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Filing State Income Tax For Free

Filing state income tax for free 35. Filing state income tax for free   Créditos Tributarios por Estudios Table of Contents Introduction Useful Items - You may want to see: ¿Quién Puede Reclamar un Crédito Tributario por Estudios? Gastos de Estudios CalificadosNo se Permite Beneficio Doble Ajustes a los Gastos de Estudios Calificados Introduction Para 2013, hay dos créditos tributarios para personas que paguen gastos de enseñanza superior (postsecundaria). Filing state income tax for free Éstos son: El crédito tributario de oportunidad para los estadounidenses y El crédito vitalicio por aprendizaje. Filing state income tax for free Este capítulo explica en términos generales estos créditos tributarios por estudios. Filing state income tax for free Para obtener la información detallada que necesitará para reclamar cualquiera de los créditos, y para ver ejemplos aclaratorios, consulte los capítulos 2 y 3 de la Publicación 970, Tax Benefits for Education (Beneficios tributarios por estudios), en inglés. Filing state income tax for free ¿Puede reclamar más de un crédito por estudios este año?   Puede escoger sólo uno de los créditos por cada estudiante por cada año. Filing state income tax for free Por ejemplo, si reclama el crédito tributario de oportunidad para los estadounidenses por un hijo en su declaración de impuestos de 2013, no puede tomar el crédito vitalicio por aprendizaje para 2013 si se trata del mismo hijo. Filing state income tax for free   Si reúne los requisitos del crédito tributario de oportunidad para los estadounidenses y también del crédito vitalicio por aprendizaje por el mismo estudiante durante el mismo año, puede reclamar sólo uno de los dos créditos, pero no ambos. Filing state income tax for free   Si paga gastos de estudios calificados por más de un estudiante durante el mismo año, puede reclamar el crédito tributario de oportunidad para los estadounidenses y el crédito vitalicio por aprendizaje basado por cada estudiante y por año. Filing state income tax for free Esto quiere decir que, por ejemplo, puede reclamar el crédito tributario de oportunidad para los estadounidenses por un estudiante y el crédito vitalicio por aprendizaje por otro estudiante en el mismo año. Filing state income tax for free    Tabla 35-1. Filing state income tax for free Comparación de los Créditos Tributarios por Estudios Precaución: Puede reclamar el crédito tributario de oportunidad para los estadounidenses y el crédito vitalicio por aprendizaje en la misma declaración —pero no por el mismo estudiante. Filing state income tax for free   Crédito tributario de oportunidad para los estadounidenses Crédito vitalicio por aprendizaje Crédito máximo Un crédito de hasta $2,500 por cada estudiante que reúne los requisitos Un crédito de hasta $2,000 por cada declaración Límite a los ingresos brutos ajustados modificados (MAGI, por sus siglas en inglés) $180,000 si es casado que presenta una declaración conjunta;  $90,000 si es soltero, cabeza de familia o viudo que reúne los requisitos $127,000 si es casado que presenta una declaración conjunta;  $63,000 si es soltero, cabeza de familia o viudo que reúne los requisitos Reembolsable o no reembolsable El 40% del crédito podría ser reembolsable El monto del crédito está limitado al monto de impuestos que tiene que pagar sobre sus ingresos sujetos a impuestos Número de años de enseñanza postsecundaria Disponible SÓLO si el estudiante no ha completado los 4 primeros años de enseñanza postsecundaria antes de 2013 Disponible para todo año de enseñanza postsecundaria y cursos para adquirir o mejorar aptitudes en el trabajo Número de años tributarios por los cuales se ofrece el crédito Disponible SÓLO por 4 años por cada estudiante que reúna los requisitos (incluido todo año en el que se haya reclamado el crédito Hope) Disponible por un número ilimitado de años Tipo de programa académico requerido El estudiante tiene que estar cursando un programa de estudios con miras a sacar una licenciatura u otro título o certificado académico acreditado El estudiante no necesita estar cursando un programa de estudios con miras a sacar una licenciatura u otro título o certificado académico acreditado Número de cursos El estudiante tiene que estar matriculado a medio tiempo como mínimo durante al menos un período académico que haya comenzado en el transcurso del año tributario Disponible para uno o más cursos Fallo condenatorio por delito grave de drogas Si para el fin de 2013 no consta fallo condenatorio alguno al estudiante por delito grave de poseer o distribuir drogas Fallos condenatorios por delito grave de drogas no hacen que el estudiante no reúna los requisitos Gastos que reúnen los requisitos Costos de matrícula y gastos de inscripción obligatorios y todos los materiales relacionados con un curso que necesita el estudiante, tanto si son comprados o no en la institución como condición de inscripción o asistencia Costos de matrícula y gastos de inscripción obligatorios (incluidas cantidades que tienen que pagarse a la institución por textos, materiales y equipo relacionados con un curso) Pagos por períodos académicos Pagos efectuados en 2013 para períodos académicos que se iniciaron en 2013 y en los tres primeros meses de 2014 Diferencias entre el crédito tributario de oportunidad para los estadounidenses y el crédito vitalicio por aprendizaje. Filing state income tax for free   Existen varias diferencias entre estos dos créditos. Filing state income tax for free Estas diferencias se resumen en la Tabla 35-1, más adelante. Filing state income tax for free Useful Items - You may want to see: Publicación 970 Tax Benefits for Education (Beneficios tributarios por estudios), en inglés Formulario (e Instrucciones) 8863 Education Credits (American Opportunity and Lifetime Learning Credits) (Créditos tributarios por estudios (crédito tributario de oportunidad para los estadounidenses y crédito vitalicio por aprendizaje)), en inglés ¿Quién Puede Reclamar un Crédito Tributario por Estudios? Tal vez pueda reclamar un crédito tributario por estudios si usted, su cónyuge o un dependiente reclamado en su declaración de impuestos era estudiante matriculado en, o asistió a, una institución de enseñanza superior que reúne los requisitos. Filing state income tax for free Los créditos se basan en la cantidad de gastos de estudios calificados que hayan sido pagados a nombre del estudiante en 2013 por períodos académicos que comenzaron en 2013 y en los primeros tres meses de 2014. Filing state income tax for free Por ejemplo, si pagó $1,500 en diciembre de 2013 por una matrícula calificada por el semestre de primavera de 2014 que comience en enero de 2014, tal vez pueda usar los $1,500 en el cálculo del (de los) crédito(s) para 2013. Filing state income tax for free Período académico. Filing state income tax for free   Un período académico abarca un semestre, trimestre, cuatrimestre u otro período de estudios (como un curso de escuela de verano) según lo determine de manera razonable una institución de enseñanza superior. Filing state income tax for free En el caso de una institución de enseñanza superior que no tenga períodos académicos sino horas de crédito u horas de reloj, cada período de pago se puede considerar período académico. Filing state income tax for free Institución de enseñanza superior que reúne los requisitos. Filing state income tax for free   Una “institución de enseñanza superior que reúne los requisitos” es todo colegio universitario, universidad, escuela de enseñanza técnica u otra institución de enseñanza superior con derecho a participar en un programa de asistencia financiera al estudiante administrado por el Departamento de Educación de los Estados Unidos. Filing state income tax for free Esta clase de institución abarca prácticamente todas las instituciones acreditadas de enseñanza superior públicas, sin fines de lucro y las privadas con fines de lucro. Filing state income tax for free La institución de enseñanza superior debe poder indicarle si reúne los requisitos. Filing state income tax for free   Determinadas instituciones de enseñanza superior ubicadas en el extranjero participan también en los programas de Federal Student Aid (Asistencia Financiera al Estudiante o FSA, por sus siglas en inglés) del Departamento de Educación de los Estados Unidos. Filing state income tax for free ¿Quién puede reclamar los gastos de un dependiente?   Si una persona reclama al estudiante como dependiente y se permite una deducción por aquel estudiante en la declaración de dicha persona, se considera que esa persona ha pagado todos los gastos de estudios calificados del estudiante. Filing state income tax for free Por lo tanto, sólo esa persona puede reclamar un crédito por estudios en nombre del estudiante. Filing state income tax for free Si un estudiante no es reclamado como dependiente en la declaración de impuestos de otra persona, sólo el estudiante puede reclamar un crédito. Filing state income tax for free Gastos pagados por un tercero. Filing state income tax for free   Los gastos de estudios calificados pagados en nombre del estudiante por una persona que no sea el estudiante (como un pariente) se tratan como si hubiesen sido pagados por dicho estudiante. Filing state income tax for free Sin embargo, los gastos de estudios calificados pagados (o que se tratan como si hubiesen sido pagados) por un estudiante que es reclamado como dependiente en su declaración de impuestos, se tratan como si hubiesen sido pagados por usted. Filing state income tax for free Por lo tanto, a usted se le trata como si hubiese pagado los gastos que fueron pagados por el tercero. Filing state income tax for free Para más información y para ver un ejemplo, vea Who can Claim a Dependent's Expenses (¿Quién puede reclamar los gastos de un dependiente?) en el capítulo 2 ó 3 de la Publicación 970, en inglés. Filing state income tax for free ¿Quién no puede reclamar el crédito?   No puede tomar un crédito tributario por estudios si alguna de las siguientes situaciones le corresponde: Usted es reclamado como dependiente en la declaración de impuestos de otra persona, como la de sus padres. Filing state income tax for free Su estado civil para efectos de la declaración es casado que presenta una declaración por separado. Filing state income tax for free Usted (o su cónyuge) fue extranjero no residente durante cualquier parte de 2013 y no optó por ser tratado como extranjero residente para fines tributarios. Filing state income tax for free Sus ingresos brutos ajustados modificados (MAGI, por sus siglas en inglés) es uno de los siguientes: Crédito tributario de oportunidad para los estadounidenses: $180,000 o más si es casado que presenta la declaración conjunta, o $90,000 o más si es soltero, cabeza de familia o viudo que reúne los requisitos. Filing state income tax for free Crédito vitalicio por aprendizaje: $127,000 o más si es casado que presenta la declaración conjunta, o $63,000 o más si es soltero, cabeza de familia o viudo que reúne los requisitos. Filing state income tax for free   Por lo general, su MAGI es la cantidad de la línea 38 de su Formulario 1040 o la línea 22 del Formulario 1040A. Filing state income tax for free No obstante, si presenta el Formulario 2555, 2555-EZ o 4563 o si excluye ingresos de fuentes dentro de Puerto Rico, sume la cantidad excluida del ingreso a la cantidad en la línea 38 de su Formulario 1040 o de la línea 22 del Formulario 1040A. Filing state income tax for free Para más detalles, vea la Publicación 970, en inglés. Filing state income tax for free   La Figura 35-A podría ser útil al momento de determinar si puede reclamar un crédito tributario por estudios en su declaración de impuestos. Filing state income tax for free    El crédito tributario de oportunidad para los estadounidenses siempre será mayor que o igual al crédito vitalicio por aprendizaje para todo estudiante que reúna los requisitos para ambos créditos. Filing state income tax for free Sin embargo, si no se cumplen todos los requisitos correspondientes al crédito tributario de oportunidad para los estadounidenses enumerados anteriormente en la Tabla 35-1, usted no puede reclamar dicho crédito en base de este estudiante. Filing state income tax for free En lugar de ello, quizás podría reclamar el crédito vitalicio por aprendizaje por una parte o la totalidad de los gastos de estudios calificados de dicho estudiante. Filing state income tax for free Para obtener información sobre otros beneficios relacionados con los estudios, vea la Publicación 970, en inglés. Filing state income tax for free Gastos de Estudios Calificados Generalmente, se considera que los gastos de estudios calificados son cantidades pagadas en 2013 por matrícula y gastos escolares obligatorios para matricularse en un curso o asistir al mismo en una institución de enseñanza superior. Filing state income tax for free No importa si los gastos fueron pagados en efectivo, por cheque, con tarjeta de crédito o débito, o con préstamos. Filing state income tax for free Sólo reúnen los requisitos ciertos gastos por libros, materiales y equipos relacionados con un curso: Crédito tributario de oportunidad para los estadounidenses: Los gastos de estudios calificados abarcan cantidades gastadas en libros, materiales y equipos necesarios para cursos de un programa de estudios, ya sea o no que se compren estos materiales en la institución de enseñanza como condición para matricularse o asistir a tales cursos. Filing state income tax for free Crédito vitalicio por aprendizaje: Los gastos de estudios calificados abarcan cantidades gastadas en libros, materiales y equipos sólo si se tienen que pagar a la institución como condición para matricularse o asistir a cursos. Filing state income tax for free Los gastos de estudios calificados incluyen cuotas no académicas, tales como cuotas por actividades estudiantiles, cuotas por actividades deportivas u otros gastos no relacionados con el curso de instrucción, sólo si la cuota tiene que pagarse a la institución como condición de inscripción o asistencia. Filing state income tax for free Sin embargo, las cuotas por gastos personales (descritos a continuación) nunca se consideran gastos de estudios calificados. Filing state income tax for free Los gastos de estudios calificados no incluyen cantidades pagadas por: Gastos personales. Filing state income tax for free Éstos incluyen gastos de alojamiento y comida, seguros, gastos médicos (incluyendo las cuotas de servicios de salud para estudiantes), transporte y otros gastos personales similares o de familia. Filing state income tax for free Todo curso u otros estudios que se relacionen con deportes, juegos o pasatiempos o todo curso sin crédito académico, a menos que dicho curso o dichos estudios formen parte del programa de estudios para obtener un título del estudiante o (sólo en el caso del crédito vitalicio por aprendizaje) ayude al estudiante a adquirir o mejorar aptitudes en el trabajo. Filing state income tax for free Usted debe recibir el Formulario 1098-T, Tuition Statement (Información sobre el pago de matrícula), en inglés, de la institución que informa cualesquiera de los pagos recibidos en 2013 (encasillado 1) o las cantidades facturadas en 2013 (encasillado 2). Filing state income tax for free Sin embargo, la cantidad pagada (o tratada como pagada) puede ser distinta a la cantidad en el encasillado 1 ó 2 del Formulario 1098-T. Filing state income tax for free Al completar el Formulario 8863, en inglés, utilice sólo las cantidades que realmente pagó (además de cualquier otra cantidad tratada como pagada) en 2013, reducida cuando sea necesario, como se describe en Ajustes a los Gastos de Estudios Calificados , más adelante. Filing state income tax for free Los gastos de estudios calificados pagados en nombre del estudiante por una persona que no sea el estudiante (como un pariente) se tratan como si hubiesen sido pagados por dicho estudiante. Filing state income tax for free Los gastos de estudios calificados pagados (o que se tratan como si hubiesen sido pagados) por un estudiante que es reclamado como dependiente en su declaración de impuestos se tratan como si hubiesen sido pagados por usted. Filing state income tax for free Al calcular los créditos tributarios por estudios, si usted o el estudiante toman una deducción por gastos de enseñanza superior, tal como en el Anexo A o C (Formulario 1040), no pueden utilizar esos gastos como gastos de estudios calificados. Filing state income tax for free Los gastos de estudios calificados para cualquier período académico tienen que ser reducidos por toda ayuda económica de estudios exenta de los impuestos asignable a dicho período académico. Filing state income tax for free Vea Ajustes a los Gastos de Estudios Calificados , más adelante. Filing state income tax for free Gastos pagados por adelantado. Filing state income tax for free   Los gastos de estudios calificados pagados en 2013 para un período académico que comienza en los primeros tres meses de 2014 se pueden utilizar sólo en el cálculo del crédito por estudios de 2013. Filing state income tax for free Vea Período académico , anteriormente. Filing state income tax for free Por ejemplo, si usted paga $2,000 en diciembre de 2013 para matrícula calificada por el cuatrimestre del invierno de 2014 que comienza en enero de 2014, puede utilizar los $2,000 en el cálculo del crédito por estudios sólo para 2013 (si reúne todos los otros requisitos). Filing state income tax for free No puede utilizar cantidad alguna que haya pagado en 2012 ó 2014 para calcular su(s) crédito(s) tributario(s) por estudios de 2013. Filing state income tax for free Gastos pagados con un préstamo. Filing state income tax for free   Puede reclamar un crédito por estudios en el caso de gastos de estudios calificados que haya pagado con un préstamo. Filing state income tax for free Utilice los gastos para calcular el crédito tributario por estudios correspondiente al año en que se paguen los gastos y no al año en el que se pague el préstamo. Filing state income tax for free Trate los pagos del préstamo enviados directamente a la institución de enseñanza superior como si se hubiesen pagado en la fecha en que dicha institución abone los pagos a la cuenta del estudiante. Filing state income tax for free Si el estudiante se retira de uno o más cursos. Filing state income tax for free   Puede reclamar un crédito tributario por estudios en el caso de gastos de estudios calificados que no se le devuelvan al estudiante si el estudiante se retira de uno o más cursos. Filing state income tax for free No se Permite Beneficio Doble No se permite hacer lo siguiente: Deducir gastos de enseñanza superior en su declaración de impuestos sobre los ingresos (por ejemplo, un gasto de negocio) y reclamar también un crédito por estudios basándose en dichos gastos. Filing state income tax for free Reclamar más de un (1) crédito tributario por estudios basándose en los mismos gastos de estudios calificados. Filing state income tax for free Reclamar un crédito por estudios basándose en los mismos gastos utilizados para calcular la parte exenta del impuesto de distribuciones de una cuenta de ahorros para estudios Coverdell (Coverdell ESA, por su abreviatura en inglés) o un programa de matrícula calificada (QTP, por sus siglas en inglés). Filing state income tax for free Reclamar un crédito basándose en gastos de estudios calificados que hayan sido pagados con ayuda para estudios, tal como una beca o subvención o ayuda provista por el empleador, libres de impuestos. Filing state income tax for free Vea Ajustes a los Gastos de Estudios Calificados, a continuación. Filing state income tax for free Ajustes a los Gastos de Estudios Calificados Para cada estudiante, se tiene que restar los gastos de estudios calificados, pagados en 2013, por o en nombre de dicho estudiante bajo las siguientes reglas. Filing state income tax for free El resultado es la cantidad ajustada en gastos de estudios calificados por cada estudiante. Filing state income tax for free Ayuda económica para estudios exenta de impuestos. Filing state income tax for free   Si en 2013 recibió ayuda económica para estudios que está exenta de impuestos, reste la cantidad de la ayuda económica para estudios exenta de impuestos asignable para cada período académico de la cantidad de gastos de estudios calificados para cada período académico. Filing state income tax for free Vea Período académico , anteriormente. Filing state income tax for free   La ayuda económica para estudios exenta de impuestos incluye: Partes no sujetas a impuestos de becas de estudios y becas de investigación (vea el capítulo 12 de esta publicación y el capítulo 1 de la Publicación 970, en inglés), La parte no sujeta a impuestos de subvenciones federales Pell (vea el capítulo 1 de la Publicación 970, en inglés), La parte no sujeta a impuestos de ayuda económica para estudios provista por el empleador (vea la Publicación 970, en inglés), Ayuda económica para estudios para veteranos (vea el capítulo 1 de la Publicación 970, en inglés) y Cualquier otro pago no sujeto a impuestos (libre de impuestos) (que no sean regalos ni herencias) recibido como ayuda económica para estudios. Filing state income tax for free   Por lo general, toda beca de estudios o de investigación es tratada como una ayuda económica para estudios exenta de impuestos. Filing state income tax for free Sin embargo, una beca de estudios o de investigación no será tratada como dicha ayuda al punto de que el estudiante la incluye como ingreso bruto (si el estudiante tiene que presentar una declaración de impuestos) para el año en que reciba la beca de estudios o de investigación y le corresponde uno de los siguientes: La beca de estudios o de investigación (o cualquier parte de dicha beca) tiene que ser aplicada (por sus condiciones) a gastos (como de alojamiento y comida) que no sean gastos de estudios calificados como se define en el capítulo 1, Qualified education expenses (Gastos de estudios calificados), de la Publicación 970, en inglés, o La beca de estudios o de investigación (o cualquier parte de dicha beca) puede ser aplicada (por sus condiciones) a gastos (como de alojamiento y comida) que no sean gastos de estudios calificados como se define en el capítulo 1, Qualified education expenses (Gastos de estudios calificados), de la Publicación 970, en inglés. Filing state income tax for free Podría aumentar el valor combinado del crédito tributario por estudios y cierta ayuda económica para estudios si el estudiante incluye alguna o toda ayuda económica para estudios del ingreso en el año en que recibió dicha ayuda. Filing state income tax for free Para detalles, vea Adjustments of Qualified Education Expenses (Ajustes a los gastos de estudios calificados) en los capítulos 2 y 3 de la Publicación 970, en inglés. Filing state income tax for free Cierta ayuda económica para estudios exenta de impuestos recibida después de 2013 podría ser tratada como un reembolso de gastos de estudios calificados que se pagaron en 2013. Filing state income tax for free Esta ayuda económica para estudios exenta de impuestos es toda ayuda económica para estudios exenta de impuestos que usted o cualquier otro ha recibido después de 2013 por gastos de estudios calificados pagados en nombre de un estudiante en 2013 (o atribuible a la matrícula de una institución de enseñanza superior que reúne los requisitos durante 2013). Filing state income tax for free Si dicha ayuda económica para estudios exenta de impuestos se recibe después de 2013 pero antes de que presente su declaración de impuestos sobre los ingresos para 2013, vea Reembolsos recibidos después de 2013 pero antes de presentar su declaración de impuestos sobre los ingresos, más adelante. Filing state income tax for free Si dicha ayuda económica para estudios exenta de impuestos se recibe después de 2013 y después que presenta su declaración de impuestos sobre los ingresos para 2013, vea Reembolsos recibidos después de 2013 y después que presenta su declaración de impuestos sobre los ingresos, más adelante. Filing state income tax for free Reembolsos. Filing state income tax for free   Un reembolso de gastos de estudios calificados puede reducir gastos de estudios calificados por el año tributable o puede requerir que recupere (reintegre) el crédito tributario por estudios que reclamó en un año anterior. Filing state income tax for free Cierta ayuda económica para estudios exenta de impuestos recibida después de 2013 puede ser tratada como un reembolso. Filing state income tax for free Vea Ayuda económica para estudios exenta de impuestos, anteriormente. Filing state income tax for free Reembolsos recibidos en 2013. Filing state income tax for free   Por cada estudiante, calcule los gastos de estudios calificados ajustados de 2013 sumando todos los gastos de estudios calificados pagados en 2013 y reste todos los reembolsos de esos gastos recibidos de la institución de enseñanza superior que reúne los requisitos durante 2013. Filing state income tax for free Reembolsos recibidos después de 2013 pero antes de presentar su declaración de impuestos sobre los ingresos. Filing state income tax for free   Si alguien recibe un reembolso después de 2013 por gastos de estudios calificados pagado en nombre de un estudiante en 2013 y el reembolso es recibido antes de que presente su declaración de impuestos sobre los ingresos de 2013, reste la cantidad de gastos de estudios calificados de 2013 por la cantidad del reembolso. Filing state income tax for free Reembolsos recibidos después de 2013 y después de presentar su declaración de impuestos sobre los ingresos. Filing state income tax for free   Si alguien recibe un reembolso después de 2013 por gastos de estudios calificados pagados en nombre de un estudiante en 2013 y el reembolso es recibido después de presentar su declaración de impuestos sobre los ingresos de 2013, podría verse obligado a reintegrar parte o todo el crédito tributario por estudios que reclamó. Filing state income tax for free Vea Recuperar (reintegrar) el crédito, a continuación. Filing state income tax for free Recuperar (reintegrar) el crédito. Filing state income tax for free   Si después de haber presentado su declaración de impuestos sobre los ingresos de 2013, recibe alguna ayuda económica para estudios exenta de impuestos o cualquier reembolso correspondiente a gastos de estudios calificados que haya pagado en 2013, tiene que recuperar (reintegrar) todo crédito en exceso. Filing state income tax for free Cuando se vuelve a calcular la cantidad de gastos de estudios calificados ajustados de 2013, reste de dichos gastos la cantidad de la ayuda económica para estudios exenta de impuestos o el (los) reembolso(s) que haya recibido. Filing state income tax for free Entonces se calcula nuevamente su(s) crédito(s) tributario(s) por estudios de 2013 y se calcula la cantidad por la cual su impuesto adeudado de 2013 hubiera aumentado si hubiese reclamado dicho(s) crédito(s) nuevamente calculado(s). Filing state income tax for free Incluya esa cantidad como un impuesto adicional para el año en que la ayuda económica o el reembolso fueron recibidos. Filing state income tax for free Ejemplo. Filing state income tax for free   Usted pagó $8,000 por matrícula y gastos escolares de su hijo en diciembre de 2013 por el semestre de primavera que comienza en enero de 2014. Filing state income tax for free Usted presentó su declaración de impuestos de 2013 el 3 de febrero de 2014 y reclamó un crédito vitalicio por aprendizaje de $1,600 ($8,000 de gastos de estudios calificados multiplicado por 0. Filing state income tax for free 20). Filing state income tax for free Usted no reclamó otros créditos tributarios. Filing state income tax for free Después de haber presentado su declaración, su hijo se retiró de dos cursos y usted recibió un reembolso de $1,400. Filing state income tax for free Tiene que volver a calcular su crédito vitalicio por aprendizaje de 2013 usando $6,600 ($1,400 del reembolso que se resta de los gastos de estudios calificados de $8,000). Filing state income tax for free El crédito nuevamente calculado es $1,320 y su impuesto adeudado aumentó por $280. Filing state income tax for free Tiene que incluir el resultado de $280 (lo que queda después de que haya restado $1,320 (el crédito nuevamente calculado) de $1,600 (el crédito que había reclamado originalmente)) como un impuesto adicional en su declaración de impuestos sobre los ingresos de 2014. Filing state income tax for free Para determinar en dónde incluir dicho impuesto adicional, vea las instrucciones de su declaración de impuestos sobre los ingresos de 2014. Filing state income tax for free    Si también paga gastos de estudios calificados en 2014 para un período académico que comienza en los primeros tres meses de 2014 y recibe ayuda económica para estudios exenta de impuestos o un reembolso como se explicó anteriormente, usted puede escoger reducir sus gastos de estudios calificados para el 2014 en vez de reducir sus gastos para 2013. Filing state income tax for free Cantidades que no reducen los gastos de estudios calificados. Filing state income tax for free   No reste de los gastos de estudios calificados las cantidades pagadas con fondos que el estudiante reciba como: Pagos por servicios, como salarios; Un préstamo; Un regalo; Una herencia o Un retiro de la cuenta de ahorros personal del estudiante. Filing state income tax for free   No reste de los gastos de estudios calificados ninguna beca de estudios o beca de investigación reclamada como ingresos en la declaración de ingresos del estudiante en las siguientes situaciones: El uso del dinero está limitado, por los términos de la beca de estudios o de investigación, a los costos de asistencia (como alojamiento y comida) que no sean gastos de estudios calificados, como se definen en el capítulo 1 de la Publicación 970, en inglés. Filing state income tax for free El uso del dinero no está limitado. Filing state income tax for free   Para ver ejemplos, consulte el capítulo 2 de la Publicación 970, en inglés. Filing state income tax for free Please click here for the text description of the image. Filing state income tax for free Figura 35-A ¿Puede usted reclamar el crédito por Estudios para 2013? Prev  Up  Next   Home   More Online Publications
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The Filing State Income Tax For Free

Filing state income tax for free 3. Filing state income tax for free   Ordinary or Capital Gain or Loss for Business Property Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Section 1231 Gains and LossesNonrecaptured section 1231 losses. Filing state income tax for free Depreciation RecaptureSection 1245 Property Section 1250 Property Installment Sales Gifts Transfers at Death Like-Kind Exchanges and Involuntary Conversions Multiple Properties Introduction When you dispose of business property, your taxable gain or loss is usually a section 1231 gain or loss. Filing state income tax for free Its treatment as ordinary or capital is determined under rules for section 1231 transactions. Filing state income tax for free When you dispose of depreciable property (section 1245 property or section 1250 property) at a gain, you may have to recognize all or part of the gain as ordinary income under the depreciation recapture rules. Filing state income tax for free Any remaining gain is a section 1231 gain. Filing state income tax for free Topics - This chapter discusses: Section 1231 gains and losses Depreciation recapture Useful Items - You may want to see: Publication 534 Depreciating Property Placed in Service Before 1987 537 Installment Sales 547 Casualties, Disasters and Thefts 551 Basis of Assets 946 How To Depreciate Property Form (and Instructions) 4797 Sales of Business Property See chapter 5 for information about getting publications and forms. Filing state income tax for free Section 1231 Gains and Losses Section 1231 gains and losses are the taxable gains and losses from section 1231 transactions (discussed below). Filing state income tax for free Their treatment as ordinary or capital depends on whether you have a net gain or a net loss from all your section 1231 transactions. Filing state income tax for free If you have a gain from a section 1231 transaction, first determine whether any of the gain is ordinary income under the depreciation recapture rules (explained later). Filing state income tax for free Do not take that gain into account as section 1231 gain. Filing state income tax for free Section 1231 transactions. Filing state income tax for free   The following transactions result in gain or loss subject to section 1231 treatment. Filing state income tax for free Sales or exchanges of real property or depreciable personal property. Filing state income tax for free This property must be used in a trade or business and held longer than 1 year. Filing state income tax for free Generally, property held for the production of rents or royalties is considered to be used in a trade or business. Filing state income tax for free Depreciable personal property includes amortizable section 197 intangibles (described in chapter 2 under Other Dispositions). Filing state income tax for free Sales or exchanges of leaseholds. Filing state income tax for free The leasehold must be used in a trade or business and held longer than 1 year. Filing state income tax for free Sales or exchanges of cattle and horses. Filing state income tax for free The cattle and horses must be held for draft, breeding, dairy, or sporting purposes and held for 2 years or longer. Filing state income tax for free Sales or exchanges of other livestock. Filing state income tax for free This livestock does not include poultry. Filing state income tax for free It must be held for draft, breeding, dairy, or sporting purposes and held for 1 year or longer. Filing state income tax for free Sales or exchanges of unharvested crops. Filing state income tax for free The crop and land must be sold, exchanged, or involuntarily converted at the same time and to the same person and the land must be held longer than 1 year. Filing state income tax for free You cannot keep any right or option to directly or indirectly reacquire the land (other than a right customarily incident to a mortgage or other security transaction). Filing state income tax for free Growing crops sold with a lease on the land, though sold to the same person in the same transaction, are not included. Filing state income tax for free Cutting of timber or disposal of timber, coal, or iron ore. Filing state income tax for free The cutting or disposal must be treated as a sale, as described in chapter 2 under Timber and Coal and Iron Ore. Filing state income tax for free Condemnations. Filing state income tax for free The condemned property must have been held longer than 1 year. Filing state income tax for free It must be business property or a capital asset held in connection with a trade or business or a transaction entered into for profit, such as investment property. Filing state income tax for free It cannot be property held for personal use. Filing state income tax for free Casualties and thefts. Filing state income tax for free The casualty or theft must have affected business property, property held for the production of rents and royalties, or investment property (such as notes and bonds). Filing state income tax for free You must have held the property longer than 1 year. Filing state income tax for free However, if your casualty or theft losses are more than your casualty or theft gains, neither the gains nor the losses are taken into account in the section 1231 computation. Filing state income tax for free For more information on casualties and thefts, see Publication 547. Filing state income tax for free Property for sale to customers. Filing state income tax for free   A sale, exchange, or involuntary conversion of property held mainly for sale to customers is not a section 1231 transaction. Filing state income tax for free If you will get back all, or nearly all, of your investment in the property by selling it rather than by using it up in your business, it is property held mainly for sale to customers. Filing state income tax for free Example. Filing state income tax for free You manufacture and sell steel cable, which you deliver on returnable reels that are depreciable property. Filing state income tax for free Customers make deposits on the reels, which you refund if the reels are returned within a year. Filing state income tax for free If they are not returned, you keep each deposit as the agreed-upon sales price. Filing state income tax for free Most reels are returned within the 1-year period. Filing state income tax for free You keep adequate records showing depreciation and other charges to the capitalized cost of the reels. Filing state income tax for free Under these conditions, the reels are not property held for sale to customers in the ordinary course of your business. Filing state income tax for free Any gain or loss resulting from their not being returned may be capital or ordinary, depending on your section 1231 transactions. Filing state income tax for free Copyrights. Filing state income tax for free    The sale of a copyright, a literary, musical, or artistic composition, or similar property is not a section 1231 transaction if your personal efforts created the property, or if you acquired the property in a way that entitled you to the basis of the previous owner whose personal efforts created it (for example, if you receive the property as a gift). Filing state income tax for free The sale of such property results in ordinary income and generally is reported in Part II of Form 4797. Filing state income tax for free Treatment as ordinary or capital. Filing state income tax for free   To determine the treatment of section 1231 gains and losses, combine all your section 1231 gains and losses for the year. Filing state income tax for free If you have a net section 1231 loss, it is ordinary loss. Filing state income tax for free If you have a net section 1231 gain, it is ordinary income up to the amount of your nonrecaptured section 1231 losses from previous years. Filing state income tax for free The rest, if any, is long-term capital gain. Filing state income tax for free Nonrecaptured section 1231 losses. Filing state income tax for free   Your nonrecaptured section 1231 losses are your net section 1231 losses for the previous 5 years that have not been applied against a net section 1231 gain. Filing state income tax for free Therefore, if in any of your five preceding tax years you had section 1231 losses, a net gain for the current year from the sale of section 1231 assets is ordinary gain to the extent of your prior losses. Filing state income tax for free These losses are applied against your net section 1231 gain beginning with the earliest loss in the 5-year period. Filing state income tax for free Example. Filing state income tax for free In 2013, Ben has a $2,000 net section 1231 gain. Filing state income tax for free To figure how much he has to report as ordinary income and long-term capital gain, he must first determine his section 1231 gains and losses from the previous 5-year period. Filing state income tax for free From 2008 through 2012 he had the following section 1231 gains and losses. Filing state income tax for free Year Amount 2008 -0- 2009 -0- 2010 ($2,500) 2011 -0- 2012 $1,800 Ben uses this information to figure how to report his net section 1231 gain for 2013 as shown below. Filing state income tax for free 1) Net section 1231 gain (2013) $2,000 2) Net section 1231 loss (2010) ($2,500)   3) Net section 1231 gain (2012) 1,800   4) Remaining net section 1231 loss from prior 5 years ($700)   5) Gain treated as  ordinary income $700 6) Gain treated as long-term  capital gain $1,300 Depreciation Recapture If you dispose of depreciable or amortizable property at a gain, you may have to treat all or part of the gain (even if otherwise nontaxable) as ordinary income. Filing state income tax for free To figure any gain that must be reported as ordinary income, you must keep permanent records of the facts necessary to figure the depreciation or amortization allowed or allowable on your property. Filing state income tax for free This includes the date and manner of acquisition, cost or other basis, depreciation or amortization, and all other adjustments that affect basis. Filing state income tax for free On property you acquired in a nontaxable exchange or as a gift, your records also must indicate the following information. Filing state income tax for free Whether the adjusted basis was figured using depreciation or amortization you claimed on other property. Filing state income tax for free Whether the adjusted basis was figured using depreciation or amortization another person claimed. Filing state income tax for free Corporate distributions. Filing state income tax for free   For information on property distributed by corporations, see Distributions to Shareholders in Publication 542, Corporations. Filing state income tax for free General asset accounts. Filing state income tax for free   Different rules apply to dispositions of property you depreciated using a general asset account. Filing state income tax for free For information on these rules, see Publication 946. Filing state income tax for free Section 1245 Property A gain on the disposition of section 1245 property is treated as ordinary income to the extent of depreciation allowed or allowable on the property. Filing state income tax for free See Gain Treated as Ordinary Income, later. Filing state income tax for free Any gain recognized that is more than the part that is ordinary income from depreciation is a section 1231 gain. Filing state income tax for free See Treatment as ordinary or capital under Section 1231 Gains and Losses, earlier. Filing state income tax for free Section 1245 property defined. Filing state income tax for free   Section 1245 property includes any property that is or has been subject to an allowance for depreciation or amortization and that is any of the following types of property. Filing state income tax for free Personal property (either tangible or intangible). Filing state income tax for free Other tangible property (except buildings and their structural components) used as any of the following. Filing state income tax for free See Buildings and structural components below. Filing state income tax for free An integral part of manufacturing, production, or extraction, or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services. Filing state income tax for free A research facility in any of the activities in (a). Filing state income tax for free A facility in any of the activities in (a) for the bulk storage of fungible commodities (discussed on the next page). Filing state income tax for free That part of real property (not included in (2)) with an adjusted basis reduced by (but not limited to) the following. Filing state income tax for free Amortization of certified pollution control facilities. Filing state income tax for free The section 179 expense deduction. Filing state income tax for free Deduction for clean-fuel vehicles and certain refueling property. Filing state income tax for free Deduction for capital costs incurred in complying with Environmental Protection Agency sulfur regulations. Filing state income tax for free Deduction for certain qualified refinery property. Filing state income tax for free Deduction for qualified energy efficient commercial building property. Filing state income tax for free Amortization of railroad grading and tunnel bores, if in effect before the repeal by the Revenue Reconciliation Act of 1990. Filing state income tax for free (Repealed by Public Law 99-514, Tax Reform Act of 1986, section 242(a). Filing state income tax for free ) Certain expenditures for child care facilities if in effect before repeal by Public Law 101-58, Omnibus Budget Reconciliation Act of 1990, section 11801(a)(13) (except with regards to deductions made prior to November 5, 1990). Filing state income tax for free Expenditures to remove architectural and transportation barriers to the handicapped and elderly. Filing state income tax for free Deduction for qualified tertiary injectant expenses. Filing state income tax for free Certain reforestation expenditures. Filing state income tax for free Deduction for election to expense qualified advanced mine safety equipment property. Filing state income tax for free Single purpose agricultural (livestock) or horticultural structures. Filing state income tax for free Storage facilities (except buildings and their structural components) used in distributing petroleum or any primary product of petroleum. Filing state income tax for free Any railroad grading or tunnel bore. Filing state income tax for free Buildings and structural components. Filing state income tax for free   Section 1245 property does not include buildings and structural components. Filing state income tax for free The term building includes a house, barn, warehouse, or garage. Filing state income tax for free The term structural component includes walls, floors, windows, doors, central air conditioning systems, light fixtures, etc. Filing state income tax for free   Do not treat a structure that is essentially machinery or equipment as a building or structural component. Filing state income tax for free Also, do not treat a structure that houses property used as an integral part of an activity as a building or structural component if the structure's use is so closely related to the property's use that the structure can be expected to be replaced when the property it initially houses is replaced. Filing state income tax for free   The fact that the structure is specially designed to withstand the stress and other demands of the property and cannot be used economically for other purposes indicates it is closely related to the use of the property it houses. Filing state income tax for free Structures such as oil and gas storage tanks, grain storage bins, silos, fractionating towers, blast furnaces, basic oxygen furnaces, coke ovens, brick kilns, and coal tipples are not treated as buildings, but as section 1245 property. Filing state income tax for free Facility for bulk storage of fungible commodities. Filing state income tax for free   This term includes oil or gas storage tanks and grain storage bins. Filing state income tax for free Bulk storage means the storage of a commodity in a large mass before it is used. Filing state income tax for free For example, if a facility is used to store oranges that have been sorted and boxed, it is not used for bulk storage. Filing state income tax for free To be fungible, a commodity must be such that one part may be used in place of another. Filing state income tax for free   Stored materials that vary in composition, size, and weight are not fungible. Filing state income tax for free Materials are not fungible if one part cannot be used in place of another part and the materials cannot be estimated and replaced by simple reference to weight, measure, and number. Filing state income tax for free For example, the storage of different grades and forms of aluminum scrap is not storage of fungible commodities. Filing state income tax for free Gain Treated as Ordinary Income The gain treated as ordinary income on the sale, exchange, or involuntary conversion of section 1245 property, including a sale and leaseback transaction, is the lesser of the following amounts. Filing state income tax for free The depreciation and amortization allowed or allowable on the property. Filing state income tax for free The gain realized on the disposition (the amount realized from the disposition minus the adjusted basis of the property). Filing state income tax for free A limit on this amount for gain on like-kind exchanges and involuntary conversions is explained later. Filing state income tax for free For any other disposition of section 1245 property, ordinary income is the lesser of (1) earlier or the amount by which its fair market value is more than its adjusted basis. Filing state income tax for free See Gifts and Transfers at Death, later. Filing state income tax for free Use Part III of Form 4797 to figure the ordinary income part of the gain. Filing state income tax for free Depreciation taken on other property or taken by other taxpayers. Filing state income tax for free   Depreciation and amortization include the amounts you claimed on the section 1245 property as well as the following depreciation and amortization amounts. Filing state income tax for free Amounts you claimed on property you exchanged for, or converted to, your section 1245 property in a like-kind exchange or involuntary conversion. Filing state income tax for free Amounts a previous owner of the section 1245 property claimed if your basis is determined with reference to that person's adjusted basis (for example, the donor's depreciation deductions on property you received as a gift). Filing state income tax for free Depreciation and amortization. Filing state income tax for free   Depreciation and amortization that must be recaptured as ordinary income include (but are not limited to) the following items. Filing state income tax for free Ordinary depreciation deductions. Filing state income tax for free Any special depreciation allowance you claimed. Filing state income tax for free Amortization deductions for all the following costs. Filing state income tax for free Acquiring a lease. Filing state income tax for free Lessee improvements. Filing state income tax for free Certified pollution control facilities. Filing state income tax for free Certain reforestation expenses. Filing state income tax for free Section 197 intangibles. Filing state income tax for free Childcare facility expenses made before 1982, if in effect before the repeal of IRC 188. Filing state income tax for free Franchises, trademarks, and trade names acquired before August 11, 1993. Filing state income tax for free The section 179 deduction. Filing state income tax for free Deductions for all the following costs. Filing state income tax for free Removing barriers to the disabled and the elderly. Filing state income tax for free Tertiary injectant expenses. Filing state income tax for free Depreciable clean-fuel vehicles and refueling property (minus the amount of any recaptured deduction). Filing state income tax for free Environmental cleanup costs. Filing state income tax for free Certain reforestation expenses. Filing state income tax for free Qualified disaster expenses. Filing state income tax for free Any basis reduction for the investment credit (minus any basis increase for credit recapture). Filing state income tax for free Any basis reduction for the qualified electric vehicle credit (minus any basis increase for credit recapture). Filing state income tax for free Example. Filing state income tax for free You file your returns on a calendar year basis. Filing state income tax for free In February 2011, you bought and placed in service for 100% use in your business a light-duty truck (5-year property) that cost $10,000. Filing state income tax for free You used the half-year convention and your MACRS deductions for the truck were $2,000 in 2011 and $3,200 in 2012. Filing state income tax for free You did not take the section 179 deduction. Filing state income tax for free You sold the truck in May 2013 for $7,000. Filing state income tax for free The MACRS deduction in 2013, the year of sale, is $960 (½ of $1,920). Filing state income tax for free Figure the gain treated as ordinary income as follows. Filing state income tax for free 1) Amount realized $7,000 2) Cost (February 2011) $10,000   3) Depreciation allowed or allowable (MACRS deductions: $2,000 + $3,200 + $960) 6,160   4) Adjusted basis (subtract line 3 from line 2) $3,840 5) Gain realized (subtract line 4 from line 1) $3,160 6) Gain treated as ordinary income (lesser of line 3 or line 5) $3,160 Depreciation on other tangible property. Filing state income tax for free   You must take into account depreciation during periods when the property was not used as an integral part of an activity or did not constitute a research or storage facility, as described earlier under Section 1245 property. Filing state income tax for free   For example, if depreciation deductions taken on certain storage facilities amounted to $10,000, of which $6,000 is from the periods before their use in a prescribed business activity, you must use the entire $10,000 in determining ordinary income from depreciation. Filing state income tax for free Depreciation allowed or allowable. Filing state income tax for free   The greater of the depreciation allowed or allowable is generally the amount to use in figuring the part of gain to report as ordinary income. Filing state income tax for free However, if in prior years, you have consistently taken proper deductions under one method, the amount allowed for your prior years will not be increased even though a greater amount would have been allowed under another proper method. Filing state income tax for free If you did not take any deduction at all for depreciation, your adjustments to basis for depreciation allowable are figured by using the straight line method. Filing state income tax for free   This treatment applies only when figuring what part of gain is treated as ordinary income under the rules for section 1245 depreciation recapture. Filing state income tax for free Multiple asset accounts. Filing state income tax for free   In figuring ordinary income from depreciation, you can treat any number of units of section 1245 property in a single depreciation account as one item if the total ordinary income from depreciation figured by using this method is not less than it would be if depreciation on each unit were figured separately. Filing state income tax for free Example. Filing state income tax for free In one transaction you sold 50 machines, 25 trucks, and certain other property that is not section 1245 property. Filing state income tax for free All of the depreciation was recorded in a single depreciation account. Filing state income tax for free After dividing the total received among the various assets sold, you figured that each unit of section 1245 property was sold at a gain. Filing state income tax for free You can figure the ordinary income from depreciation as if the 50 machines and 25 trucks were one item. Filing state income tax for free However, if five of the trucks had been sold at a loss, only the 50 machines and 20 of the trucks could be treated as one item in determining the ordinary income from depreciation. Filing state income tax for free Normal retirement. Filing state income tax for free   The normal retirement of section 1245 property in multiple asset accounts does not require recognition of gain as ordinary income from depreciation if your method of accounting for asset retirements does not require recognition of that gain. Filing state income tax for free Section 1250 Property Gain on the disposition of section 1250 property is treated as ordinary income to the extent of additional depreciation allowed or allowable on the property. Filing state income tax for free To determine the additional depreciation on section 1250 property, see Additional Depreciation, below. Filing state income tax for free Section 1250 property defined. Filing state income tax for free   This includes all real property that is subject to an allowance for depreciation and that is not and never has been section 1245 property. Filing state income tax for free It includes a leasehold of land or section 1250 property subject to an allowance for depreciation. Filing state income tax for free A fee simple interest in land is not included because it is not depreciable. Filing state income tax for free   If your section 1250 property becomes section 1245 property because you change its use, you can never again treat it as section 1250 property. Filing state income tax for free Additional Depreciation If you hold section 1250 property longer than 1 year, the additional depreciation is the actual depreciation adjustments that are more than the depreciation figured using the straight line method. Filing state income tax for free For a list of items treated as depreciation adjustments, see Depreciation and amortization under Gain Treated as Ordinary Income, earlier. Filing state income tax for free For the treatment of unrecaptured section 1250 gain, see Capital Gains Tax Rate, later. Filing state income tax for free If you hold section 1250 property for 1 year or less, all the depreciation is additional depreciation. Filing state income tax for free You will not have additional depreciation if any of the following conditions apply to the property disposed of. Filing state income tax for free You figured depreciation for the property using the straight line method or any other method that does not result in depreciation that is more than the amount figured by the straight line method; you held the property longer than 1 year; and, if the property was qualified property, you made a timely election not to claim any special depreciation allowance. Filing state income tax for free In addition, if the property was in a renewal community, you must not have elected to claim a commercial revitalization deduction for property placed in service before January 1, 2010. Filing state income tax for free The property was residential low-income rental property you held for 162/3 years or longer. Filing state income tax for free For low-income rental housing on which the special 60-month depreciation for rehabilitation expenses was allowed, the 162/3 years start when the rehabilitated property is placed in service. Filing state income tax for free You chose the alternate ACRS method for the property, which was a type of 15-, 18-, or 19-year real property covered by the section 1250 rules. Filing state income tax for free The property was residential rental property or nonresidential real property placed in service after 1986 (or after July 31, 1986, if the choice to use MACRS was made); you held it longer than 1 year; and, if the property was qualified property, you made a timely election not to claim any special depreciation allowance. Filing state income tax for free These properties are depreciated using the straight line method. Filing state income tax for free In addition, if the property was in a renewal community, you must not have elected to claim a commercial revitalization deduction. Filing state income tax for free Depreciation taken by other taxpayers or on other property. Filing state income tax for free   Additional depreciation includes all depreciation adjustments to the basis of section 1250 property whether allowed to you or another person (as carryover basis property). Filing state income tax for free Example. Filing state income tax for free Larry Johnson gives his son section 1250 property on which he took $2,000 in depreciation deductions, of which $500 is additional depreciation. Filing state income tax for free Immediately after the gift, the son's adjusted basis in the property is the same as his father's and reflects the $500 additional depreciation. Filing state income tax for free On January 1 of the next year, after taking depreciation deductions of $1,000 on the property, of which $200 is additional depreciation, the son sells the property. Filing state income tax for free At the time of sale, the additional depreciation is $700 ($500 allowed the father plus $200 allowed the son). Filing state income tax for free Depreciation allowed or allowable. Filing state income tax for free   The greater of depreciation allowed or allowable (to any person who held the property if the depreciation was used in figuring its adjusted basis in your hands) generally is the amount to use in figuring the part of the gain to be reported as ordinary income. Filing state income tax for free If you can show that the deduction allowed for any tax year was less than the amount allowable, the lesser figure will be the depreciation adjustment for figuring additional depreciation. Filing state income tax for free Retired or demolished property. Filing state income tax for free   The adjustments reflected in adjusted basis generally do not include deductions for depreciation on retired or demolished parts of section 1250 property unless these deductions are reflected in the basis of replacement property that is section 1250 property. Filing state income tax for free Example. Filing state income tax for free A wing of your building is totally destroyed by fire. Filing state income tax for free The depreciation adjustments figured in the adjusted basis of the building after the wing is destroyed do not include any deductions for depreciation on the destroyed wing unless it is replaced and the adjustments for depreciation on it are reflected in the basis of the replacement property. Filing state income tax for free Figuring straight line depreciation. Filing state income tax for free   The useful life and salvage value you would have used to figure straight line depreciation are the same as those used under the depreciation method you actually used. Filing state income tax for free If you did not use a useful life under the depreciation method actually used (such as with the units-of-production method) or if you did not take salvage value into account (such as with the declining balance method), the useful life or salvage value for figuring what would have been the straight line depreciation is the useful life and salvage value you would have used under the straight line method. Filing state income tax for free   Salvage value and useful life are not used for the ACRS method of depreciation. Filing state income tax for free Figure straight line depreciation for ACRS real property by using its 15-, 18-, or 19-year recovery period as the property's useful life. Filing state income tax for free   The straight line method is applied without any basis reduction for the investment credit. Filing state income tax for free Property held by lessee. Filing state income tax for free   If a lessee makes a leasehold improvement, the lease period for figuring what would have been the straight line depreciation adjustments includes all renewal periods. Filing state income tax for free This inclusion of the renewal periods cannot extend the lease period taken into account to a period that is longer than the remaining useful life of the improvement. Filing state income tax for free The same rule applies to the cost of acquiring a lease. Filing state income tax for free   The term renewal period means any period for which the lease may be renewed, extended, or continued under an option exercisable by the lessee. Filing state income tax for free However, the inclusion of renewal periods cannot extend the lease by more than two-thirds of the period that was the basis on which the actual depreciation adjustments were allowed. Filing state income tax for free Applicable Percentage The applicable percentage used to figure the ordinary income because of additional depreciation depends on whether the real property you disposed of is nonresidential real property, residential rental property, or low-income housing. Filing state income tax for free The percentages for these types of real property are as follows. Filing state income tax for free Nonresidential real property. Filing state income tax for free   For real property that is not residential rental property, the applicable percentage for periods after 1969 is 100%. Filing state income tax for free For periods before 1970, the percentage is zero and no ordinary income because of additional depreciation before 1970 will result from its disposition. Filing state income tax for free Residential rental property. Filing state income tax for free   For residential rental property (80% or more of the gross income is from dwelling units) other than low-income housing, the applicable percentage for periods after 1975 is 100%. Filing state income tax for free The percentage for periods before 1976 is zero. Filing state income tax for free Therefore, no ordinary income because of additional depreciation before 1976 will result from a disposition of residential rental property. Filing state income tax for free Low-income housing. Filing state income tax for free    Low-income housing includes all the following types of residential rental property. Filing state income tax for free Federally assisted housing projects if the mortgage is insured under section 221(d)(3) or 236 of the National Housing Act or housing financed or assisted by direct loan or tax abatement under similar provisions of state or local laws. Filing state income tax for free Low-income rental housing for which a depreciation deduction for rehabilitation expenses was allowed. Filing state income tax for free Low-income rental housing held for occupancy by families or individuals eligible to receive subsidies under section 8 of the United States Housing Act of 1937, as amended, or under provisions of state or local laws that authorize similar subsidies for low-income families. Filing state income tax for free Housing financed or assisted by direct loan or insured under Title V of the Housing Act of 1949. Filing state income tax for free   The applicable percentage for low-income housing is 100% minus 1% for each full month the property was held over 100 full months. Filing state income tax for free If you have held low-income housing at least 16 years and 8 months, the percentage is zero and no ordinary income will result from its disposition. Filing state income tax for free Foreclosure. Filing state income tax for free   If low-income housing is disposed of because of foreclosure or similar proceedings, the monthly applicable percentage reduction is figured as if you disposed of the property on the starting date of the proceedings. Filing state income tax for free Example. Filing state income tax for free On June 1, 2001, you acquired low-income housing property. Filing state income tax for free On April 3, 2012 (130 months after the property was acquired), foreclosure proceedings were started on the property and on December 3, 2013 (150 months after the property was acquired), the property was disposed of as a result of the foreclosure proceedings. Filing state income tax for free The property qualifies for a reduced applicable percentage because it was held more than 100 full months. Filing state income tax for free The applicable percentage reduction is 30% (130 months minus 100 months) rather than 50% (150 months minus 100 months) because it does not apply after April 3, 2012, the starting date of the foreclosure proceedings. Filing state income tax for free Therefore, 70% of the additional depreciation is treated as ordinary income. Filing state income tax for free Holding period. Filing state income tax for free   The holding period used to figure the applicable percentage for low-income housing generally starts on the day after you acquired it. Filing state income tax for free For example, if you bought low-income housing on January 1, 1997, the holding period starts on January 2, 1997. Filing state income tax for free If you sold it on January 2, 2013, the holding period is exactly 192 full months. Filing state income tax for free The applicable percentage for additional depreciation is 8%, or 100% minus 1% for each full month the property was held over 100 full months. Filing state income tax for free Holding period for constructed, reconstructed, or erected property. Filing state income tax for free   The holding period used to figure the applicable percentage for low-income housing you constructed, reconstructed, or erected starts on the first day of the month it is placed in service in a trade or business, in an activity for the production of income, or in a personal activity. Filing state income tax for free Property acquired by gift or received in a tax-free transfer. Filing state income tax for free   For low-income housing you acquired by gift or in a tax-free transfer the basis of which is figured by reference to the basis in the hands of the transferor, the holding period for the applicable percentage includes the holding period of the transferor. Filing state income tax for free   If the adjusted basis of the property in your hands just after acquiring it is more than its adjusted basis to the transferor just before transferring it, the holding period of the difference is figured as if it were a separate improvement. Filing state income tax for free See Low-Income Housing With Two or More Elements, next. Filing state income tax for free Low-Income Housing With Two or More Elements If you dispose of low-income housing property that has two or more separate elements, the applicable percentage used to figure ordinary income because of additional depreciation may be different for each element. Filing state income tax for free The gain to be reported as ordinary income is the sum of the ordinary income figured for each element. Filing state income tax for free The following are the types of separate elements. Filing state income tax for free A separate improvement (defined below). Filing state income tax for free The basic section 1250 property plus improvements not qualifying as separate improvements. Filing state income tax for free The units placed in service at different times before all the section 1250 property is finished. Filing state income tax for free For example, this happens when a taxpayer builds an apartment building of 100 units and places 30 units in service (available for renting) on January 4, 2011, 50 on July 18, 2011, and the remaining 20 on January 18, 2012. Filing state income tax for free As a result, the apartment house consists of three separate elements. Filing state income tax for free The 36-month test for separate improvements. Filing state income tax for free   A separate improvement is any improvement (qualifying under The 1-year test, below) added to the capital account of the property, but only if the total of the improvements during the 36-month period ending on the last day of any tax year is more than the greatest of the following amounts. Filing state income tax for free Twenty-five percent of the adjusted basis of the property at the start of the first day of the 36-month period, or the first day of the holding period of the property, whichever is later. Filing state income tax for free Ten percent of the unadjusted basis (adjusted basis plus depreciation and amortization adjustments) of the property at the start of the period determined in (1). Filing state income tax for free $5,000. Filing state income tax for free The 1-year test. Filing state income tax for free   An addition to the capital account for any tax year (including a short tax year) is treated as an improvement only if the sum of all additions for the year is more than the greater of $2,000 or 1% of the unadjusted basis of the property. Filing state income tax for free The unadjusted basis is figured as of the start of that tax year or the holding period of the property, whichever is later. Filing state income tax for free In applying the 36-month test, improvements in any one of the 3 years are omitted entirely if the total improvements in that year do not qualify under the 1-year test. Filing state income tax for free Example. Filing state income tax for free The unadjusted basis of a calendar year taxpayer's property was $300,000 on January 1 of this year. Filing state income tax for free During the year, the taxpayer made improvements A, B, and C, which cost $1,000, $600, and $700, respectively. Filing state income tax for free The sum of the improvements, $2,300, is less than 1% of the unadjusted basis ($3,000), so the improvements do not satisfy the 1-year test and are not treated as improvements for the 36-month test. Filing state income tax for free However, if improvement C had cost $1,500, the sum of these improvements would have been $3,100. Filing state income tax for free Then, it would be necessary to apply the 36-month test to figure if the improvements must be treated as separate improvements. Filing state income tax for free Addition to the capital account. Filing state income tax for free   Any addition to the capital account made after the initial acquisition or completion of the property by you or any person who held the property during a period included in your holding period is to be considered when figuring the total amount of separate improvements. Filing state income tax for free   The addition to the capital account of depreciable real property is the gross addition not reduced by amounts attributable to replaced property. Filing state income tax for free For example, if a roof with an adjusted basis of $20,000 is replaced by a new roof costing $50,000, the improvement is the gross addition to the account, $50,000, and not the net addition of $30,000. Filing state income tax for free The $20,000 adjusted basis of the old roof is no longer reflected in the basis of the property. Filing state income tax for free The status of an addition to the capital account is not affected by whether it is treated as a separate property for determining depreciation deductions. Filing state income tax for free   Whether an expense is treated as an addition to the capital account may depend on the final disposition of the entire property. Filing state income tax for free If the expense item property and the basic property are sold in two separate transactions, the entire section 1250 property is treated as consisting of two distinct properties. Filing state income tax for free Unadjusted basis. Filing state income tax for free   In figuring the unadjusted basis as of a certain date, include the actual cost of all previous additions to the capital account plus those that did not qualify as separate improvements. Filing state income tax for free However, the cost of components retired before that date is not included in the unadjusted basis. Filing state income tax for free Holding period. Filing state income tax for free   Use the following guidelines for figuring the applicable percentage for property with two or more elements. Filing state income tax for free The holding period of a separate element placed in service before the entire section 1250 property is finished starts on the first day of the month that the separate element is placed in service. Filing state income tax for free The holding period for each separate improvement qualifying as a separate element starts on the day after the improvement is acquired or, for improvements constructed, reconstructed, or erected, the first day of the month that the improvement is placed in service. Filing state income tax for free The holding period for each improvement not qualifying as a separate element takes the holding period of the basic property. Filing state income tax for free   If an improvement by itself does not meet the 1-year test (greater of $2,000 or 1% of the unadjusted basis), but it does qualify as a separate improvement that is a separate element (when grouped with other improvements made during the tax year), determine the start of its holding period as follows. Filing state income tax for free Use the first day of a calendar month that is closest to the middle of the tax year. Filing state income tax for free If there are two first days of a month that are equally close to the middle of the year, use the earlier date. Filing state income tax for free Figuring ordinary income attributable to each separate element. Filing state income tax for free   Figure ordinary income attributable to each separate element as follows. Filing state income tax for free   Step 1. Filing state income tax for free Divide the element's additional depreciation after 1975 by the sum of all the elements' additional depreciation after 1975 to determine the percentage used in Step 2. Filing state income tax for free   Step 2. Filing state income tax for free Multiply the percentage figured in Step 1 by the lesser of the additional depreciation after 1975 for the entire property or the gain from disposition of the entire property (the difference between the fair market value or amount realized and the adjusted basis). Filing state income tax for free   Step 3. Filing state income tax for free Multiply the result in Step 2 by the applicable percentage for the element. Filing state income tax for free Example. Filing state income tax for free You sold at a gain of $25,000 low-income housing property subject to the ordinary income rules of section 1250. Filing state income tax for free The property consisted of four elements (W, X, Y, and Z). Filing state income tax for free Step 1. Filing state income tax for free The additional depreciation for each element is: W-$12,000; X-None; Y-$6,000; and Z-$6,000. Filing state income tax for free The sum of the additional depreciation for all the elements is $24,000. Filing state income tax for free Step 2. Filing state income tax for free The depreciation deducted on element X was $4,000 less than it would have been under the straight line method. Filing state income tax for free Additional depreciation on the property as a whole is $20,000 ($24,000 − $4,000). Filing state income tax for free $20,000 is lower than the $25,000 gain on the sale, so $20,000 is used in Step 2. Filing state income tax for free Step 3. Filing state income tax for free The applicable percentages to be used in Step 3 for the elements are: W-68%; X-85%; Y-92%; and Z-100%. Filing state income tax for free From these facts, the sum of the ordinary income for each element is figured as follows. Filing state income tax for free   Step 1 Step 2 Step 3 Ordinary Income W . Filing state income tax for free 50 $10,000 68% $ 6,800 X -0- -0- 85% -0- Y . Filing state income tax for free 25 5,000 92% 4,600 Z . Filing state income tax for free 25 5,000 100% 5,000 Sum of ordinary income of separate elements $16,400 Gain Treated as Ordinary Income To find what part of the gain from the disposition of section 1250 property is treated as ordinary income, follow these steps. Filing state income tax for free In a sale, exchange, or involuntary conversion of the property, figure the amount realized that is more than the adjusted basis of the property. Filing state income tax for free In any other disposition of the property, figure the fair market value that is more than the adjusted basis. Filing state income tax for free Figure the additional depreciation for the periods after 1975. Filing state income tax for free Multiply the lesser of (1) or (2) by the applicable percentage, discussed earlier under Applicable Percentage. Filing state income tax for free Stop here if this is residential rental property or if (2) is equal to or more than (1). Filing state income tax for free This is the gain treated as ordinary income because of additional depreciation. Filing state income tax for free Subtract (2) from (1). Filing state income tax for free Figure the additional depreciation for periods after 1969 but before 1976. Filing state income tax for free Add the lesser of (4) or (5) to the result in (3). Filing state income tax for free This is the gain treated as ordinary income because of additional depreciation. Filing state income tax for free A limit on the amount treated as ordinary income for gain on like-kind exchanges and involuntary conversions is explained later. Filing state income tax for free Use Form 4797, Part III, to figure the ordinary income part of the gain. Filing state income tax for free Corporations. Filing state income tax for free   Corporations, other than S corporations, must recognize an additional amount as ordinary income on the sale or other disposition of section 1250 property. Filing state income tax for free The additional amount treated as ordinary income is 20% of the excess of the amount that would have been ordinary income if the property were section 1245 property over the amount treated as ordinary income under section 1250. Filing state income tax for free Report this additional ordinary income on Form 4797, Part III, line 26 (f). Filing state income tax for free Installment Sales If you report the sale of property under the installment method, any depreciation recapture under section 1245 or 1250 is taxable as ordinary income in the year of sale. Filing state income tax for free This applies even if no payments are received in that year. Filing state income tax for free If the gain is more than the depreciation recapture income, report the rest of the gain using the rules of the installment method. Filing state income tax for free For this purpose, include the recapture income in your installment sale basis to determine your gross profit on the installment sale. Filing state income tax for free If you dispose of more than one asset in a single transaction, you must figure the gain on each asset separately so that it may be properly reported. Filing state income tax for free To do this, allocate the selling price and the payments you receive in the year of sale to each asset. Filing state income tax for free Report any depreciation recapture income in the year of sale before using the installment method for any remaining gain. Filing state income tax for free For a detailed discussion of installment sales, see Publication 537. Filing state income tax for free Gifts If you make a gift of depreciable personal property or real property, you do not have to report income on the transaction. Filing state income tax for free However, if the person who receives it (donee) sells or otherwise disposes of the property in a disposition subject to recapture, the donee must take into account the depreciation you deducted in figuring the gain to be reported as ordinary income. Filing state income tax for free For low-income housing, the donee must take into account the donor's holding period to figure the applicable percentage. Filing state income tax for free See Applicable Percentage and its discussion Holding period under Section 1250 Property, earlier. Filing state income tax for free Part gift and part sale or exchange. Filing state income tax for free   If you transfer depreciable personal property or real property for less than its fair market value in a transaction considered to be partly a gift and partly a sale or exchange and you have a gain because the amount realized is more than your adjusted basis, you must report ordinary income (up to the amount of gain) to recapture depreciation. Filing state income tax for free If the depreciation (additional depreciation, if section 1250 property) is more than the gain, the balance is carried over to the transferee to be taken into account on any later disposition of the property. Filing state income tax for free However, see Bargain sale to charity, later. Filing state income tax for free Example. Filing state income tax for free You transferred depreciable personal property to your son for $20,000. Filing state income tax for free When transferred, the property had an adjusted basis to you of $10,000 and a fair market value of $40,000. Filing state income tax for free You took depreciation of $30,000. Filing state income tax for free You are considered to have made a gift of $20,000, the difference between the $40,000 fair market value and the $20,000 sale price to your son. Filing state income tax for free You have a taxable gain on the transfer of $10,000 ($20,000 sale price minus $10,000 adjusted basis) that must be reported as ordinary income from depreciation. Filing state income tax for free You report $10,000 of your $30,000 depreciation as ordinary income on the transfer of the property, so the remaining $20,000 depreciation is carried over to your son for him to take into account on any later disposition of the property. Filing state income tax for free Gift to charitable organization. Filing state income tax for free   If you give property to a charitable organization, you figure your deduction for your charitable contribution by reducing the fair market value of the property by the ordinary income and short-term capital gain that would have resulted had you sold the property at its fair market value at the time of the contribution. Filing state income tax for free Thus, your deduction for depreciable real or personal property given to a charitable organization does not include the potential ordinary gain from depreciation. Filing state income tax for free   You also may have to reduce the fair market value of the contributed property by the long-term capital gain (including any section 1231 gain) that would have resulted had the property been sold. Filing state income tax for free For more information, see Giving Property That Has Increased in Value in Publication 526. Filing state income tax for free Bargain sale to charity. Filing state income tax for free   If you transfer section 1245 or section 1250 property to a charitable organization for less than its fair market value and a deduction for the contribution part of the transfer is allowable, your ordinary income from depreciation is figured under different rules. Filing state income tax for free First, figure the ordinary income as if you had sold the property at its fair market value. Filing state income tax for free Then, allocate that amount between the sale and the contribution parts of the transfer in the same proportion that you allocated your adjusted basis in the property to figure your gain. Filing state income tax for free See Bargain Sale under Gain or Loss From Sales and Exchanges in chapter 1. Filing state income tax for free Report as ordinary income the lesser of the ordinary income allocated to the sale or your gain from the sale. Filing state income tax for free Example. Filing state income tax for free You sold section 1245 property in a bargain sale to a charitable organization and are allowed a deduction for your contribution. Filing state income tax for free Your gain on the sale was $1,200, figured by allocating 20% of your adjusted basis in the property to the part sold. Filing state income tax for free If you had sold the property at its fair market value, your ordinary income would have been $5,000. Filing state income tax for free Your ordinary income is $1,000 ($5,000 × 20%) and your section 1231 gain is $200 ($1,200 – $1,000). Filing state income tax for free Transfers at Death When a taxpayer dies, no gain is reported on depreciable personal property or real property transferred to his or her estate or beneficiary. Filing state income tax for free For information on the tax liability of a decedent, see Publication 559, Survivors, Executors, and Administrators. Filing state income tax for free However, if the decedent disposed of the property while alive and, because of his or her method of accounting or for any other reason, the gain from the disposition is reportable by the estate or beneficiary, it must be reported in the same way the decedent would have had to report it if he or she were still alive. Filing state income tax for free Ordinary income due to depreciation must be reported on a transfer from an executor, administrator, or trustee to an heir, beneficiary, or other individual if the transfer is a sale or exchange on which gain is realized. Filing state income tax for free Example 1. Filing state income tax for free Janet Smith owned depreciable property that, upon her death, was inherited by her son. Filing state income tax for free No ordinary income from depreciation is reportable on the transfer, even though the value used for estate tax purposes is more than the adjusted basis of the property to Janet when she died. Filing state income tax for free However, if she sold the property before her death and realized a gain and if, because of her method of accounting, the proceeds from the sale are income in respect of a decedent reportable by her son, he must report ordinary income from depreciation. Filing state income tax for free Example 2. Filing state income tax for free The trustee of a trust created by a will transfers depreciable property to a beneficiary in satisfaction of a specific bequest of $10,000. Filing state income tax for free If the property had a value of $9,000 at the date used for estate tax valuation purposes, the $1,000 increase in value to the date of distribution is a gain realized by the trust. Filing state income tax for free Ordinary income from depreciation must be reported by the trust on the transfer. Filing state income tax for free Like-Kind Exchanges and Involuntary Conversions A like-kind exchange of your depreciable property or an involuntary conversion of the property into similar or related property will not result in your having to report ordinary income from depreciation unless money or property other than like-kind, similar, or related property is also received in the transaction. Filing state income tax for free For information on like-kind exchanges and involuntary conversions, see chapter 1. Filing state income tax for free Depreciable personal property. Filing state income tax for free   If you have a gain from either a like-kind exchange or an involuntary conversion of your depreciable personal property, the amount to be reported as ordinary income from depreciation is the amount figured under the rules explained earlier (see Section 1245 Property), limited to the sum of the following amounts. Filing state income tax for free The gain that must be included in income under the rules for like-kind exchanges or involuntary conversions. Filing state income tax for free The fair market value of the like-kind, similar, or related property other than depreciable personal property acquired in the transaction. Filing state income tax for free Example 1. Filing state income tax for free You bought a new machine for $4,300 cash plus your old machine for which you were allowed a $1,360 trade-in. Filing state income tax for free The old machine cost you $5,000 two years ago. Filing state income tax for free You took depreciation deductions of $3,950. Filing state income tax for free Even though you deducted depreciation of $3,950, the $310 gain ($1,360 trade-in allowance minus $1,050 adjusted basis) is not reported because it is postponed under the rules for like-kind exchanges and you received only depreciable personal property in the exchange. Filing state income tax for free Example 2. Filing state income tax for free You bought office machinery for $1,500 two years ago and deducted $780 depreciation. Filing state income tax for free This year a fire destroyed the machinery and you received $1,200 from your fire insurance, realizing a gain of $480 ($1,200 − $720 adjusted basis). Filing state income tax for free You choose to postpone reporting gain, but replacement machinery cost you only $1,000. Filing state income tax for free Your taxable gain under the rules for involuntary conversions is limited to the remaining $200 insurance payment. Filing state income tax for free All your replacement property is depreciable personal property, so your ordinary income from depreciation is limited to $200. Filing state income tax for free Example 3. Filing state income tax for free A fire destroyed office machinery you bought for $116,000. Filing state income tax for free The depreciation deductions were $91,640 and the machinery had an adjusted basis of $24,360. Filing state income tax for free You received a $117,000 insurance payment, realizing a gain of $92,640. Filing state income tax for free You immediately spent $105,000 of the insurance payment for replacement machinery and $9,000 for stock that qualifies as replacement property and you choose to postpone reporting the gain. Filing state income tax for free $114,000 of the $117,000 insurance payment was used to buy replacement property, so the gain that must be included in income under the rules for involuntary conversions is the part not spent, or $3,000. Filing state income tax for free The part of the insurance payment ($9,000) used to buy the nondepreciable property (the stock) also must be included in figuring the gain from depreciation. Filing state income tax for free The amount you must report as ordinary income on the transaction is $12,000, figured as follows. Filing state income tax for free 1) Gain realized on the transaction ($92,640) limited to depreciation ($91,640) $91,640 2) Gain includible in income (amount not spent) 3,000     Plus: fair market value of property other than depreciable personal property (the stock) 9,000 12,000 Amount reportable as ordinary income (lesser of (1) or (2)) $12,000   If, instead of buying $9,000 in stock, you bought $9,000 worth of depreciable personal property similar or related in use to the destroyed property, you would only report $3,000 as ordinary income. Filing state income tax for free Depreciable real property. Filing state income tax for free   If you have a gain from either a like-kind exchange or involuntary conversion of your depreciable real property, ordinary income from additional depreciation is figured under the rules explained earlier (see Section 1250 Property), limited to the greater of the following amounts. Filing state income tax for free The gain that must be reported under the rules for like-kind exchanges or involuntary conversions plus the fair market value of stock bought as replacement property in acquiring control of a corporation. Filing state income tax for free The gain you would have had to report as ordinary income from additional depreciation had the transaction been a cash sale minus the cost (or fair market value in an exchange) of the depreciable real property acquired. Filing state income tax for free   The ordinary income not reported for the year of the disposition is carried over to the depreciable real property acquired in the like-kind exchange or involuntary conversion as additional depreciation from the property disposed of. Filing state income tax for free Further, to figure the applicable percentage of additional depreciation to be treated as ordinary income, the holding period starts over for the new property. Filing state income tax for free Example. Filing state income tax for free The state paid you $116,000 when it condemned your depreciable real property for public use. Filing state income tax for free You bought other real property similar in use to the property condemned for $110,000 ($15,000 for depreciable real property and $95,000 for land). Filing state income tax for free You also bought stock for $5,000 to get control of a corporation owning property similar in use to the property condemned. Filing state income tax for free You choose to postpone reporting the gain. Filing state income tax for free If the transaction had been a sale for cash only, under the rules described earlier, $20,000 would have been reportable as ordinary income because of additional depreciation. Filing state income tax for free The ordinary income to be reported is $6,000, which is the greater of the following amounts. Filing state income tax for free The gain that must be reported under the rules for involuntary conversions, $1,000 ($116,000 − $115,000) plus the fair market value of stock bought as qualified replacement property, $5,000, for a total of $6,000. Filing state income tax for free The gain you would have had to report as ordinary income from additional depreciation ($20,000) had this transaction been a cash sale minus the cost of the depreciable real property bought ($15,000), or $5,000. Filing state income tax for free   The ordinary income not reported, $14,000 ($20,000 − $6,000), is carried over to the depreciable real property you bought as additional depreciation. Filing state income tax for free Basis of property acquired. Filing state income tax for free   If the ordinary income you have to report because of additional depreciation is limited, the total basis of the property you acquired is its fair market value (its cost, if bought to replace property involuntarily converted into money) minus the gain postponed. Filing state income tax for free   If you acquired more than one item of property, allocate the total basis among the properties in proportion to their fair market value (their cost, in an involuntary conversion into money). Filing state income tax for free However, if you acquired both depreciable real property and other property, allocate the total basis as follows. Filing state income tax for free Subtract the ordinary income because of additional depreciation that you do not have to report from the fair market value (or cost) of the depreciable real property acquired. Filing state income tax for free Add the fair market value (or cost) of the other property acquired to the result in (1). Filing state income tax for free Divide the result in (1) by the result in (2). Filing state income tax for free Multiply the total basis by the result in (3). Filing state income tax for free This is the basis of the depreciable real property acquired. Filing state income tax for free If you acquired more than one item of depreciable real property, allocate this basis amount among the properties in proportion to their fair market value (or cost). Filing state income tax for free Subtract the result in (4) from the total basis. Filing state income tax for free This is the basis of the other property acquired. Filing state income tax for free If you acquired more than one item of other property, allocate this basis amount among the properties in proportion to their fair market value (or cost). Filing state income tax for free Example 1. Filing state income tax for free In 1988, low-income housing property that you acquired and placed in service in 1983 was destroyed by fire and you received a $90,000 insurance payment. Filing state income tax for free The property's adjusted basis was $38,400, with additional depreciation of $14,932. Filing state income tax for free On December 1, 1988, you used the insurance payment to acquire and place in service replacement low-income housing property. Filing state income tax for free Your realized gain from the involuntary conversion was $51,600 ($90,000 − $38,400). Filing state income tax for free You chose to postpone reporting the gain under the involuntary conversion rules. Filing state income tax for free Under the rules for depreciation recapture on real property, the ordinary gain was $14,932, but you did not have to report any of it because of the limit for involuntary conversions. Filing state income tax for free The basis of the replacement low-income housing property was its $90,000 cost minus the $51,600 gain you postponed, or $38,400. Filing state income tax for free The $14,932 ordinary gain you did not report is treated as additional depreciation on the replacement property. Filing state income tax for free If you sold the property in 2013, your holding period for figuring the applicable percentage of additional depreciation to report as ordinary income will have begun December 2, 1988, the day after you acquired the property. Filing state income tax for free Example 2. Filing state income tax for free John Adams received a $90,000 fire insurance payment for depreciable real property (office building) with an adjusted basis of $30,000. Filing state income tax for free He uses the whole payment to buy property similar in use, spending $42,000 for depreciable real property and $48,000 for land. Filing state income tax for free He chooses to postpone reporting the $60,000 gain realized on the involuntary conversion. Filing state income tax for free Of this gain, $10,000 is ordinary income from additional depreciation but is not reported because of the limit for involuntary conversions of depreciable real property. Filing state income tax for free The basis of the property bought is $30,000 ($90,000 − $60,000), allocated as follows. Filing state income tax for free The $42,000 cost of depreciable real property minus $10,000 ordinary income not reported is $32,000. Filing state income tax for free The $48,000 cost of other property (land) plus the $32,000 figured in (1) is $80,000. Filing state income tax for free The $32,000 figured in (1) divided by the $80,000 figured in (2) is 0. Filing state income tax for free 4. Filing state income tax for free The basis of the depreciable real property is $12,000. Filing state income tax for free This is the $30,000 total basis multiplied by the 0. Filing state income tax for free 4 figured in (3). Filing state income tax for free The basis of the other property (land) is $18,000. Filing state income tax for free This is the $30,000 total basis minus the $12,000 figured in (4). Filing state income tax for free The ordinary income that is not reported ($10,000) is carried over as additional depreciation to the depreciable real property that was bought and may be taxed as ordinary income on a later disposition. Filing state income tax for free Multiple Properties If you dispose of depreciable property and other property in one transaction and realize a gain, you must allocate the amount realized between the two types of property in proportion to their respective fair market values to figure the part of your gain to be reported as ordinary income from depreciation. Filing state income tax for free Different rules may apply to the allocation of the amount realized on the sale of a business that includes a group of assets. Filing state income tax for free See chapter 2. Filing state income tax for free In general, if a buyer and seller have adverse interests as to the allocation of the amount realized between the depreciable property and other property, any arm's length agreement between them will establish the allocation. Filing state income tax for free In the absence of an agreement, the allocation should be made by taking into account the appropriate facts and circumstances. Filing state income tax for free These include, but are not limited to, a comparison between the depreciable property and all the other property being disposed of in the transaction. Filing state income tax for free The comparison should take into account all the following facts and circumstances. Filing state income tax for free The original cost and reproduction cost of construction, erection, or production. Filing state income tax for free The remaining economic useful life. Filing state income tax for free The state of obsolescence. Filing state income tax for free The anticipated expenditures required to maintain, renovate, or modernize the properties. Filing state income tax for free Like-kind exchanges and involuntary conversions. Filing state income tax for free   If you dispose of and acquire depreciable personal property and other property (other than depreciable real property) in a like-kind exchange or involuntary conversion, the amount realized is allocated in the following way. Filing state income tax for free The amount allocated to the depreciable personal property disposed of is treated as consisting of, first, the fair market value of the depreciable personal property acquired and, second (to the extent of any remaining balance), the fair market value of the other property acquired. Filing state income tax for free The amount allocated to the other property disposed of is treated as consisting of the fair market value of all property acquired that has not already been taken into account. Filing state income tax for free   If you dispose of and acquire depreciable real property and other property in a like-kind exchange or involuntary conversion, the amount realized is allocated in the following way. Filing state income tax for free The amount allocated to each of the three types of property (depreciable real property, depreciable personal property, or other property) disposed of is treated as consisting of, first, the fair market value of that type of property acquired and, second (to the extent of any remaining balance), any excess fair market value of the other types of property acquired. Filing state income tax for free If the excess fair market value is more than the remaining balance of the amount realized and is from both of the other two types of property, you can apply the unallocated amount in any manner you choose. Filing state income tax for free Example. Filing state income tax for free A fire destroyed your property with a total fair market value of $50,000. Filing state income tax for free It consisted of machinery worth $30,000 and nondepreciable property worth $20,000. Filing state income tax for free You received an insurance payment of $40,000 and immediately used it with $10,000 of your own funds (for a total of $50,000) to buy machinery with a fair market value of $15,000 and nondepreciable property with a fair market value of $35,000. Filing state income tax for free The adjusted basis of the destroyed machinery was $5,000 and your depreciation on it was $35,000. Filing state income tax for free You choose to postpone reporting your gain from the involuntary conversion. Filing state income tax for free You must report $9,000 as ordinary income from depreciation arising from this transaction, figured as follows. Filing state income tax for free The $40,000 insurance payment must be allocated between the machinery and the other property destroyed in proportion to the fair market value of each. Filing state income tax for free The amount allocated to the machinery is 30,000/50,000 × $40,000, or $24,000. Filing state income tax for free The amount allocated to the other property is 20,000/50,000 × $40,000, or $16,000. Filing state income tax for free Your gain on the involuntary conversion of the machinery is $24,000 minus $5,000 adjusted basis, or $19,000. Filing state income tax for free The $24,000 allocated to the machinery disposed of is treated as consisting of the $15,000 fair market value of the replacement machinery bought and $9,000 of the fair market value of other property bought in the transaction. Filing state income tax for free All $16,000 allocated to the other property disposed of is treated as consisting of the fair market value of the other property that was bought. Filing state income tax for free Your potential ordinary income from depreciation is $19,000, the gain on the machinery, because it is less than the $35,000 depreciation. Filing state income tax for free However, the amount you must report as ordinary income is limited to the $9,000 included in the amount realized for the machinery that represents the fair market value of property other than the depreciable property you bought. Filing state income tax for free Prev  Up  Next   Home   More Online Publications