxes A change in the accounting for amortizable assets from a single asset account to a multiple asset account (pooling), or vice versa. Filing an amendment to taxes A change in the accounting for amortizable assets from one type of multiple asset account to a different type of multiple asset account. Filing an amendment to taxes Changes in amortization that are not a change in method of accounting include the following: A change in computing amortization in the tax year in which your use of the asset changes. Filing an amendment to taxes An adjustment in the useful life of an amortizable asset. Filing an amendment to taxes Generally, the making of a late amortization election or the revocation of a timely valid amortization election. Filing an amendment to taxes Any change in the placed-in-service date of an amortizable asset. Filing an amendment to taxes See Regulations section 1. Filing an amendment to taxes 446-1(e)(2)(ii)(a) for more information and examples. Filing an amendment to taxes Automatic approval. Filing an amendment to taxes   In some instances, you may be able to get automatic approval from the IRS to change your method of accounting for amortization. Filing an amendment to taxes For a list of automatic accounting method changes, see the Instructions for Form 3115. Filing an amendment to taxes Also see the Instructions for Form 3115 for more information on getting approval, automatic approval procedures, and a list of exceptions to the automatic approval process. Filing an amendment to taxes For more information, see Revenue Procedure 2006-12, as modified by Revenue Procedure 2006-37, and Revenue Procedure 2008-52, as amplified, clarified, and modified by Revenue Procedure 2009-39, as clarified and modified by Revenue Procedure 2011-14, as modified and amplified by Revenue Procedure 2011-22, as modified by Revenue Procedure 2012-39, or any successor. Filing an amendment to taxes See Revenue Procedure 2006-12, 2006-3 I. Filing an amendment to taxes R. Filing an amendment to taxes B. Filing an amendment to taxes 310, available at  www. Filing an amendment to taxes irs. Filing an amendment to taxes gov/irb/2006-03_IRB/ar14. Filing an amendment to taxes html. Filing an amendment to taxes  See Revenue Procedure 2006-37, 2006-38 I. Filing an amendment to taxes R. Filing an amendment to taxes B. Filing an amendment to taxes 499, available at  www. Filing an amendment to taxes irs. Filing an amendment to taxes gov/irb/2006-38_IRB/ar10. Filing an amendment to taxes html. Filing an amendment to taxes  See Revenue Procedure 2008-52, 2008-36 I. Filing an amendment to taxes R. Filing an amendment to taxes B. Filing an amendment to taxes 587, available at www. Filing an amendment to taxes irs. Filing an amendment to taxes gov/irb/2008-36_IRB/ar09. Filing an amendment to taxes html. Filing an amendment to taxes  See Revenue Procedure 2009-39, 2009-38 I. Filing an amendment to taxes R. Filing an amendment to taxes B. Filing an amendment to taxes 371, available at  www. Filing an amendment to taxes irs. Filing an amendment to taxes gov/irb/2009-38_IRB/ar08. Filing an amendment to taxes html. Filing an amendment to taxes  See Revenue Procedure 2011-14, 2011-4 I. Filing an amendment to taxes R. Filing an amendment to taxes B. Filing an amendment to taxes 330, available at  www. Filing an amendment to taxes irs. Filing an amendment to taxes gov/irb/2011-04_IRB/ar08. Filing an amendment to taxes html. Filing an amendment to taxes  See Revenue Procedure 2011-22, 2011-18 I. Filing an amendment to taxes R. Filing an amendment to taxes B. Filing an amendment to taxes 737, available at  www. Filing an amendment to taxes irs. Filing an amendment to taxes gov/irb/2011-18_IRB/ar08. Filing an amendment to taxes html. Filing an amendment to taxes Also, see Revenue Procedure 2012-39, 2012-41 I. Filing an amendment to taxes R. Filing an amendment to taxes B. Filing an amendment to taxes 470 available at www. Filing an amendment to taxes irs. Filing an amendment to taxes gov/irb/2012-41_IRB/index. Filing an amendment to taxes html. Filing an amendment to taxes Disposition of Section 197 Intangibles A section 197 intangible is treated as depreciable property used in your trade or business. Filing an amendment to taxes If you held the intangible for more than 1 year, any gain on its disposition, up to the amount of allowable amortization, is ordinary income (section 1245 gain). Filing an amendment to taxes If multiple section 197 intangibles are disposed of in a single transaction or a series of related transactions, treat all of the section 197 intangibles as if they were a single asset for purposes of determining the amount of gain that is ordinary income. Filing an amendment to taxes Any remaining gain, or any loss, is a section 1231 gain or loss. Filing an amendment to taxes If you held the intangible 1 year or less, any gain or loss on its disposition is an ordinary gain or loss. Filing an amendment to taxes For more information on ordinary or capital gain or loss on business property, see chapter 3 in Publication 544. Filing an amendment to taxes Nondeductible loss. Filing an amendment to taxes   You cannot deduct any loss on the disposition or worthlessness of a section 197 intangible that you acquired in the same transaction (or series of related transactions) as other section 197 intangibles you still have. Filing an amendment to taxes Instead, increase the adjusted basis of each remaining amortizable section 197 intangible by a proportionate part of the nondeductible loss. Filing an amendment to taxes Figure the increase by multiplying the nondeductible loss on the disposition of the intangible by the following fraction. Filing an amendment to taxes The numerator is the adjusted basis of each remaining intangible on the date of the disposition. Filing an amendment to taxes The denominator is the total adjusted bases of all remaining amortizable section 197 intangibles on the date of the disposition. Filing an amendment to taxes Covenant not to compete. Filing an amendment to taxes   A covenant not to compete, or similar arrangement, is not considered disposed of or worthless before you dispose of your entire interest in the trade or business for which you entered into the covenant. Filing an amendment to taxes Nonrecognition transfers. Filing an amendment to taxes   If you acquire a section 197 intangible in a nonrecognition transfer, you are treated as the transferor with respect to the part of your adjusted basis in the intangible that is not more than the transferor's adjusted basis. Filing an amendment to taxes You amortize this part of the adjusted basis over the intangible's remaining amortization period in the hands of the transferor. Filing an amendment to taxes Nonrecognition transfers include transfers to a corporation, partnership contributions and distributions, like-kind exchanges, and involuntary conversions. Filing an amendment to taxes   In a like-kind exchange or involuntary conversion of a section 197 intangible, you must continue to amortize the part of your adjusted basis in the acquired intangible that is not more than your adjusted basis in the exchanged or converted intangible over the remaining amortization period of the exchanged or converted intangible. Filing an amendment to taxes Amortize over a new 15-year period the part of your adjusted basis in the acquired intangible that is more than your adjusted basis in the exchanged or converted intangible. Filing an amendment to taxes Example. Filing an amendment to taxes You own a section 197 intangible you have amortized for 4 full years. Filing an amendment to taxes It has a remaining unamortized basis of $30,000. Filing an amendment to taxes You exchange the asset plus $10,000 for a like-kind section 197 intangible. Filing an amendment to taxes The nonrecognition provisions of like-kind exchanges apply. Filing an amendment to taxes You amortize $30,000 of the $40,000 adjusted basis of the acquired intangible over the 11 years remaining in the original 15-year amortization period for the transferred asset. Filing an amendment to taxes You amortize the other $10,000 of adjusted basis over a new 15-year period. Filing an amendment to taxes For more information, see Regulations section 1. Filing an amendment to taxes 197-2(g). Filing an amendment to taxes Reforestation Costs You can elect to deduct a limited amount of reforestation costs paid or incurred during the tax year. Filing an amendment to taxes See Reforestation Costs in chapter 7. Filing an amendment to taxes You can elect to amortize the qualifying costs that are not deducted currently over an 84-month period. Filing an amendment to taxes There is no limit on the amount of your amortization deduction for reforestation costs paid or incurred during the tax year. Filing an amendment to taxes The election to amortize reforestation costs incurred by a partnership, S corporation, or estate must be made by the partnership, corporation, or estate. Filing an amendment to taxes A partner, shareholder, or beneficiary cannot make that election. Filing an amendment to taxes A partner's or shareholder's share of amortizable costs is figured under the general rules for allocating items of income, loss, deduction, etc. Filing an amendment to taxes , of a partnership or S corporation. Filing an amendment to taxes The amortizable costs of an estate are divided between the estate and the income beneficiary based on the income of the estate allocable to each. Filing an amendment to taxes Qualifying costs. Filing an amendment to taxes   Reforestation costs are the direct costs of planting or seeding for forestation or reforestation. Filing an amendment to taxes Qualifying costs include only those costs you must capitalize and include in the adjusted basis of the property. Filing an amendment to taxes They include costs for the following items. Filing an amendment to taxes Site preparation. Filing an amendment to taxes Seeds or seedlings. Filing an amendment to taxes Labor. Filing an amendment to taxes Tools. Filing an amendment to taxes Depreciation on equipment used in planting and seeding. Filing an amendment to taxes Qualifying costs do not include costs for which the government reimburses you under a cost-sharing program, unless you include the reimbursement in your income. Filing an amendment to taxes Qualified timber property. Filing an amendment to taxes   Qualified timber property is property that contains trees in significant commercial quantities. Filing an amendment to taxes It can be a woodlot or other site that you own or lease. Filing an amendment to taxes The property qualifies only if it meets all of the following requirements. Filing an amendment to taxes It is located in the United States. Filing an amendment to taxes It is held for the growing and cutting of timber you will either use in, or sell for use in, the commercial production of timber products. Filing an amendment to taxes It consists of at least one acre planted with tree seedlings in the manner normally used in forestation or reforestation. Filing an amendment to taxes Qualified timber property does not include property on which you have planted shelter belts or ornamental trees, such as Christmas trees. Filing an amendment to taxes Amortization period. Filing an amendment to taxes   The 84-month amortization period starts on the first day of the first month of the second half of the tax year you incur the costs (July 1 for a calendar year taxpayer), regardless of the month you actually incur the costs. Filing an amendment to taxes You can claim amortization deductions for no more than 6 months of the first and last (eighth) tax years of the period. Filing an amendment to taxes Life tenant and remainderman. Filing an amendment to taxes   If one person holds the property for life with the remainder going to another person, the life tenant is entitled to the full amortization for qualifying reforestation costs incurred by the life tenant. Filing an amendment to taxes Any remainder interest in the property is ignored for amortization purposes. Filing an amendment to taxes Recapture. Filing an amendment to taxes   If you dispose of qualified timber property within 10 years after the tax year you incur qualifying reforestation expenses, report any gain as ordinary income up to the amortization you took. Filing an amendment to taxes See chapter 3 of Publication 544 for more information. Filing an amendment to taxes How to make the election. Filing an amendment to taxes   To elect to amortize qualifying reforestation costs, complete Part VI of Form 4562 and attach a statement that contains the following information. Filing an amendment to taxes A description of the costs and the dates you incurred them. Filing an amendment to taxes A description of the type of timber being grown and the purpose for which it is grown. Filing an amendment to taxes Attach a separate statement for each property for which you amortize reforestation costs. Filing an amendment to taxes   Generally, you must make the election on a timely filed return (including extensions) for the tax year in which you incurred the costs. Filing an amendment to taxes However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Filing an amendment to taxes Attach Form 4562 and the statement to the amended return and write “Filed pursuant to section 301. Filing an amendment to taxes 9100-2” on Form 4562. Filing an amendment to taxes File the amended return at the same address you filed the original return. Filing an amendment to taxes Revoking the election. Filing an amendment to taxes   You must get IRS approval to revoke your election to amortize qualifying reforestation costs. Filing an amendment to taxes Your application to revoke the election must include your name, address, the years for which your election was in effect, and your reason for revoking it. Filing an amendment to taxes Please provide your daytime telephone number (optional), in case we need to contact you. Filing an amendment to taxes You, or your duly authorized representative, must sign the application and file it at least 90 days before the due date (without extensions) for filing your income tax return for the first tax year for which your election is to end. Filing an amendment to taxes    Send the application to: Internal Revenue Service Associate Chief Counsel Passthroughs and Special Industries CC:PSI:6 1111 Constitution Ave. Filing an amendment to taxes NW, IR-5300 Washington, DC 20224 Geological and Geophysical Costs You can amortize the cost of geological and geophysical expenses paid or incurred in connection with oil and gas exploration or development within the United States. Filing an amendment to taxes These costs can be amortized ratably over a 24-month period beginning on the mid-point of the tax year in which the expenses were paid or incurred. Filing an amendment to taxes For major integrated oil companies (as defined in section 167(h)(5)), these costs must be amortized ratably over a 5-year period for costs paid or incurred after May 17, 2006 (a 7-year period for costs paid or incurred after December 19, 2007). Filing an amendment to taxes If you retire or abandon the property during the amortization period, no amortization deduction is allowed in the year of retirement or abandonment. Filing an amendment to taxes Pollution Control Facilities You can elect to amortize the cost of a certified pollution control facility over 60 months. Filing an amendment to taxes However, see Atmospheric pollution control facilities for an exception. Filing an amendment to taxes The cost of a pollution control facility that is not eligible for amortization can be depreciated under the regular rules for depreciation. Filing an amendment to taxes Also, you can claim a special depreciation allowance on a certified pollution control facility that is qualified property even if you elect to amortize its cost. Filing an amendment to taxes You must reduce its cost (amortizable basis) by the amount of any special allowance you claim. Filing an amendment to taxes See chapter 3 of Publication 946. Filing an amendment to taxes A certified pollution control facility is a new identifiable treatment facility used in connection with a plant or other property in operation before 1976, to reduce or control water or atmospheric pollution or contamination. Filing an amendment to taxes The facility must do so by removing, changing, disposing, storing, or preventing the creation or emission of pollutants, contaminants, wastes, or heat. Filing an amendment to taxes The facility must be certified by state and federal certifying authorities. Filing an amendment to taxes The facility must not significantly increase the output or capacity, extend the useful life, or reduce the total operating costs of the plant or other property. Filing an amendment to taxes Also, it must not significantly change the nature of the manufacturing or production process or facility. Filing an amendment to taxes The federal certifying authority will not certify your property to the extent it appears you will recover (over the property's useful life) all or part of its cost from the profit based on its operation (such as through sales of recovered wastes). Filing an amendment to taxes The federal certifying authority will describe the nature of the potential cost recovery. Filing an amendment to taxes You must then reduce the amortizable basis of the facility by this potential recovery. Filing an amendment to taxes New identifiable treatment facility. Filing an amendment to taxes   A new identifiable treatment facility is tangible depreciable property that is identifiable as a treatment facility. Filing an amendment to taxes It does not include a building and its structural components unless the building is exclusively a treatment facility. Filing an amendment to taxes Atmospheric pollution control facilities. Filing an amendment to taxes   Certain atmospheric pollution control facilities can be amortized over 84 months. Filing an amendment to taxes To qualify, the following must apply. Filing an amendment to taxes The facility must be acquired and placed in service after April 11, 2005. Filing an amendment to taxes If acquired, the original use must begin with you after April 11, 2005. Filing an amendment to taxes The facility must be used in connection with an electric generation plant or other property placed in operation after December 31, 1975, that is primarily coal fired. Filing an amendment to taxes If you construct, reconstruct, or erect the facility, only the basis attributable to the construction, reconstruction, or erection completed after April 11, 2005, qualifies. Filing an amendment to taxes Basis reduction for corporations. Filing an amendment to taxes   A corporation must reduce the amortizable basis of a pollution control facility by 20% before figuring the amortization deduction. Filing an amendment to taxes More information. Filing an amendment to taxes   For more information on the amortization of pollution control facilities, see Code sections 169 and 291(c) and the related regulations. Filing an amendment to taxes Research and Experimental Costs You can elect to amortize your research and experimental costs, deduct them as current business expenses, or write them off over a 10-year period (see Optional write-off method below). Filing an amendment to taxes If you elect to amortize these costs, deduct them in equal amounts over 60 months or more. Filing an amendment to taxes The amortization period begins the month you first receive an economic benefit from the costs. Filing an amendment to taxes For a definition of “research and experimental costs” and information on deducting them as current business expenses, see chapter 7. Filing an amendment to taxes Optional write-off method. Filing an amendment to taxes   Rather than amortize these costs or deduct them as a current expense, you have the option of deducting (writing off) research and experimental costs ratably over a 10-year period beginning with the tax year in which you incurred the costs. Filing an amendment to taxes For more information, see Optional Write-off of Certain Tax Preferences , later, and section 59(e) of the Internal Revenue Code. Filing an amendment to taxes Costs you can amortize. Filing an amendment to taxes   You can amortize costs chargeable to a capital account (see chapter 1) if you meet both of the following requirements. Filing an amendment to taxes You paid or incurred the costs in your trade or business. Filing an amendment to taxes You are not deducting the costs currently. Filing an amendment to taxes How to make the election. Filing an amendment to taxes   To elect to amortize research and experimental costs, complete Part VI of Form 4562 and attach it to your income tax return. Filing an amendment to taxes Generally, you must file the return by the due date (including extensions). Filing an amendment to taxes However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Filing an amendment to taxes Attach Form 4562 to the amended return and write “Filed pursuant to section 301. Filing an amendment to taxes 9100-2” on Form 4562. Filing an amendment to taxes File the amended return at the same address you filed the original return. Filing an amendment to taxes   Your election is binding for the year it is made and for all later years unless you obtain approval from the IRS to change to a different method. Filing an amendment to taxes Optional Write-off of Certain Tax Preferences You can elect to amortize certain tax preference items over an optional period beginning in the tax year in which you incurred the costs. Filing an amendment to taxes If you make this election, there is no AMT adjustment. Filing an amendment to taxes The applicable costs and the optional recovery periods are as follows: Circulation costs — 3 years, Intangible drilling and development costs — 60 months, Mining exploration and development costs — 10 years, and Research and experimental costs — 10 years. Filing an amendment to taxes How to make the election. Filing an amendment to taxes   To elect to amortize qualifying costs over the optional recovery period, complete Part VI of Form 4562 and attach a statement containing the following information to your return for the tax year in which the election begins: Your name, address, and taxpayer identification number; and The type of cost and the specific amount of the cost for which you are making the election. Filing an amendment to taxes   Generally, the election must be made on a timely filed return (including extensions) for the tax year in which you incurred the costs. Filing an amendment to taxes However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Filing an amendment to taxes Attach Form 4562 to the amended return and write “Filed pursuant to section 301. Filing an amendment to taxes 9100-2” on Form 4562. Filing an amendment to taxes File the amended return at the same address you filed the original return. Filing an amendment to taxes Revoking the election. Filing an amendment to taxes   You must obtain consent from the IRS to revoke your election. Filing an amendment to taxes Your request to revoke the election must be submitted to the IRS in the form of a letter ruling before the end of the tax year in which the optional recovery period ends. Filing an amendment to taxes The request must contain all of the information necessary to demonstrate the rare and unusual circumstances that would justify granting revocation. Filing an amendment to taxes If the request for revocation is approved, any unamortized costs are deductible in the year the revocation is effective. Filing an amendment to taxes Prev  Up  Next   Home   More Online Publications
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Filing an amendment to taxes Publication 970 - Introductory Material Table of Contents Future Developments What's New Reminders IntroductionComparison table. Filing an amendment to taxes Ordering forms and publications. Filing an amendment to taxes Tax questions. Filing an amendment to taxes Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 970, such as legislation enacted after it was published, go to www. Filing an amendment to taxes irs. Filing an amendment to taxes gov/pub970. Filing an amendment to taxes What's New Lifetime learning credit. Filing an amendment to taxes  For 2013, the amount of your lifetime learning credit is gradually reduced (phased out) if your modified adjusted gross income (MAGI) is between $53,000 and $63,000 ($107,000 and $127,000 if you file a joint return). Filing an amendment to taxes You cannot claim a credit if your MAGI is $63,000 or more ($127,000 or more if you file a joint return). Filing an amendment to taxes This is an increase from the 2012 limits of $52,000 and $62,000 ($104,000 and $124,000 if filing a joint return). Filing an amendment to taxes For more information, see chapter 3, Lifetime Learning Credit . Filing an amendment to taxes Business deduction for work-related education. Filing an amendment to taxes  For 2013, if you drive your car to and from school and qualify to deduct transportation expenses, the amount you can deduct for miles driven from January 1, 2013 through December 31, 2013 is 56. Filing an amendment to taxes 5 cents per mile. Filing an amendment to taxes See chapter 12, Business Deduction for Work-Related Education , for more information. Filing an amendment to taxes Reminders Form 1098-T, Tuition Statement. Filing an amendment to taxes  When figuring an education credit or the tuition and fees deduction, use only the amounts you paid and are deemed to have paid during the tax year for qualified education expenses. Filing an amendment to taxes In most cases, the student should receive Form 1098-T from the eligible educational institution by January 31, 2014. Filing an amendment to taxes An institution my choose to report either payments received during calendar year 2013 (box 1), or amounts billed during the calendar year 2013 (box 2), for qualified education expenses. Filing an amendment to taxes However, the amounts in boxes 1 and 2 of Form 1098-T might be different than the amount you actually paid and are deemed to have paid. Filing an amendment to taxes In addition, the Form 1098-T should give you other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements, or refunds, and whether the student was enrolled at least half-time or was a graduate student. Filing an amendment to taxes The eligible educational institution may ask for a completed Form W-9S, Request for Student's or Borrower's Taxpayer Identification Number and Certification, or similar statement to obtain the student's name, address, and taxpayer identification number. Filing an amendment to taxes Hope Scholarship Credit. Filing an amendment to taxes  For 2013, the Hope Scholarship Credit is not available. Filing an amendment to taxes However, you may be able to claim an American opportunity or lifetime learning credit. Filing an amendment to taxes See chapter 2, American Opportunity Credit , and chapter 3, Lifetime Learning Credit , for more information. Filing an amendment to taxes Estimated tax payments. Filing an amendment to taxes  If you have taxable income from any of your education benefits and the payer does not withhold enough income tax, you may need to make estimated tax payments. Filing an amendment to taxes For more information, see Publication 505, Tax Withholding and Estimated Tax. Filing an amendment to taxes Photographs of missing children. Filing an amendment to taxes  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Filing an amendment to taxes Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Filing an amendment to taxes You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Filing an amendment to taxes Introduction This publication explains tax benefits that may be available to you if you are saving for or paying education costs for yourself or, in many cases, another student who is a member of your immediate family. Filing an amendment to taxes Most benefits apply only to higher education. Filing an amendment to taxes What is in this publication. Filing an amendment to taxes    Chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions , explains the tax treatment of various types of educational assistance, including scholarships, fellowships, and tuition reductions. Filing an amendment to taxes   Two tax credits for which you may be eligible are explained in chapter 2, American Opportunity Credit , and chapter 3, Lifetime Learning Credit . Filing an amendment to taxes These benefits, which reduce the amount of income tax you may have to pay, are: The American opportunity credit, and The lifetime learning credit. Filing an amendment to taxes    Ten other types of benefits are explained in chapters 4 through 12. Filing an amendment to taxes These benefits, which reduce the amount of income tax you may have to pay, are: Deduct student loan interest; Receive tax-free treatment of a canceled student loan; Receive tax-free student loan repayment assistance; Deduct tuition and fees for education; Establish and contribute to a Coverdell education savings account (ESA), which features tax-free earnings; Participate in a qualified tuition program (QTP), which features tax-free earnings; Take early distributions from any type of individual retirement arrangement (IRA) for education costs without paying the 10% additional tax on early distributions; Cash in savings bonds for education costs without having to pay tax on the interest; Receive tax-free educational benefits from your employer; and Take a business deduction for work-related education. Filing an amendment to taxes Note. Filing an amendment to taxes You generally cannot claim more than one of the benefits described in the list above for the same qualifying education expense. Filing an amendment to taxes Comparison table. Filing an amendment to taxes   Some of the features of these benefits are highlighted in Appendix B, Highlights of Education Tax Benefits for Tax Year 2013 , later, in this publication. Filing an amendment to taxes This general comparison table may guide you in determining which benefits you may be eligible for and which chapters you may want to read. Filing an amendment to taxes When you figure your taxes, you may want to compare these tax benefits so you can choose the method(s) that gives you the lowest tax liability. Filing an amendment to taxes If you qualify, you may find that a combination of credit(s) and deduction(s) gives you the lowest tax. Filing an amendment to taxes Analyzing your tax withholding. Filing an amendment to taxes   After you estimate your education tax benefits for the year, you may be able to reduce the amount of your federal income tax withholding. Filing an amendment to taxes Also, you may want to recheck your withholding during the year if your personal or financial situation changes. Filing an amendment to taxes See Publication 919, How Do I Adjust My Tax Withholding, for more information. Filing an amendment to taxes Glossary. Filing an amendment to taxes   In this publication, wherever appropriate, we have tried to use the same or similar terminology when referring to the basic components of each education benefit. Filing an amendment to taxes Some of the terms used are: Qualified education expenses, Eligible educational institution, and Modified adjusted gross income. Filing an amendment to taxes   Even though the same term, such as qualified education expenses, is used to label a basic component of many of the education benefits, the same expenses are not necessarily allowed for each benefit. Filing an amendment to taxes For example, the cost of room and board is a qualified education expense for the qualified tuition program, but not for the education savings bond program. Filing an amendment to taxes   Many of the terms used in the publication are defined in the glossary near the end of the publication. Filing an amendment to taxes The glossary is not intended to be a substitute for reading the chapter on a particular education benefit, but it will give you an overview of how certain terms are used in discussing the different benefits. Filing an amendment to taxes Comments and suggestions. Filing an amendment to taxes   We welcome your comments about this publication and your suggestions for future editions. Filing an amendment to taxes   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Filing an amendment to taxes NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Filing an amendment to taxes Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Filing an amendment to taxes   You can send your comments from www. Filing an amendment to taxes irs. Filing an amendment to taxes gov/formspubs/. Filing an amendment to taxes Click on “More Information” and then on “Comment on Tax Forms and Publications”. Filing an amendment to taxes   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Filing an amendment to taxes Ordering forms and publications. Filing an amendment to taxes   Visit www. Filing an amendment to taxes irs. Filing an amendment to taxes gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Filing an amendment to taxes Internal Revenue Service 1201 N. Filing an amendment to taxes Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Filing an amendment to taxes   If you have a tax question, check the information available on IRS. Filing an amendment to taxes gov or call 1-800-829-1040. Filing an amendment to taxes We cannot answer tax questions sent to either of the above addresses. Filing an amendment to taxes Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income 550 Investment Income and Expenses 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) 1040 U. Filing an amendment to taxes S. Filing an amendment to taxes Individual Income Tax Return 1040A U. Filing an amendment to taxes S. Filing an amendment to taxes Individual Income Tax Return 1040EZ Income Tax Return for Single and Joint Filers With No Dependents 1040NR U. Filing an amendment to taxes S. Filing an amendment to taxes Nonresident Alien Income Tax Return 1040NR-EZ U. Filing an amendment to taxes S. Filing an amendment to taxes Income Tax Return for Certain Nonresident Aliens With No Dependents 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 5329 Additional Taxes on Qualified Plans and Other Tax-Favored Accounts 8815 Exclusion of Interest From Series EE and I U. Filing an amendment to taxes S. Filing an amendment to taxes Savings Bonds Issued After 1989 8863 Education Credits 8917 Tuition and Fees Deduction Schedule A (Form 1040) Itemized Deductions  See chapter 13, How To Get Tax Help , for information about getting these publications and forms. 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