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Form 1040ez 2013

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Form 1040ez 2013

Form 1040ez 2013 4. Form 1040ez 2013   Filing U. Form 1040ez 2013 S. Form 1040ez 2013 Tax Returns Table of Contents Who Must FileFiling Requirement if Possession Income Is Excluded When To FileExtension of Time To File Where To File Special Rules for Completing Your U. Form 1040ez 2013 S. Form 1040ez 2013 Tax ReturnU. Form 1040ez 2013 S. Form 1040ez 2013 Armed Forces. Form 1040ez 2013 Deductions if Possession Income Is Excluded Foreign Tax Credit if Possession Income Is Excluded Self-Employment Tax Additional Medicare Tax Net Investment Income Tax Paying Your TaxesEstimated Tax Double TaxationCompetent Authority Assistance The information in chapter 3 will tell you if a U. Form 1040ez 2013 S. Form 1040ez 2013 income tax return is required for your situation. Form 1040ez 2013 If a U. Form 1040ez 2013 S. Form 1040ez 2013 return is required, your next step is to see if you meet the filing requirements. Form 1040ez 2013 If you do meet the filing requirements, the information presented in this chapter will help you understand the special procedures involved. Form 1040ez 2013 This chapter discusses: Filing requirements, When to file your return, Where to send your return, How to adjust your deductions and credits if you are excluding income from American Samoa or Puerto Rico, How to make estimated tax payments and pay self-employment tax, and How to request assistance in resolving instances of double taxation. Form 1040ez 2013 Who Must File If you are not required to file a possession tax return that includes your worldwide income, you must generally file a U. Form 1040ez 2013 S. Form 1040ez 2013 income tax return if your gross income is at least the amount shown in Table 4-1, later, for your filing status and age. Form 1040ez 2013 If you were a bona fide resident of American Samoa or Puerto Rico and are able to exclude your possession income from your U. Form 1040ez 2013 S. Form 1040ez 2013 tax return, your filing requirement may be less than the amount in Table 4-1. Form 1040ez 2013 For details, see the information under Filing Requirement if Possession Income Is Excluded , later. Form 1040ez 2013 Some individuals (such as those who can be claimed as a dependent on another person's return or who owe certain taxes, such as self-employment tax) must file a tax return even though the gross income is less than the amount shown in Table 4-1 for their filing status and age. Form 1040ez 2013 For more information, see the Form 1040 instructions. Form 1040ez 2013 Filing Requirement if Possession Income Is Excluded If you were a bona fide resident of American Samoa or Puerto Rico and qualify to exclude possession income on your U. Form 1040ez 2013 S. Form 1040ez 2013 tax return, you must determine your adjusted filing requirement. Form 1040ez 2013 Generally, your filing requirement is based on the total of your (and your spouse's if filing a joint return) personal exemption(s) plus your standard deduction. Form 1040ez 2013 Personal exemption. Form 1040ez 2013   When figuring your filing requirement, your personal exemption is allowed in full. Form 1040ez 2013 Do not reduce it for this purpose. Form 1040ez 2013 Do not include exemptions for your dependents. Form 1040ez 2013 Allowable standard deduction. Form 1040ez 2013   Unless your filing status is married filing separately, the minimum income level at which you must file a return is based, in part, on the standard deduction for your filing status and age. Form 1040ez 2013 Because the standard deduction applies to all types of income, it must be divided between your excluded income and income from other sources. Form 1040ez 2013 Multiply the regular standard deduction for your filing status and age (this is zero if you are married filing a separate return; all others, see Form 1040 instructions) by the following fraction:      Gross income subject to U. Form 1040ez 2013 S. Form 1040ez 2013 income tax     Gross income from all sources (including excluded possession income)   Example. Form 1040ez 2013 Barbara Spruce, a U. Form 1040ez 2013 S. Form 1040ez 2013 citizen, is single, under 65, and a bona fide resident of American Samoa. Form 1040ez 2013 During 2013, she received $20,000 of income from American Samoa sources (qualifies for exclusion) and $8,000 of income from sources outside the possession (subject to U. Form 1040ez 2013 S. Form 1040ez 2013 income tax). Form 1040ez 2013 Her allowable standard deduction for 2013 is figured as follows:   $8,000 $28,000 × $6,100 (regular standard deduction) = $1,743   Adjusted filing requirement. Form 1040ez 2013   Figure your adjusted filing requirement by adding the amount of your allowable standard deduction to the amount of your personal exemption. Form 1040ez 2013 You must file a U. Form 1040ez 2013 S. Form 1040ez 2013 income tax return if your gross income is at least the amount shown on line 3 of the following worksheet. Form 1040ez 2013    1. Form 1040ez 2013 Enter the allowable standard deduction you figured earlier under Allowable standard deduction . Form 1040ez 2013 If your filing status is married filing separately, enter -0-   2. Form 1040ez 2013 Personal exemption. Form 1040ez 2013 If your filing status is married filing jointly, enter $7,800; if someone can claim you as a dependent, enter -0-; otherwise, enter $3,900   3. Form 1040ez 2013 Add lines 1 and 2. Form 1040ez 2013 You must file a U. Form 1040ez 2013 S. Form 1040ez 2013 income tax return if your gross income from sources outside the relevant possession is at least this amount   Table 4-1. Form 1040ez 2013 2013 Filing Requirements Chart for Most Taxpayers IF your filing status is. Form 1040ez 2013 . Form 1040ez 2013 . Form 1040ez 2013 AND at the end of 2013 you were*. Form 1040ez 2013 . Form 1040ez 2013 . Form 1040ez 2013 THEN file a return if your gross income** was at least. Form 1040ez 2013 . Form 1040ez 2013 . Form 1040ez 2013 single under 65 $10,000 65 or older $11,500 married filing jointly*** under 65 (both spouses) $20,000 65 or older (one spouse) $21,200 65 or older (both spouses) $22,400 married filing separately any age $3,900 head of household under 65 $12,850 65 or older $14,350 qualifying widow(er)  with dependent child under 65 $16,100 65 or older $17,300 * If you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. Form 1040ez 2013 ** Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States (even if you can exclude part or all of it). Form 1040ez 2013 Do not include social security benefits unless (a) you are married filing a separate return and you lived with your spouse at any time during 2013, or (b) one-half of your social security benefits plus your other gross income is more than $25,000 ($32,000 if married filing jointly). Form 1040ez 2013 If (a) or (b) applies, see the instructions for Form 1040 or Publication 915, Social Security and Equivalent Railroad Retirement Benefits, to figure the taxable part of social security benefits you must include in gross income. Form 1040ez 2013 *** If you did not live with your spouse at the end of 2013 (or on the date your spouse died) and your gross income was at least $3,900 you must file a return regardless of your age. Form 1040ez 2013 Example 1. Form 1040ez 2013 James and Joan Thompson, one over 65, are U. Form 1040ez 2013 S. Form 1040ez 2013 citizens and bona fide residents of Puerto Rico during the entire tax year. Form 1040ez 2013 They file a joint income tax return. Form 1040ez 2013 During 2013, they received $35,000 of income from Puerto Rico sources (qualifies for exclusion) and $6,000 of income from sources outside Puerto Rico (subject to U. Form 1040ez 2013 S. Form 1040ez 2013 income tax). Form 1040ez 2013 Their allowable standard deduction for 2013 is figured as follows:   $6,000 $41,000 × $13,400 ( standard deduction for 65 or older (one spouse) ) = $1,961   The Thompsons do not have to file a U. Form 1040ez 2013 S. Form 1040ez 2013 income tax return because their gross income subject to U. Form 1040ez 2013 S. Form 1040ez 2013 tax ($6,000) is less than their allowable standard deduction plus their personal exemptions ($1,961+ $7,800= $9,761). Form 1040ez 2013 Example 2. Form 1040ez 2013 Barbara Spruce (see Example under Allowable standard deduction, earlier), however, must file a U. Form 1040ez 2013 S. Form 1040ez 2013 income tax return because her gross income subject to U. Form 1040ez 2013 S. Form 1040ez 2013 tax ($8,000) is more than her allowable standard deduction plus her personal exemption ($1,743 + $3,900 = $5,643). Form 1040ez 2013 If you must file a U. Form 1040ez 2013 S. Form 1040ez 2013 income tax return, you may be able to file a paperless return using IRS e-file. Form 1040ez 2013 See your form instructions or visit our website at IRS. Form 1040ez 2013 gov. Form 1040ez 2013 When To File If you file on a calendar year basis, the due date for filing your U. Form 1040ez 2013 S. Form 1040ez 2013 income tax return is April 15 following the end of your tax year. Form 1040ez 2013 If you use a fiscal year (a year ending on the last day of a month other than December), the due date is the 15th day of the 4th month after the end of your fiscal year. Form 1040ez 2013 If any due date falls on a Saturday, Sunday, or legal holiday, your tax return is due on the next business day. Form 1040ez 2013 For your 2013 tax return, the due date is April 15, 2014. Form 1040ez 2013 If you mail your federal tax return, it is considered timely if it bears an official postmark dated on or before the due date, including any extensions. Form 1040ez 2013 If you use a private delivery service designated by the IRS, generally the postmark date is the date the private delivery service records in its database or marks on the mailing label. Form 1040ez 2013 See your form instructions for a list of designated private delivery services. Form 1040ez 2013 Extension of Time To File You can get an extension of time to file your U. Form 1040ez 2013 S. Form 1040ez 2013 income tax return. Form 1040ez 2013 Special rules apply for those living outside the United States. Form 1040ez 2013 Automatic 6-Month Extension If you cannot file your 2013 return by the due date, you can get an automatic 6-month extension of time to file. Form 1040ez 2013 Example. Form 1040ez 2013 If your return must be filed by April 15, 2014, you will have until October 15, 2014, to file. Form 1040ez 2013 Although you are not required to make a payment of the tax you estimate as due, Form 4868 does not extend the time to pay taxes. Form 1040ez 2013 If you do not pay the amount due by the regular due date (generally April 15), you will owe interest on any unpaid tax from the original due date to the date you pay the tax. Form 1040ez 2013 You may also be charged penalties (see the Instructions for Form 4868). Form 1040ez 2013 How to get the automatic extension. Form 1040ez 2013   You can get the automatic 6-month extension if you do one of the following by the due date for filing your return. Form 1040ez 2013 E-file Form 4868 using your personal computer or a tax professional. Form 1040ez 2013 E-file and pay by credit or debit card. Form 1040ez 2013 Your payment must be at least $1. Form 1040ez 2013 You may pay by phone or over the Internet. Form 1040ez 2013 Do not file Form 4868. Form 1040ez 2013 File a paper Form 4868. Form 1040ez 2013 If you are a fiscal year taxpayer, you must file a paper Form 4868. Form 1040ez 2013 See Form 4868 for information on getting an extension using these options. Form 1040ez 2013 When to file. Form 1040ez 2013   You must request the automatic extension by the due date for your return. Form 1040ez 2013 You can file your return any time before the 6-month extension period ends. Form 1040ez 2013 When you file your return. Form 1040ez 2013   Enter any payment you made related to the extension of time to file on Form 1040, line 68. Form 1040ez 2013 If you file Form 1040A, U. Form 1040ez 2013 S. Form 1040ez 2013 Individual Income Tax Return, or Form 1040EZ, Income Tax Return for Single and Joint Filers With No Dependents, include that payment in your total payments on Form 1040A, line 41, or Form 1040EZ, line 9. Form 1040ez 2013 Also enter “Form 4868” and the amount paid in the space to the left of the entry space for line 41 or line 9. Form 1040ez 2013 You cannot ask the Internal Revenue Service to figure your tax if you use the extension of time to file. Form 1040ez 2013 Individuals Outside the United States and Puerto Rico You are allowed an automatic 2-month extension (until June 16, 2014, if you use the calendar year) to file your 2013 return and pay any federal income tax due if: You are a U. Form 1040ez 2013 S. Form 1040ez 2013 citizen or resident, and On the due date of your return: You are living outside of the United States and Puerto Rico, and your main place of business or post of duty is outside the United States and Puerto Rico, or You are in military or naval service on duty outside the United States and Puerto Rico. Form 1040ez 2013 However, if you pay the tax due after the regular due date (generally April 15), interest will be charged from April 15 until the date the tax is paid. Form 1040ez 2013 If you serve in a combat zone or qualified hazardous duty area, you may be eligible for a longer extension of time to file. Form 1040ez 2013 For more information, see Publication 3, Armed Forces' Tax Guide. Form 1040ez 2013 Married taxpayers. Form 1040ez 2013   If you file a joint return, only one spouse has to qualify for this automatic extension. Form 1040ez 2013 However, if you and your spouse file separate returns, this automatic extension applies only to the spouse who qualifies. Form 1040ez 2013 How to get the extension. Form 1040ez 2013   To use this special automatic extension, you must attach a statement to your return explaining what situation qualified you for the extension. Form 1040ez 2013 (See the situations listed under (2), earlier. Form 1040ez 2013 ) Extension beyond 2 months. Form 1040ez 2013   If you cannot file your 2013 return within the automatic 2-month extension period, you can get an additional 4-month extension, for a total of 6 months. Form 1040ez 2013 File Form 4868 by the end of the automatic extension period (June 16, 2014 for calendar year taxpayers). Form 1040ez 2013 Be sure to check the box on Form 4868, line 8, if appropriate. Form 1040ez 2013   In addition to this 6-month extension, taxpayers who are out of the country (as defined under (2) earlier) can request a discretionary 2-month additional extension of time to file their returns (to December 15 for calendar year taxpayers). Form 1040ez 2013   To request this extension, you must send the IRS a letter explaining the reasons why you need the additional 2 months. Form 1040ez 2013 Send the letter by the extended due date (October 15 for calendar year taxpayers) to:  Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA   You will not receive any notification from the IRS unless your request is denied for being untimely. Form 1040ez 2013 Where To File Use the addresses listed below if you have to file Form 1040 with the United States and you are excluding possession income from American Samoa or Puerto Rico. Form 1040ez 2013 If you are not including a check or a money order, send your U. Form 1040ez 2013 S. Form 1040ez 2013 tax return and all attachments to:   Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA If you are including a check or a money order, send your U. Form 1040ez 2013 S. Form 1040ez 2013 tax return and all attachments to:  Internal Revenue Service P. Form 1040ez 2013 O. Form 1040ez 2013 Box 1303 Charlotte, NC 28201-1303 USA Also send your U. Form 1040ez 2013 S. Form 1040ez 2013 return to these addresses if you are attaching Form 5074 or Form 8689. Form 1040ez 2013 If you are not in either of the above categories, send your return to the address shown in the Form 1040 instructions for the possession or state in which you reside. Form 1040ez 2013 Special Rules for Completing Your U. Form 1040ez 2013 S. Form 1040ez 2013 Tax Return If you are not excluding possession income from your U. Form 1040ez 2013 S. Form 1040ez 2013 tax return, follow the instructions for the specific forms you file. Form 1040ez 2013 However, you may not qualify to claim the earned income credit (EIC). Form 1040ez 2013 Earned income credit. Form 1040ez 2013   Even if you maintain a household in one of the possessions discussed in this publication that is your main home and the home of your qualifying child, you cannot claim the earned income credit on your U. Form 1040ez 2013 S. Form 1040ez 2013 tax return. Form 1040ez 2013 This credit is available only if you maintain the household in the United States or you are serving on extended active duty in the U. Form 1040ez 2013 S. Form 1040ez 2013 Armed Forces. Form 1040ez 2013 U. Form 1040ez 2013 S. Form 1040ez 2013 Armed Forces. Form 1040ez 2013   U. Form 1040ez 2013 S. Form 1040ez 2013 military personnel stationed outside the United States on extended active duty are considered to live in the United States during that duty period for purposes of the EIC. Form 1040ez 2013 Extended active duty means you are called or ordered to duty for an indefinite period or for a period of more than 90 days. Form 1040ez 2013 Once you begin serving your extended active duty, you are still considered to have been on extended active duty even if you do not serve more than 90 days. Form 1040ez 2013 Income from American Samoa or Puerto Rico excluded. Form 1040ez 2013   You will not be allowed to take deductions and credits that apply to the excluded income. Form 1040ez 2013 The additional information you need follows. Form 1040ez 2013 Deductions if Possession Income Is Excluded Deductions that specifically apply to your excluded possession income, such as employee business expenses, are not allowable on your U. Form 1040ez 2013 S. Form 1040ez 2013 income tax return. Form 1040ez 2013 Deductions that do not specifically apply to any particular type of income must be divided between your excluded income from sources in the relevant possession and income from all other sources to find the part that you can deduct on your U. Form 1040ez 2013 S. Form 1040ez 2013 tax return. Form 1040ez 2013 Examples of such deductions are alimony payments, the standard deduction, and certain itemized deductions (such as medical expenses, charitable contributions, real estate taxes, and mortgage interest on your home). Form 1040ez 2013 Figuring the deduction. Form 1040ez 2013   To find the part of a deduction that is allowable, multiply the deduction by the following fraction. Form 1040ez 2013   Gross income subject to U. Form 1040ez 2013 S. Form 1040ez 2013 income tax     Gross income from all sources (including excluded possession income)   Adjustments to Income Your adjusted gross income equals your gross income minus certain deductions (adjustments). Form 1040ez 2013 Moving expense deduction. Form 1040ez 2013   Generally, expenses of a move to a possession are directly attributable to wages, salaries, and other earned income from that possession. Form 1040ez 2013 Likewise, the expenses of a move back to the United States are generally attributable to U. Form 1040ez 2013 S. Form 1040ez 2013 earned income. Form 1040ez 2013   If you are claiming expenses for a move to a relevant possession, how and where you will deduct the expenses depends on your status as a bona fide resident and if any of your possession income is excluded on your U. Form 1040ez 2013 S. Form 1040ez 2013 tax return. Form 1040ez 2013 For more information, see Moving expense deduction in chapter 3 under the name of the relevant possession. Form 1040ez 2013   If you are claiming expenses for a move from a U. Form 1040ez 2013 S. Form 1040ez 2013 possession to the United States, use Form 3903 to figure your deductible expenses and enter the amount on Form 1040, line 26. Form 1040ez 2013 For purposes of deducting moving expenses, the possessions are considered part of the United States. Form 1040ez 2013 See Publication 521, Moving Expenses, for information about what expenses are deductible. Form 1040ez 2013 Self-employment tax deduction. Form 1040ez 2013   Generally, if you are reporting self-employment income on your U. Form 1040ez 2013 S. Form 1040ez 2013 return, you can include the deductible part of your self-employment tax on Form 1040, line 27. Form 1040ez 2013 This is an income tax deduction only; it is not a deduction in figuring net earnings from self-employment (for self-employment tax). Form 1040ez 2013   However, if you are a bona fide resident of American Samoa or Puerto Rico and you exclude all of your self-employment income from gross income, you cannot take the deduction on Form 1040, line 27, because the deduction is related to excluded income. Form 1040ez 2013   If only part of your self-employment income is excluded, the part of the deduction that is based on the nonexcluded income is allowed. Form 1040ez 2013 This would happen if, for instance, you have two businesses and only the income from one of them is excludable. Form 1040ez 2013   For purposes of the deduction only, figure the self-employment tax on the nonexcluded income by multiplying your total self-employment tax (from Schedule SE (Form 1040)), Self-Employment Tax) by the following fraction. Form 1040ez 2013   Self-employment income subject to U. Form 1040ez 2013 S. Form 1040ez 2013 income tax     Total self-employment income (including excluded possession income)   The result is your self-employment tax on nonexcluded income. Form 1040ez 2013 Include the deductible part of this amount on Form 1040, line 27. Form 1040ez 2013 Individual retirement arrangement (IRA) deduction. Form 1040ez 2013   Do not take excluded income into account when figuring your deductible IRA contribution. Form 1040ez 2013 Standard Deduction The standard deduction is composed of the regular standard deduction amount and the additional standard deduction for taxpayers who are blind or age 65 or over. Form 1040ez 2013 To find the amount you can claim on Form 1040, line 40, first figure your full standard deduction according to the Instructions for Form 1040. Form 1040ez 2013 Then multiply your full standard deduction by the following fraction. Form 1040ez 2013   Gross income subject to U. Form 1040ez 2013 S. Form 1040ez 2013 income tax     Gross income from all sources (including excluded possession income)   In the space above line 40, enter “Standard deduction modified due to income excluded under section 931 (if American Samoa) or section 933 (if Puerto Rico). Form 1040ez 2013 ” This calculation may not be the same as the one you used to determine if you need to file a U. Form 1040ez 2013 S. Form 1040ez 2013 tax return. Form 1040ez 2013 Itemized Deductions Most itemized deductions do not apply to a particular type of income. Form 1040ez 2013 However, itemized deductions can be divided into three categories. Form 1040ez 2013 Those that apply specifically to excluded income, such as employee business expenses, are not deductible. Form 1040ez 2013 Those that apply specifically to income subject to U. Form 1040ez 2013 S. Form 1040ez 2013 income tax, which might also be employee business expenses, are fully allowable under the Instructions for Schedule A (Form 1040), Itemized Deductions. Form 1040ez 2013 Those that do not apply to specific income must be allocated between your gross income subject to U. Form 1040ez 2013 S. Form 1040ez 2013 income tax and your total gross income from all sources. Form 1040ez 2013 The example given later shows how to figure the deductible part of each type of expense that is not related to specific income. Form 1040ez 2013 Example. Form 1040ez 2013 In 2013, you and your spouse are both under 65 and U. Form 1040ez 2013 S. Form 1040ez 2013 citizens who are bona fide residents of Puerto Rico during the entire tax year. Form 1040ez 2013 You file a joint income tax return. Form 1040ez 2013 During 2013, you earned $20,000 from Puerto Rican sources (excluded from U. Form 1040ez 2013 S. Form 1040ez 2013 gross income) and your spouse earned $60,000 from the U. Form 1040ez 2013 S. Form 1040ez 2013 Government. Form 1040ez 2013 You have $16,000 of itemized deductions that do not apply to any specific type of income. Form 1040ez 2013 These are medical expenses of $4,000, real estate taxes of $5,000, home mortgage interest of $6,000, and charitable contributions of $1,000 (cash contributions). Form 1040ez 2013 You determine the amount of each deduction that you can claim on your Schedule A (Form 1040), Itemized Deductions, by multiplying the deduction by the fraction shown under Figuring the deduction , earlier under Deductions if Possession Income is Excluded. Form 1040ez 2013   Medical Expenses   $60,000$80,000 × $4,000 = $3,000  (enter on line 1  of Schedule A)     Real Estate Taxes   $60,000$80,000 × $5,000 = $3,750  (enter on line 6  of Schedule A)     Home Mortgage Interest   $60,000$80,000 × $6,000 = $4,500  (enter on line 10 or 11 of  Schedule A)     Charitable Contributions (cash contributions)   $60,000$80,000 × $1,000 = $750  (enter on line 16 of Schedule A)   Enter on Schedule A (Form 1040) only the allowable portion of each deduction. Form 1040ez 2013 Overall limitation on itemized deductions. Form 1040ez 2013   If your adjusted gross income (discussed earlier) is over $300,000 if married filing jointly or qualifying widow(er); $275,000 if head of household; $250,000 if single; or $150,000 if married filing separately; see the Itemized Deductions Worksheet in the Instructions for Schedule A (Form 1040), to figure your itemized deductions. Form 1040ez 2013 Personal Exemptions Personal exemptions are allowed in full even if excluding possession income. Form 1040ez 2013 However, depending upon your adjusted gross income and filing status, the amount you can deduct may be reduced. Form 1040ez 2013 See the Deduction for Exemptions Worksheet—Line 42 in the instructions for Form 1040. Form 1040ez 2013 Foreign Tax Credit if Possession Income Is Excluded If you must report American Samoa or Puerto Rico source income on your U. Form 1040ez 2013 S. Form 1040ez 2013 tax return, you can claim a foreign tax credit for income taxes paid to the possession on that income. Form 1040ez 2013 However, you cannot claim a foreign tax credit for taxes paid on possession income that is excluded on your U. Form 1040ez 2013 S. Form 1040ez 2013 tax return. Form 1040ez 2013 The foreign tax credit is generally figured on Form 1116. Form 1040ez 2013 If you have income, such as U. Form 1040ez 2013 S. Form 1040ez 2013 Government wages, that is not excludable, and you also have possession source income that is excludable, you must figure the credit by reducing your foreign taxes paid or accrued by the taxes based on the excluded income. Form 1040ez 2013 You make this reduction for each separate income category. Form 1040ez 2013 To find the amount of this reduction, use the following formula for each income category. Form 1040ez 2013 Excluded income from possession sources less deductible expenses based on that income x Tax paid or accrued to the possession = Reduction in foreign taxes Total income subject to possession tax less deductible expenses based on that income Enter the amount of the reduction on Form 1116, line 12. Form 1040ez 2013 For more information on the foreign tax credit, see Publication 514. Form 1040ez 2013 Example. Form 1040ez 2013 Jason and Lynn Reddy are U. Form 1040ez 2013 S. Form 1040ez 2013 citizens who were bona fide residents of Puerto Rico during all of 2013. Form 1040ez 2013 They file a joint tax return. Form 1040ez 2013 The following table shows their excludable and taxable income for U. Form 1040ez 2013 S. Form 1040ez 2013 federal income tax purposes. Form 1040ez 2013   Taxable   Excludable Jason's wages from  U. Form 1040ez 2013 S. Form 1040ez 2013 Government $25,000     Lynn's wages from Puerto Rico  corp. Form 1040ez 2013     $15,000 Dividend from Puerto Rico corp. Form 1040ez 2013 doing business in Puerto Rico     200 Dividend from U. Form 1040ez 2013 S. Form 1040ez 2013  corp. Form 1040ez 2013 doing business  in U. Form 1040ez 2013 S. Form 1040ez 2013 * 1,000     Totals $26,000   $15,200 * Income from sources outside Puerto Rico is taxable. Form 1040ez 2013   Jason and Lynn must file 2013 income tax returns with both Puerto Rico and the United States. Form 1040ez 2013 They have gross income of $26,000 for U. Form 1040ez 2013 S. Form 1040ez 2013 tax purposes. Form 1040ez 2013 They paid taxes to Puerto Rico of $4,000 ($3,980 on their wages and $20 on the dividend from the Puerto Rico corporation). Form 1040ez 2013 They figure their foreign tax credit on two Forms 1116, which they must attach to their U. Form 1040ez 2013 S. Form 1040ez 2013 return. Form 1040ez 2013 They fill out one Form 1116 for wages and one Form 1116 for the dividend. Form 1040ez 2013 Jason and Lynn figure the Puerto Rico taxes on excluded income as follows. Form 1040ez 2013   Wages: ($15,000 ÷ $40,000) × $3,980 = $1,493   Dividend: ($200 ÷ $200) × $20 = $20 They enter $1,493 on Form 1116, line 12, for wages and $20 on the second Form 1116, line 12, for the dividend. Form 1040ez 2013 Self-Employment Tax Self-employment tax includes both social security and Medicare taxes for individuals who are self-employed. Form 1040ez 2013 A U. Form 1040ez 2013 S. Form 1040ez 2013 citizen or resident alien who is self-employed must pay self-employment tax on net self-employment earnings of $400 or more. Form 1040ez 2013 This rule applies whether or not the earnings are excludable from gross income (or whether or not a U. Form 1040ez 2013 S. Form 1040ez 2013 income tax return must otherwise be filed). Form 1040ez 2013 Bona fide residents of the possessions discussed in this publication are considered U. Form 1040ez 2013 S. Form 1040ez 2013 residents for this purpose and are subject to the self-employment tax. Form 1040ez 2013 Forms to file. Form 1040ez 2013   If you have net self-employment income and are subject to self-employment tax, file one of the following with the United States. Form 1040ez 2013 If you are required to file Form 1040 with the United States, complete Schedule SE (Form 1040) and attach it to your Form 1040. Form 1040ez 2013 If you are not required to file Form 1040 with the United States and you are a bona fide resident of American Samoa, the CNMI, Guam, Puerto Rico, or the USVI, file Form 1040-SS. Form 1040ez 2013 If you are a resident of Puerto Rico, you can file the Spanish-language Form 1040-PR instead. Form 1040ez 2013 Do not file forms 1040-SS or 1040-PR with Form 1040. Form 1040ez 2013 If you are required to pay Additional Medicare Tax (discussed later) on your self-employment income, attach Form 8959, Additional Medicare Tax to Form 1040, Form 1040-SS, or Form 1040-PR, as applicable. Form 1040ez 2013 Chapter 11 Bankruptcy cases. Form 1040ez 2013   While you are a debtor in a chapter 11 bankruptcy case, your net profit or loss from self-employment will be included on the income tax return (Form 1041, U. Form 1040ez 2013 S. Form 1040ez 2013 Income Tax Return for Estates and Trusts) of the bankruptcy estate. Form 1040ez 2013 However, you—not the bankruptcy estate—are responsible for paying self-employment tax on your net earnings from self-employment. Form 1040ez 2013   Use Schedule SE (Form 1040), Form 1040-SS, or Form 1040-PR, as determined above, to figure your correct amount of self-employment tax. Form 1040ez 2013   For other reporting requirements, see Chapter 11 Bankruptcy Cases in the Instructions for Form 1040. Form 1040ez 2013 Additional Medicare Tax Beginning in 2013, a 0. Form 1040ez 2013 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 if single, head of household, or qualifying widow(er). Form 1040ez 2013 Medicare wages and self-employment income are combined to determine if income exceeds the threshold. Form 1040ez 2013 A self-employment loss should not be considered for purposes of this tax. Form 1040ez 2013 RRTA compensation should be separately compared to the threshold. Form 1040ez 2013 Your employer is responsible for withholding the 0. Form 1040ez 2013 9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays to you in excess of $200,000. Form 1040ez 2013 You should consider this withholding, if applicable, in determining whether you need to make estimated tax payments. Form 1040ez 2013 There are no special rules for U. Form 1040ez 2013 S. Form 1040ez 2013 citizens and nonresident aliens living abroad for purposes of this provision. Form 1040ez 2013 Wages, RRTA compensation, and self-employment income that are subject to Medicare tax will also be subject to Additional Medicare Tax if in excess of the applicable threshold. Form 1040ez 2013 For more information, see Form 8959, Additional Medicare Tax, and its instructions or visit www. Form 1040ez 2013 irs. Form 1040ez 2013 gov and enter the following words in the search box: Additional Medicare Tax. Form 1040ez 2013 You cannot include the Additional Medicare Tax as a deductible part of your self-employment tax. Form 1040ez 2013 Net Investment Income Tax Beginning in 2013, the Net Investment Income Tax (NIIT) imposes a 3. Form 1040ez 2013 8% tax on the lesser of an individual’s net investment income or the excess of the individual’s modified adjusted gross income over a specified threshold amount. Form 1040ez 2013 Bona fide residents of Puerto Rico and American Samoa who may have a federal income tax return filing obligation may be liable for the NIIT if the taxpayer’s modified adjusted gross income from non-territory sources exceeds a specified threshold amount. Form 1040ez 2013 The NIIT does not apply to any individual who is a nonresident alien with respect to the United States. Form 1040ez 2013 Bona fide residents must take into account any additional tax liability associated with the NIIT when calculating your estimated tax payments. Form 1040ez 2013 Forms to file. Form 1040ez 2013   If you are a bona fide resident of American Samoa and Puerto Rico and you are required to pay the NIIT, you must file Form 1040 with the United States and attach Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts. Form 1040ez 2013 For more information, see Form 8960 and its instructions. Form 1040ez 2013 Paying Your Taxes You may find that not all of your income tax has been paid through withholding by either the United States or the possession. Form 1040ez 2013 This is often true if you have income that is not subject to withholding, such as self-employment, interest, or rental income. Form 1040ez 2013 In this situation, you may need to make estimated tax payments. Form 1040ez 2013 Estimated Tax If your estimated income tax obligation is to the United States, use the worksheet in the Form 1040-ES package to figure your estimated tax, including self-employment tax. Form 1040ez 2013 Include the Additional Medicare Tax and Net Investment Income Tax if applicable. Form 1040ez 2013 If you are paying by check or money order, use the payment vouchers in the Form 1040-ES package. Form 1040ez 2013 Or, you can make your payments electronically and not have to file any paper forms. Form 1040ez 2013 See the Form 1040-ES instructions for information on making payments. Form 1040ez 2013 Double Taxation Mutual agreement procedures exist to settle issues where there is inconsistent tax treatment between the IRS and the taxing authorities of the following possessions. Form 1040ez 2013 American Samoa. Form 1040ez 2013 The Commonwealth of Puerto Rico. Form 1040ez 2013 The Commonwealth of the Northern Mariana Islands. Form 1040ez 2013 Guam. Form 1040ez 2013 The U. Form 1040ez 2013 S. Form 1040ez 2013 Virgin Islands. Form 1040ez 2013 These issues usually involve allocations of income, deductions, credits, or allowances between related persons; determinations of residency; and determinations of the source of income and related expenses. Form 1040ez 2013 Competent Authority Assistance The tax coordination agreements between the United States and the possession tax departments contain provisions allowing the competent authorities of the United States and the relevant possession to resolve, by mutual agreement, inconsistent tax treatment by the two jurisdictions. Form 1040ez 2013 How to make your request. Form 1040ez 2013   Your request for competent authority assistance must include all the information listed in Revenue Procedure 2006-23, 2006-20 I. Form 1040ez 2013 R. Form 1040ez 2013 B. Form 1040ez 2013 900 available at www. Form 1040ez 2013 irs. Form 1040ez 2013 gov/pub/irs-irbs/irb06-49. Form 1040ez 2013 pdf. Form 1040ez 2013    Also, see Notice 2013-78, which provides proposed updates to the procedures for requesting U. Form 1040ez 2013 S. Form 1040ez 2013 competent authority assistance under tax treaties. Form 1040ez 2013 As noted, an update to Revenue Procedure 2006-23 will be published in the future. Form 1040ez 2013   Your request must be in the form of a letter addressed to the Deputy Commissioner (International) LB&I. Form 1040ez 2013 It must contain a statement that competent authority assistance is requested under the mutual agreement procedure with the possession. Form 1040ez 2013 You (or a person having authority to sign your federal return) must sign and date the request. Form 1040ez 2013    Send your written request for U. Form 1040ez 2013 S. Form 1040ez 2013 assistance under this procedure to:   Deputy Commissioner (International) Large Business and International Division Internal Revenue Service 1111 Constitution Avenue, N. Form 1040ez 2013 W. Form 1040ez 2013  Routing: M4-365 Washington, DC 20224 (Attention: TAIT) Nonresident aliens generally must present their initial request for assistance to the relevant possession tax agency. Form 1040ez 2013 Credit or Refund In addition to the tax assistance request, if you seek a credit or refund of any overpayment of U. Form 1040ez 2013 S. Form 1040ez 2013 tax paid on the income in question, you should file a claim on Form 1040X, Amended U. Form 1040ez 2013 S. Form 1040ez 2013 Individual Income Tax Return. Form 1040ez 2013 Indicate on the form that a request for assistance under the mutual agreement procedure with the possession has been filed. Form 1040ez 2013 Attach a copy of the request to the form. Form 1040ez 2013 Also, you should take whatever steps must be taken under the possession tax code to prevent the expiration of the statutory period for filing a claim for credit or refund of a possession tax. Form 1040ez 2013 See Revenue Procedure 2006-54 (or its successor), section 9, for complete information. Form 1040ez 2013 Prev  Up  Next   Home   More Online Publications
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The Form 1040ez 2013

Form 1040ez 2013 3. Form 1040ez 2013   Farm Income Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Schedule F (Form 1040) Sales of Farm ProductsSchedule F. Form 1040ez 2013 Form 4797. Form 1040ez 2013 Sales Caused by Weather-Related Conditions Rents (Including Crop Shares)Crop Shares Agricultural Program PaymentsCommodity Credit Corporation (CCC) Loans Conservation Reserve Program (CRP) Crop Insurance and Crop Disaster Payments Feed Assistance and Payments Cost-Sharing Exclusion (Improvements) Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 2008 Tobacco Quota Buyout Program Payments Other Payments Payment to More Than One Person Income From CooperativesPatronage Dividends Per-Unit Retain Certificates Cancellation of DebtGeneral Rule Exceptions Exclusions Income From Other SourcesSod. Form 1040ez 2013 Granting the right to remove deposits. Form 1040ez 2013 Income Averaging for FarmersElected Farm Income (EFI) How To Figure the Tax Effect on Other Tax Determinations Tax for Certain Children Who Have Unearned Income Alternative Minimum Tax (AMT) Schedule J Introduction You may receive income from many sources. Form 1040ez 2013 You must report the income from all the different sources on your tax return, unless it is excluded by law. Form 1040ez 2013 Where you report the income on your tax return depends on its source. Form 1040ez 2013 This chapter discusses farm income you report on Schedule F (Form 1040), Profit or Loss From Farming. Form 1040ez 2013 For information on where to report other income, see the Instructions for Form 1040, U. Form 1040ez 2013 S. Form 1040ez 2013 Individual Income Tax Return. Form 1040ez 2013 Accounting method. Form 1040ez 2013   The rules discussed in this chapter assume you use the cash method of accounting. Form 1040ez 2013 Under the cash method, you generally include an item of income in gross income in the year you receive it. Form 1040ez 2013 See Cash Method in chapter 2. Form 1040ez 2013   If you use an accrual method of accounting, different rules may apply to your situation. Form 1040ez 2013 See Accrual Method in chapter 2. Form 1040ez 2013 Topics - This chapter discusses: Schedule F Sales of farm products Rents (including crop shares) Agricultural program payments Income from cooperatives Cancellation of debt Income from other sources Income averaging for farmers Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 550 Investment Income and Expenses 908 Bankruptcy Tax Guide 925 Passive Activity and At-Risk Rules 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) 982 Reduction of Tax Attributes Due to Discharge of Indebtedness Sch E (Form 1040) Supplemental Income and Loss Sch J (Form 1040) Income Averaging for Farmers and Fishermen 1099-G Certain Government Payments 1099-PATR Taxable Distributions Received From Cooperatives 4797 Sales of Business Property 4835 Farm Rental Income and Expenses See chapter 16 for information about getting publications and forms. Form 1040ez 2013 Schedule F (Form 1040) Individuals, trusts, and partnerships report farm income on Schedule F (Form 1040), Profit or Loss From Farming. Form 1040ez 2013 Use this schedule to figure the net profit or loss from regular farming operations. Form 1040ez 2013 Income from farming reported on Schedule F includes amounts you receive from cultivating, operating, or managing a farm for gain or profit, either as owner or tenant. Form 1040ez 2013 This includes income from operating a stock, dairy, poultry, fish, fruit, or truck farm and income from operating a plantation, ranch, range, or orchard. Form 1040ez 2013 It also includes income from the sale of crop shares if you materially participate in producing the crop. Form 1040ez 2013 See Rents (Including Crop Shares) , later. Form 1040ez 2013 Income received from operating a nursery, which specializes in growing ornamental plants, is considered to be income from farming. Form 1040ez 2013 Income reported on Schedule F does not include gains or losses from sales or other dispositions of the following farm assets. Form 1040ez 2013 Land. Form 1040ez 2013 Depreciable farm equipment. Form 1040ez 2013 Buildings and structures. Form 1040ez 2013 Livestock held for draft, breeding, sport, or dairy purposes. Form 1040ez 2013 Gains and losses from most dispositions of farm assets are discussed in chapters 8 and 9. Form 1040ez 2013 Gains and losses from casualties, thefts, and condemnations are discussed in chapter 11. Form 1040ez 2013 Sales of Farm Products Where to report. Form 1040ez 2013    Table 3-1 shows where to report the sale of farm products on your tax return. Form 1040ez 2013 Schedule F. Form 1040ez 2013   Amounts received from the sales of products you raised on your farm for sale (or bought for resale), such as livestock, produce, or grains, are reported on Schedule F. Form 1040ez 2013 This includes money and the fair market value of any property or services you receive. Form 1040ez 2013 When you sell farm products bought for resale, your profit or loss is the difference between your selling price (money plus the fair market value of any property) and your basis in the item (usually the cost). Form 1040ez 2013 See chapter 6 for information on the basis of assets. Form 1040ez 2013 You generally report these amounts on Schedule F for the year you receive payment. Form 1040ez 2013 Example. Form 1040ez 2013 In 2012, you bought 20 feeder calves for $11,000 for resale. Form 1040ez 2013 You sold them in 2013 for $21,000. Form 1040ez 2013 You report the $21,000 sales price on Schedule F, line 1b, subtract your $11,000 basis on line 1d, and report the resulting $10,000 profit on line 1e. Form 1040ez 2013 Form 4797. Form 1040ez 2013   Sales of livestock held for draft, breeding, sport, or dairy purposes may result in ordinary or capital gains or losses, depending on the circumstances. Form 1040ez 2013 In either case, you should always report these sales on Form 4797 instead of Schedule F. Form 1040ez 2013 See Livestock under Ordinary or Capital Gain or Loss in chapter 8. Form 1040ez 2013 Animals you do not hold primarily for sale are considered business assets of your farm. Form 1040ez 2013 Table 3-1. Form 1040ez 2013 Where To Report Sales of Farm Products Item Sold Schedule F Form 4797 Farm products raised for sale X   Farm products bought for resale X   Farm assets not held primarily for sale, such as livestock held for draft, breeding, sport, or dairy purposes (bought or raised)   X Sale by agent. Form 1040ez 2013   If your agent sells your farm products, you have constructive receipt of the income when your agent receives payment and you must include the net proceeds from the sale in gross income for the year the agent receives payment. Form 1040ez 2013 This applies even if your agent pays you in a later year. Form 1040ez 2013 For a discussion on constructive receipt of income, see Cash Method under Accounting Methods in chapter 2. Form 1040ez 2013 Sales Caused by Weather-Related Conditions If you sell or exchange more livestock, including poultry, than you normally would in a year because of a drought, flood, or other weather-related condition, you may be able to postpone reporting the gain from the additional animals until the next year. Form 1040ez 2013 You must meet all the following conditions to qualify. Form 1040ez 2013 Your principal trade or business is farming. Form 1040ez 2013 You use the cash method of accounting. Form 1040ez 2013 You can show that, under your usual business practices, you would not have sold or exchanged the additional animals this year except for the weather-related condition. Form 1040ez 2013 The weather-related condition caused an area to be designated as eligible for assistance by the federal government. Form 1040ez 2013 Sales or exchanges made before an area became eligible for federal assistance qualify if the weather-related condition that caused the sale or exchange also caused the area to be designated as eligible for federal assistance. Form 1040ez 2013 The designation can be made by the President, the Department of Agriculture (or any of its agencies), or by other federal departments or agencies. Form 1040ez 2013 A weather-related sale or exchange of livestock (other than poultry) held for draft, breeding, or dairy purposes may be an involuntary conversion. Form 1040ez 2013 See Other Involuntary Conversions in chapter 11. Form 1040ez 2013 Usual business practice. Form 1040ez 2013   You must determine the number of animals you would have sold had you followed your usual business practice in the absence of the weather-related condition. Form 1040ez 2013 Do this by considering all the facts and circumstances, but do not take into account your sales in any earlier year for which you postponed the gain. Form 1040ez 2013 If you have not yet established a usual business practice, rely on the usual business practices of similarly situated farmers in your general region. Form 1040ez 2013 Connection with affected area. Form 1040ez 2013   The livestock does not have to be raised or sold in an area affected by a weather-related condition for the postponement to apply. Form 1040ez 2013 However, the sale must occur solely because of a weather-related condition that affected the water, grazing, or other requirements of the livestock. Form 1040ez 2013 This requirement generally will not be met if the costs of feed, water, or other requirements of the livestock affected by the weather-related condition are not substantial in relation to the total costs of holding the livestock. Form 1040ez 2013 Classes of livestock. Form 1040ez 2013   You must figure the amount to be postponed separately for each generic class of animals—for example, hogs, sheep, and cattle. Form 1040ez 2013 Do not separate animals into classes based on age, sex, or breed. Form 1040ez 2013 Amount to be postponed. Form 1040ez 2013   Follow these steps to figure the amount of gain to be postponed for each class of animals. Form 1040ez 2013 Divide the total income realized from the sale of all livestock in the class during the tax year by the total number of such livestock sold. Form 1040ez 2013 For this purpose, do not treat any postponed gain from the previous year as income received from the sale of livestock. Form 1040ez 2013 Multiply the result in (1) by the excess number of such livestock sold solely because of weather-related conditions. Form 1040ez 2013 Example. Form 1040ez 2013 You are a calendar year taxpayer and you normally sell 100 head of beef cattle a year. Form 1040ez 2013 As a result of drought, you sold 135 head during 2012. Form 1040ez 2013 You realized $70,200 from the sale. Form 1040ez 2013 On August 9, 2012, as a result of drought, the affected area was declared a disaster area eligible for federal assistance. Form 1040ez 2013 The income you can postpone until 2013 is $18,200 [($70,200 ÷ 135) × 35]. Form 1040ez 2013 How to postpone gain. Form 1040ez 2013   To postpone gain, attach a statement to your tax return for the year of the sale. Form 1040ez 2013 The statement must include your name and address and give the following information for each class of livestock for which you are postponing gain. Form 1040ez 2013 A statement that you are postponing gain under Internal Revenue Code (IRC) section 451(e). Form 1040ez 2013 Evidence of the weather-related conditions that forced the early sale or exchange of the livestock and the date, if known, on which an area was designated as eligible for assistance by the federal government because of weather-related conditions. Form 1040ez 2013 A statement explaining the relationship of the area affected by the weather-related condition to your early sale or exchange of the livestock. Form 1040ez 2013 The number of animals sold in each of the 3 preceding years. Form 1040ez 2013 The number of animals you would have sold in the tax year had you followed your normal business practice in the absence of weather-related conditions. Form 1040ez 2013 The total number of animals sold and the number sold because of weather-related conditions during the tax year. Form 1040ez 2013 A computation, as described above, of the income to be postponed for each class of livestock. Form 1040ez 2013   Generally, you must file the statement and the return by the due date of the return, including extensions. Form 1040ez 2013 However, for sales or exchanges treated as an involuntary conversion from weather-related sales of livestock in an area eligible for federal assistance (discussed in chapter 11), you can file this statement at any time during the replacement period. Form 1040ez 2013 For other sales or exchanges, if you timely filed your return for the year without postponing gain, you can still postpone gain by filing an amended return within 6 months of the due date of the return (excluding extensions). Form 1040ez 2013 Attach the statement to the amended return and write “Filed pursuant to section 301. Form 1040ez 2013 9100-2” at the top of the amended return. Form 1040ez 2013 File the amended return at the same address you filed the original return. Form 1040ez 2013 Once you have filed the statement, you can cancel your postponement of gain only with the approval of the IRS. Form 1040ez 2013 Rents (Including Crop Shares) The rent you receive for the use of your farmland is generally rental income, not farm income. Form 1040ez 2013 However, if you materially participate in farming operations on the land, the rent is farm income. Form 1040ez 2013 See Landlord Participation in Farming in chapter 12. Form 1040ez 2013 Pasture income and rental. Form 1040ez 2013   If you pasture someone else's livestock and take care of them for a fee, the income is from your farming business. Form 1040ez 2013 You must enter it as Other income on Schedule F. Form 1040ez 2013 If you simply rent your pasture for a flat cash amount without providing services, report the income as rent on Part I of Schedule E (Form 1040), Supplemental Income and Loss. Form 1040ez 2013 Crop Shares You must include rent you receive in the form of crop shares in income in the year you convert the shares to money or the equivalent of money. Form 1040ez 2013 It does not matter whether you use the cash method of accounting or an accrual method of accounting. Form 1040ez 2013 If you materially participate in operating a farm from which you receive rent in the form of crop shares or livestock, the rental income is included in self-employment income. Form 1040ez 2013 See Landlord Participation in Farming in chapter 12. Form 1040ez 2013 Report the rental income on Schedule F. Form 1040ez 2013 If you do not materially participate in operating the farm, report this income on Form 4835 and carry the net income or loss to Schedule E (Form 1040). Form 1040ez 2013 The income is not included in self-employment income. Form 1040ez 2013 Crop shares you use to feed livestock. Form 1040ez 2013   Crop shares you receive as a landlord and feed to your livestock are considered converted to money when fed to the livestock. Form 1040ez 2013 You must include the fair market value of the crop shares in income at that time. Form 1040ez 2013 You are entitled to a business expense deduction for the livestock feed in the same amount and at the same time you include the fair market value of the crop share as rental income. Form 1040ez 2013 Although these two transactions cancel each other for figuring adjusted gross income on Form 1040, they may be necessary to figure your self-employment tax. Form 1040ez 2013 See  chapter 12. Form 1040ez 2013 Crop shares you give to others (gift). Form 1040ez 2013   Crop shares you receive as a landlord and give to others are considered converted to money when you make the gift. Form 1040ez 2013 You must report the fair market value of the crop share as income, even though someone else receives payment for the crop share. Form 1040ez 2013 Example. Form 1040ez 2013 A tenant farmed part of your land under a crop-share arrangement. Form 1040ez 2013 The tenant harvested and delivered the crop in your name to an elevator company. Form 1040ez 2013 Before selling any of the crop, you instructed the elevator company to cancel your warehouse receipt and make out new warehouse receipts in equal amounts of the crop in the names of your children. Form 1040ez 2013 They sell their crop shares in the following year and the elevator company makes payments directly to your children. Form 1040ez 2013 In this situation, you are considered to have received rental income and then made a gift of that income. Form 1040ez 2013 You must include the fair market value of the crop shares in your income for the tax year you gave the crop shares to your children. Form 1040ez 2013 Crop share loss. Form 1040ez 2013   If you are involved in a rental or crop-share lease arrangement, any loss from these activities may be subject to the limits under the passive loss rules. Form 1040ez 2013 See Publication 925 for information on these rules. Form 1040ez 2013 Agricultural Program Payments You must include in income most government payments, such as those for approved conservation practices, direct payments, and counter-cyclical payments, whether you receive them in cash, materials, services, or commodity certificates. Form 1040ez 2013 However, you can exclude from income some payments you receive under certain cost-sharing conservation programs. Form 1040ez 2013 See Cost-Sharing Exclusion (Improvements) , later. Form 1040ez 2013 Report the agricultural program payment on the appropriate line of Schedule F, Part I. Form 1040ez 2013 Report the full amount even if you return a government check for cancellation, refund any of the payment you receive, or the government collects all or part of the payment from you by reducing the amount of some other payment or Commodity Credit Corporation (CCC) loan. Form 1040ez 2013 However, you can deduct the amount you refund or return or that reduces some other payment or loan to you. Form 1040ez 2013 Claim the deduction on Schedule F for the year of repayment or reduction. Form 1040ez 2013 Commodity Credit Corporation (CCC) Loans Generally, you do not report loans you receive as income. Form 1040ez 2013 However, if you pledge part or all of your production to secure a CCC loan, you can treat the loan as if it were a sale of the crop and report the loan proceeds as income in the year you receive them. Form 1040ez 2013 You do not need approval from the IRS to adopt this method of reporting CCC loans. Form 1040ez 2013 Once you report a CCC loan as income for the year received, you generally must report all CCC loans in that year and later years in the same way. Form 1040ez 2013 However, you can obtain for your tax year an automatic consent to change your method of accounting for loans received from the CCC, from including the loan amount in gross income for the tax year in which the loan is received to treating the loan amount as a loan. Form 1040ez 2013 For more information, see Part I of the Instructions for Form 3115 and Revenue Procedure 2008-52. Form 1040ez 2013 Revenue Procedure 2008-52, 2008-36 I. Form 1040ez 2013 R. Form 1040ez 2013 B. Form 1040ez 2013 587, is available at  www. Form 1040ez 2013 irs. Form 1040ez 2013 gov/irb/2008-36_IRB/ar09. Form 1040ez 2013 html. Form 1040ez 2013 You can request income tax withholding from CCC loan payments you receive. Form 1040ez 2013 Use Form W-4V, Voluntary Withholding Request. Form 1040ez 2013 See chapter 16 for information about ordering the form. Form 1040ez 2013 To elect to report a CCC loan as income, include the loan proceeds as income on Schedule F, line 7a, for the year you receive it. Form 1040ez 2013 Attach a statement to your return showing the details of the loan. Form 1040ez 2013 You must file the statement and the return by the due date of the return, including extensions. Form 1040ez 2013 If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Form 1040ez 2013 Attach the statement to the amended return and write “Filed pursuant to section 301. Form 1040ez 2013 9100-2” at the top of the return. Form 1040ez 2013 File the amended return at the same address you filed the original return. Form 1040ez 2013 When you make this election, the amount you report as income becomes your basis in the commodity. Form 1040ez 2013 See chapter 6 for information on the basis of assets. Form 1040ez 2013 If you later repay the loan, redeem the pledged commodity, and sell it, you report as income at the time of sale the sale proceeds minus your basis in the commodity. Form 1040ez 2013 If the sale proceeds are less than your basis in the commodity, you can report the difference as a loss on Schedule F. Form 1040ez 2013 If you forfeit the pledged crops to the CCC in full payment of the loan, the forfeiture is treated for tax purposes as a sale of the crops. Form 1040ez 2013 If you did not report the loan proceeds as income for the year you received them, you must include them in your income for the year of the forfeiture. Form 1040ez 2013 Form 1099-A. Form 1040ez 2013   If you forfeit pledged crops to the CCC in full payment of a loan, you may receive a Form 1099-A, Acquisition or Abandonment of Secured Property. Form 1040ez 2013 “CCC” should be shown in box 6. Form 1040ez 2013 The amount of any CCC loan outstanding when you forfeited your commodity should also be indicated on the form. Form 1040ez 2013 Market Gain Under the CCC nonrecourse marketing assistance loan program, your repayment amount for a loan secured by your pledge of an eligible commodity is generally based on the lower of the loan rate or the prevailing world market price for the commodity on the date of repayment. Form 1040ez 2013 If you repay the loan when the world price is lower, the difference between that repayment amount and the original loan amount is market gain. Form 1040ez 2013 Whether you use cash or CCC certificates to repay the loan, you will receive a Form 1099-G showing the market gain you realized. Form 1040ez 2013 Market gain should be reported as follows. Form 1040ez 2013 If you elected to include the CCC loan in income in the year you received it, do not include the market gain in income. Form 1040ez 2013 However, adjust the basis of the commodity for the amount of the market gain. Form 1040ez 2013 If you did not include the CCC loan in income in the year received, include the market gain in your income. Form 1040ez 2013 The following examples show how to report market gain. Form 1040ez 2013 Example 1. Form 1040ez 2013 Mike Green is a cotton farmer. Form 1040ez 2013 He uses the cash method of accounting and files his tax return on a calendar year basis. Form 1040ez 2013 He has deducted all expenses incurred in producing the cotton and has a zero basis in the commodity. Form 1040ez 2013 In 2012, Mike pledged 1,000 pounds of cotton as collateral for a CCC loan of $2,000 (a loan rate of $2. Form 1040ez 2013 00 per pound). Form 1040ez 2013 In 2013, he repaid the loan and redeemed the cotton for $1,500 when the world price was $1. Form 1040ez 2013 50 per pound (lower than the loan amount). Form 1040ez 2013 Later in 2013, he sold the cotton for $2,500. Form 1040ez 2013 The market gain on the redemption was $. Form 1040ez 2013 50 ($2. Form 1040ez 2013 00 – $1. Form 1040ez 2013 50) per pound. Form 1040ez 2013 Mike realized total market gain of $500 ($. Form 1040ez 2013 50 x 1,000 pounds). Form 1040ez 2013 How he reports this market gain and figures his gain or loss from the sale of the cotton depends on whether he included CCC loans in income in 2012. Form 1040ez 2013 Included CCC loan. Form 1040ez 2013   Mike reported the $2,000 CCC loan as income for 2012 on Schedule F, line 1b, so he is treated as if he sold the cotton for $2,000 when he pledged it and repurchased the cotton for $1,500 when he redeemed it. Form 1040ez 2013 The $500 market gain is not recognized on the redemption. Form 1040ez 2013 He reports it for 2013 as an agricultural program payment on Schedule F, line 4a, but does not include it as a taxable amount on line 4b. Form 1040ez 2013   Mike's basis in the cotton after he redeemed it was $1,500, which is the redemption (repurchase) price paid for the cotton. Form 1040ez 2013 His gain from the sale is $1,000 ($2,500 – $1,500). Form 1040ez 2013 He reports the $1,000 gain as income for 2013 on Schedule F, line 1b. Form 1040ez 2013 Excluded CCC loan. Form 1040ez 2013   Mike has income of $500 from market gain in 2013. Form 1040ez 2013 He reports it on Schedule F, lines 4a and 4b. Form 1040ez 2013 His basis in the cotton is zero, so his gain from its sale is $2,500. Form 1040ez 2013 He reports the $2,500 gain as income for 2013 on Schedule F, line 1b. Form 1040ez 2013 Example 2. Form 1040ez 2013 The facts are the same as in Example 1 except that, instead of selling the cotton for $2,500 after redeeming it, Mike entered into an option-to-purchase contract with a cotton buyer before redeeming the cotton. Form 1040ez 2013 Under that contract, Mike authorized the cotton buyer to pay the CCC loan on Mike's behalf. Form 1040ez 2013 In 2013, the cotton buyer repaid the loan for $1,500 and immediately exercised his option, buying the cotton for $1,500. Form 1040ez 2013 How Mike reports the $500 market gain on the redemption of the cotton and figures his gain or loss from its sale depends on whether he included CCC loans in income in 2012. Form 1040ez 2013 Included CCC loan. Form 1040ez 2013   As in Example 1, Mike is treated as though he sold the cotton for $2,000 when he pledged it and repurchased the cotton for $1,500 when the cotton buyer redeemed it for him. Form 1040ez 2013 The $500 market gain is not recognized on the redemption. Form 1040ez 2013 Mike reports it for 2013 as an agricultural program payment on Schedule F, line 4a, but does not include it as a taxable amount on line 4b. Form 1040ez 2013   Also, as in Example 1, Mike's basis in the cotton when the cotton buyer redeemed it for him was $1,500. Form 1040ez 2013 Mike has no gain or loss on its sale to the cotton buyer for that amount. Form 1040ez 2013 Excluded CCC loan. Form 1040ez 2013   As in Example 1, Mike has income of $500 from market gain in 2013. Form 1040ez 2013 He reports it on Schedule F, lines 4a and 4b. Form 1040ez 2013 His basis in the cotton is zero, so his gain from its sale is $1,500. Form 1040ez 2013 He reports the $1,500 gain as income for 2013 on Schedule F, line 1b. Form 1040ez 2013 Conservation Reserve Program (CRP) Under the Conservation Reserve Program (CRP), if you own or operate highly erodible or other specified cropland, you may enter into a long-term contract with the USDA, agreeing to convert to a less intensive use of that cropland. Form 1040ez 2013 You must include the annual rental payments and any one-time incentive payment you receive under the program on Schedule F, lines 4a and 4b. Form 1040ez 2013 Cost-share payments you receive may qualify for the cost-sharing exclusion. Form 1040ez 2013 See Cost-Sharing Exclusion (Improvements) , later. Form 1040ez 2013 CRP payments are reported to you on Form 1099-G. Form 1040ez 2013 Individuals who are receiving Social Security retirement or disability benefits may exclude CRP payments when calculating self-employment tax. Form 1040ez 2013 See the instructions for Schedule SE (Form 1040). Form 1040ez 2013 Crop Insurance and Crop Disaster Payments You must include in income any crop insurance proceeds you receive as the result of physical crop damage or reduction of crop revenue, or both. Form 1040ez 2013 You generally include them in the year you receive them. Form 1040ez 2013 Treat as crop insurance proceeds the crop disaster payments you receive from the federal government as the result of destruction or damage to crops, or the inability to plant crops, because of drought, flood, or any other natural disaster. Form 1040ez 2013 You can request income tax withholding from crop disaster payments you receive from the federal government. Form 1040ez 2013 Use Form W-4V, Voluntary Withholding Request. Form 1040ez 2013 See chapter 16 for information about ordering the form. Form 1040ez 2013 Election to postpone reporting until the following year. Form 1040ez 2013   You can postpone reporting some or all crop insurance proceeds as income until the year following the year the physical damage occurred if you meet all the following conditions. Form 1040ez 2013 You use the cash method of accounting. Form 1040ez 2013 You receive the crop insurance proceeds in the same tax year the crops are damaged. Form 1040ez 2013 You can show that under your normal business practice you would have included income from the damaged crops in any tax year following the year the damage occurred. Form 1040ez 2013   Deferral is not permitted for proceeds received from revenue insurance policies. Form 1040ez 2013   To postpone reporting some or all crop insurance proceeds received in 2013, report the amount you received on Schedule F, line 6a, but do not include it as a taxable amount on line 6b. Form 1040ez 2013 Check the box on line 8c and attach a statement to your tax return. Form 1040ez 2013 The statement must include your name and address and contain the following information. Form 1040ez 2013 A statement that you are making an election under IRC section 451(d) and Regulations section 1. Form 1040ez 2013 451-6. Form 1040ez 2013 The specific crop or crops physically destroyed or damaged. Form 1040ez 2013 A statement that under your normal business practice you would have included income from some or all of the destroyed or damaged crops in gross income for a tax year following the year the crops were destroyed or damaged. Form 1040ez 2013 The cause of the physical destruction or damage and the date or dates it occurred. Form 1040ez 2013 The total payments you received from insurance carriers, itemized for each specific crop, and the date you received each payment. Form 1040ez 2013 The name of each insurance carrier from whom you received payments. Form 1040ez 2013   One election covers all crops representing a single trade or business. Form 1040ez 2013 If you have more than one farming business, make a separate election for each one. Form 1040ez 2013 For example, if you operate two separate farms on which you grow different crops and you keep separate books for each farm, you should make two separate elections to postpone reporting insurance proceeds you receive for crops grown on each of your farms. Form 1040ez 2013   An election is binding for the year unless the IRS approves your request to change it. Form 1040ez 2013 To request IRS approval to change your election, write to the IRS at the following address giving your name, address, identification number, the year you made the election, and your reasons for wanting to change it. Form 1040ez 2013 Ogden Submission Processing Center P. Form 1040ez 2013 O. Form 1040ez 2013 Box 9941 Ogden, UT 84409 Feed Assistance and Payments The Disaster Assistance Act of 1988 authorizes programs to provide feed assistance, reimbursement payments, and other benefits to qualifying livestock producers if the Secretary of Agriculture determines that, because of a natural disaster, a livestock emergency exists. Form 1040ez 2013 These programs include partial reimbursement for the cost of purchased feed and for certain transportation expenses. Form 1040ez 2013 They also include the donation or sale at a below-market price of feed owned by the Commodity Credit Corporation. Form 1040ez 2013 Include in income: The market value of donated feed, The difference between the market value and the price you paid for feed you buy at below-market prices, and Any cost reimbursement you receive. Form 1040ez 2013 You must include these benefits in income in the year you receive them. Form 1040ez 2013 You cannot postpone reporting them under the rules explained earlier for weather-related sales of livestock or crop insurance proceeds. Form 1040ez 2013 Report the benefits on Schedule F, Part I, as agricultural program payments. Form 1040ez 2013 You can usually take a current deduction for the same amount as a feed expense. Form 1040ez 2013 Cost-Sharing Exclusion (Improvements) You can exclude from your income part or all of a payment you receive under certain federal or state cost-sharing conservation, reclamation, and restoration programs. Form 1040ez 2013 A payment is any economic benefit you get as a result of an improvement. Form 1040ez 2013 However, this exclusion applies only to that part of a payment that meets all three of the following tests. Form 1040ez 2013 It was for a capital expense. Form 1040ez 2013 You cannot exclude any part of a payment for an expense you can deduct in the year you pay or incur it. Form 1040ez 2013 You must include the payment for a deductible expense in income, and you can take any offsetting deduction. Form 1040ez 2013 See chapter 5 for information on deducting soil and water conservation expenses. Form 1040ez 2013 It does not substantially increase your annual income from the property for which it is made. Form 1040ez 2013 An increase in annual income is substantial if it is more than the greater of the following amounts. Form 1040ez 2013 10% of the average annual income derived from the affected property before receiving the improvement. Form 1040ez 2013 $2. Form 1040ez 2013 50 times the number of affected acres. Form 1040ez 2013 The Secretary of Agriculture certified that the payment was primarily made for conserving soil and water resources, protecting or restoring the environment, improving forests, or providing a habitat for wildlife. Form 1040ez 2013 Qualifying programs. Form 1040ez 2013   If the three tests listed above are met, you can exclude part or all of the payments from the following programs. Form 1040ez 2013 The rural clean water program authorized by the Federal Water Pollution Control Act. Form 1040ez 2013 The rural abandoned mine program authorized by the Surface Mining Control and Reclamation Act of 1977. Form 1040ez 2013 The water bank program authorized by the Water Bank Act. Form 1040ez 2013 The emergency conservation measures program authorized by title IV of the Agricultural Credit Act of 1978. Form 1040ez 2013 The agricultural conservation program authorized by the Soil Conservation and Domestic Allotment Act. Form 1040ez 2013 The great plains conservation program authorized by the Soil Conservation and Domestic Policy Act. Form 1040ez 2013 The resource conservation and development program authorized by the Bankhead-Jones Farm Tenant Act and by the Soil Conservation and Domestic Allotment Act. Form 1040ez 2013 Certain small watershed programs, listed later. Form 1040ez 2013 Any program of a state, possession of the United States, a political subdivision of any of these, or of the District of Columbia under which payments are made to individuals primarily for conserving soil, protecting or restoring the environment, improving forests, or providing a habitat for wildlife. Form 1040ez 2013 Several state programs have been approved. Form 1040ez 2013 For information about the status of those programs, contact the state offices of the Farm Service Agency (FSA) and the Natural Resources and Conservation Service (NRCS). Form 1040ez 2013 Small watershed programs. Form 1040ez 2013   If the three tests listed earlier are met, you can exclude part or all of the payments you receive under the following programs for improvements made in connection with a watershed. Form 1040ez 2013 The programs under the Watershed Protection and Flood Prevention Act. Form 1040ez 2013 The flood prevention projects under the Flood Control Act of 1944. Form 1040ez 2013 The Emergency Watershed Protection Program under the Flood Control Act of 1950. Form 1040ez 2013 Certain programs under the Colorado River Basin Salinity Control Act. Form 1040ez 2013 The Wetlands Reserve Program authorized by the Food Security Act of 1985, the Federal Agriculture Improvement and Reform Act of 1996 and the Farm Security and Rural Investment Act of 2002. Form 1040ez 2013 The Environmental Quality Incentives Program (EQIP) authorized by the Federal Agriculture Improvement and Reform Act of 1996. Form 1040ez 2013 The Wildlife Habitat Incentives Program (WHIP) authorized by the Federal Agriculture Improvement and Reform Act of 1996. Form 1040ez 2013 The Soil and Water Conservation Assistance Program authorized by the Agricultural Risk Protection Act of 2000. Form 1040ez 2013 The Agricultural Management Assistance Program authorized by the Agricultural Risk Protection Act of 2000. Form 1040ez 2013 The Conservation Reserve Program authorized by the Food Security Act of 1985 and the Federal Agriculture Improvement and Reform Act of 1996. Form 1040ez 2013 The Forest Land Enhancement Program authorized under the Farm Security and Rural Investment Act of 2002. Form 1040ez 2013 The Conservation Security Program authorized by the Food Security Act of 1985. Form 1040ez 2013 The Forest Health Protection Program (FHPP) authorized by the Cooperative Forestry Assistance Act of 1978. Form 1040ez 2013 Income realized. Form 1040ez 2013   The gross income you realize upon getting an improvement under these cost-sharing programs is the value of the improvement reduced by the sum of the excludable portion and your share of the cost of the improvement (if any). Form 1040ez 2013 Value of the improvement. Form 1040ez 2013   You determine the value of the improvement by multiplying its fair market value (defined in chapter 6) by a fraction. Form 1040ez 2013 The numerator of the fraction is the total cost of the improvement (all amounts paid either by you or by the government for the improvement) reduced by the sum of the following items. Form 1040ez 2013 Any government payments under a program not listed earlier. Form 1040ez 2013 Any part of a government payment under a program listed earlier that the Secretary of Agriculture has not certified as primarily for conservation. Form 1040ez 2013 Any government payment to you for rent or for your services. Form 1040ez 2013 The denominator of the fraction is the total cost of the improvement. Form 1040ez 2013 Excludable portion. Form 1040ez 2013   The excludable portion is the present fair market value of the right to receive annual income from the affected acreage of the greater of the following amounts. Form 1040ez 2013 10% of the prior average annual income from the affected acreage. Form 1040ez 2013 The prior average annual income is the average of the gross receipts from the affected acreage for the last 3 tax years before the tax year in which you started to install the improvement. Form 1040ez 2013 $2. Form 1040ez 2013 50 times the number of affected acres. Form 1040ez 2013 The calculation of present fair market value of the right to receive annual income is too complex to discuss in this publication. Form 1040ez 2013 You may need to consult your tax advisor for assistance. Form 1040ez 2013 Example. Form 1040ez 2013 One hundred acres of your land was reclaimed under a rural abandoned mine program contract with the Natural Resources Conservation Service of the USDA. Form 1040ez 2013 The total cost of the improvement was $500,000. Form 1040ez 2013 The USDA paid $490,000. Form 1040ez 2013 You paid $10,000. Form 1040ez 2013 The value of the cost-sharing improvement is $15,000. Form 1040ez 2013 The present fair market value of the right to receive the annual income described in (1) above is $1,380, and the present fair market value of the right to receive the annual income described in (2) is $1,550. Form 1040ez 2013 The excludable portion is the greater amount, $1,550. Form 1040ez 2013 You figure the amount to include in gross income as follows: Value of cost-sharing improvement $15,000 Minus: Your share $10,000     Excludable portion 1,550 11,550 Amount included in income $ 3,450 Effects of the exclusion. Form 1040ez 2013   When you figure the basis of property you acquire or improve using cost-sharing payments excluded from income, subtract the excluded payments from your capital costs. Form 1040ez 2013 Any payment excluded from income is not part of your basis. Form 1040ez 2013 In the example above, the increase in basis is $500,000 – $490,000 + $3,450 = $13,450. Form 1040ez 2013   In addition, you cannot take depreciation, amortization, or depletion deductions for the part of the cost of the property for which you receive cost-sharing payments you exclude from income. Form 1040ez 2013 How to report the exclusion. Form 1040ez 2013   Attach a statement to your tax return (or amended return) for the tax year you receive the last government payment for the improvement. Form 1040ez 2013 The statement must include the following information. Form 1040ez 2013 The dollar amount of the cost funded by the government payment. Form 1040ez 2013 The value of the improvement. Form 1040ez 2013 The amount you are excluding. Form 1040ez 2013   Report the total cost-sharing payments you receive on Schedule F, line 4a, and the taxable amount on line 4b. Form 1040ez 2013 Recapture. Form 1040ez 2013   If you dispose of the property within 20 years after you received the excluded payments, you must treat as ordinary income part or all of the cost-sharing payments you excluded. Form 1040ez 2013 In the above example, if the 100 acres were sold within 20 years of the exclusion for a gain of $2,000, $1,550 of that amount would be included in ordinary income. Form 1040ez 2013 You must report the recapture on Form 4797. Form 1040ez 2013 See Section 1255 property under Other Gains in chapter 9. Form 1040ez 2013 Electing not to exclude payments. Form 1040ez 2013   You can elect not to exclude all or part of any payments you receive under these programs. Form 1040ez 2013 If you make this election for all of these payments, none of the above restrictions and rules apply. Form 1040ez 2013 You must make this election by the due date, including extensions, for filing your return. Form 1040ez 2013 In the example above, an election not to exclude payments results in $5,000 included in income and a $15,000 increase in basis. Form 1040ez 2013 If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Form 1040ez 2013 Write “Filed pursuant to section 301. Form 1040ez 2013 9100-2” at the top of the amended return and file it at the same address you filed the original return. Form 1040ez 2013 Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 2008 The Farm Security and Rural Investment Act of 2002 created two new types of payments—direct and counter-cyclical payments. Form 1040ez 2013 You must include these payments on Schedule F, lines 4a and 4b. Form 1040ez 2013 The Food, Conservation, and Energy Act of 2008 provides for direct and counter-cyclical payments (DCP) as well as Average Crop Revenue Election (ACRE) payments. Form 1040ez 2013 You must include these payments on Schedule F, lines 6a and 6b. Form 1040ez 2013 The American Taxpayer Relief Act of 2012, enacted on January 2, 2013, amends the Food, Conservation, and Energy Act of 2008 and provided a one-year extension for these payments. Form 1040ez 2013 Tobacco Quota Buyout Program Payments The Fair and Equitable Tobacco Reform Act of 2004, title VI of the American Jobs Creation Act of 2004, terminated the tobacco marketing quota program and the tobacco price support program. Form 1040ez 2013 As a result, the USDA offered to enter into contracts with eligible tobacco quota holders and growers to provide compensation for the lost value of the quotas and related price support. Form 1040ez 2013 If you are an eligible tobacco quota holder, your contract entitles you to receive total payments of $7 per pound of quota in 10 equal annual payments in fiscal years 2005 through 2014. Form 1040ez 2013 If you are an eligible tobacco grower, your contract entitles you to receive total payments of up to $3 per pound of quota in 10 equal annual payments in fiscal years 2005 through 2014. Form 1040ez 2013 Tobacco Quota Holders Contract payments you receive are considered proceeds from a sale of your tobacco quota as of the date on which you and the USDA enter into the contract. Form 1040ez 2013 Your taxable gain or loss is the total amount received for your quota reduced by any amount treated as interest (discussed below), over your adjusted basis. Form 1040ez 2013 The gain or loss is capital or ordinary depending on how you used the quota. Form 1040ez 2013 See Capital or ordinary gain or loss , later. Form 1040ez 2013 Report the entire gain on your income tax return for the tax year that includes the date you entered into the contract if you elect not to use the installment method. Form 1040ez 2013 Adjusted basis. Form 1040ez 2013   The adjusted basis of your quota is determined differently depending on how you obtained the quota. Form 1040ez 2013 The basis of a quota derived from an original grant by the federal government is zero. Form 1040ez 2013 The basis of a purchased quota is the purchase price. Form 1040ez 2013 The basis of a quota received as a gift is generally the same as the donor's basis. Form 1040ez 2013 However, under certain circumstances, the basis is increased by the amount of gift taxes paid. Form 1040ez 2013 If the basis is greater than the fair market value of the quota at the time of the gift, the basis for determining loss is the fair market value. Form 1040ez 2013 The basis of an inherited quota is generally the fair market value of the quota at the time of the decedent's death. Form 1040ez 2013 Reduction of basis. Form 1040ez 2013   You are required to reduce the basis of your tobacco quota by the following amounts. Form 1040ez 2013 Deductions you took for amortization, depletion, or depreciation. Form 1040ez 2013 Amounts you previously deducted as a loss because of a reduction in the number of pounds of tobacco allowable under the quota. Form 1040ez 2013 The entire cost of a purchased quota you deducted in an earlier year (which reduces your basis to zero). Form 1040ez 2013 Amount treated as interest. Form 1040ez 2013   You must reduce your tobacco quota buyout program payment by the amount treated as interest. Form 1040ez 2013 The interest is reportable as ordinary income. Form 1040ez 2013 If payments total $3,000 or less, your total quota buyout program payment does not include any amount treated as interest and you are not required to reduce the total payment you receive. Form 1040ez 2013   In all other cases, a portion of each payment may be treated as interest for federal tax purposes. Form 1040ez 2013 You may be required to reduce your total quota buyout program payment before you calculate your gain or loss. Form 1040ez 2013 For more information, see Notice 2005-57, 2005-32 I. Form 1040ez 2013 R. Form 1040ez 2013 B. Form 1040ez 2013 267, available at www. Form 1040ez 2013 irs. Form 1040ez 2013 gov/irb/2005-32_IRB/ar13. Form 1040ez 2013 html. Form 1040ez 2013 Installment method. Form 1040ez 2013   You may use the installment method to report a gain if you receive at least one payment after the close of your tax year. Form 1040ez 2013 Under the installment method, a portion of the gain is taken into account in each year in which a payment is received. Form 1040ez 2013 See chapter 10 for more information. Form 1040ez 2013 Capital or ordinary gain or loss. Form 1040ez 2013   Whether your gain or loss is ordinary or capital depends on how you used the quota. Form 1040ez 2013 Quota used in the trade or business of farming. Form 1040ez 2013   If you used the quota in the trade or business of farming and you held it for more than one year, you report the transaction as a section 1231 transaction on Form 4797. Form 1040ez 2013 See Section 1231 transactions in the Instructions for Form 4797 for detailed information on reporting section 1231 transactions. Form 1040ez 2013 Quota held for investment. Form 1040ez 2013   If you held the quota for investment purposes, any gain or loss is capital gain or loss. Form 1040ez 2013 The same result also applies if you held the quota for the production of income, though not connected with a trade or business. Form 1040ez 2013 Gain treated as ordinary income. Form 1040ez 2013   If you previously deducted any of the following items, some or all of the capital gain must be recharacterized and reported as ordinary income. Form 1040ez 2013 Any resulting capital gain is taxed as ordinary income up to the amount previously deducted. Form 1040ez 2013 The cost of acquiring a quota. Form 1040ez 2013 Amounts for amortization, depletion, or depreciation. Form 1040ez 2013 Amounts to reflect a reduction in the quota pounds. Form 1040ez 2013   You should include the ordinary income on your return for the tax year even if you use the installment method to report the remainder of the gain. Form 1040ez 2013 Self-employment income. Form 1040ez 2013   The tobacco quota buyout payments are not self-employment income. Form 1040ez 2013 Income averaging for farmers. Form 1040ez 2013   The gain or loss resulting from the quota payments does not qualify for income averaging. Form 1040ez 2013 A tobacco quota is considered an interest in land. Form 1040ez 2013 Income averaging is not available for gain or loss arising from the sale or other disposition of land. Form 1040ez 2013 Involuntary conversion. Form 1040ez 2013   The buyout of the tobacco quota is not an involuntary conversion. Form 1040ez 2013 Form 1099-S. Form 1040ez 2013   A tobacco quota is considered an interest in land, so the USDA will generally report the total amount you receive under a contract on Form 1099-S, Proceeds From Real Estate Transactions, if the amount is $600 or more. Form 1040ez 2013 The USDA will generally report any portion of a payment treated as interest of $600 or more to you on Form 1099-INT, Interest Income, for the year in which the payment is made. Form 1040ez 2013 Like-kind exchange of quota. Form 1040ez 2013   You may postpone reporting the gain or loss from tobacco quota buyout payments by entering into a like-kind exchange if you comply with the requirements of section 1031 and the regulations thereunder. Form 1040ez 2013 See Notice 2005-57 for more information. Form 1040ez 2013 Tobacco Growers Contract payments you receive are determined by reference to the amount of quota under which you produced (or planted) quota tobacco during the 2002, 2003, and 2004 tobacco marketing years and are prorated based on the number of years that you produced (or planted) quota tobacco during those years. Form 1040ez 2013 Taxation of payments to tobacco growers. Form 1040ez 2013   Payments to growers replace ordinary income that would have been earned had the tobacco marketing quota and price support programs continued. Form 1040ez 2013 Individuals will generally report the payments as an Agricultural program payment on Schedule F. Form 1040ez 2013 If you are a landowner who does not materially participate in the operation or management of the farm and are receiving the grower payment because your farm rental income is based on the tobacco grown by a tenant, the grower payment should be reported on Form 4835. Form 1040ez 2013 Self-employment income. Form 1040ez 2013   Payments to growers generally represent self-employment income. Form 1040ez 2013 If the grower is an individual carrying on a trade or business and deriving income (other than farm rental income properly reported on Form 4835) from that trade or business, the payments are net earnings from self-employment. Form 1040ez 2013 Income averaging for farmers. Form 1040ez 2013   Payments to growers who are individuals qualify for farm income averaging. Form 1040ez 2013 Form 1099-G. Form 1040ez 2013   If the amount received in a taxable year is $600 or more, the amount will generally be reported by the USDA on a Form 1099-G. Form 1040ez 2013 Other Payments You must include most other government program payments in income. Form 1040ez 2013 Fertilizer and Lime Include in income the value of fertilizer or lime you receive under a government program. Form 1040ez 2013 How to claim the offsetting deduction is explained under Fertilizer and Lime in chapter 4. Form 1040ez 2013 Improvements If government payments are based on improvements, such as a pollution control facility, you must include them in income. Form 1040ez 2013 You must also capitalize the full cost of the improvement. Form 1040ez 2013 Since you have included the payments in income, they do not reduce your basis. Form 1040ez 2013 However, see Cost-Sharing Exclusion (Improvements) , earlier, for additional information. Form 1040ez 2013 National Tobacco Growers' Settlement Trust Fund Payments If you are a producer, landowner, or tobacco quota owner who receives money from the National Tobacco Growers' Settlement Trust Fund, you must report those payments as income. Form 1040ez 2013 You should receive a Form 1099-MISC, Miscellaneous Income, that shows the payment amount. Form 1040ez 2013 If you produce a tobacco crop, report the payments as income from farming on your Schedule F. Form 1040ez 2013 If you are a landowner or tobacco quota owner who leases tobacco-related property but you do not produce the crop, report the payments as farm rental income on Form 4835. Form 1040ez 2013 Payment to More Than One Person The USDA reports program payments to the IRS. Form 1040ez 2013 It reports a program payment intended for more than one person as having been paid to the person whose identification number is on record for that payment (payee of record). Form 1040ez 2013 If you, as the payee of record, receive a program payment belonging to someone else, such as your landlord, the amount belonging to the other person is a nominee distribution. Form 1040ez 2013 You should file Form 1099-G to report the identity of the actual recipient to the IRS. Form 1040ez 2013 You should also give this information to the recipient. Form 1040ez 2013 You can avoid the inconvenience of unnecessary inquiries about the identity of the recipient if you file this form. Form 1040ez 2013 Report the total amount reported to you as the payee of record on Schedule F, line 4a or 6a. Form 1040ez 2013 However, do not report as a taxable amount on line 4b or 6b any amount belonging to someone else. Form 1040ez 2013 See chapter 16 for information about ordering Form 1099-G. Form 1040ez 2013 Income From Cooperatives If you buy farm supplies through a cooperative, you may receive income from the cooperative in the form of patronage dividends (refunds). Form 1040ez 2013 If you sell your farm products through a cooperative, you may receive either patronage dividends or a per-unit retain certificate, explained later, from the cooperative. Form 1040ez 2013 Form 1099-PATR. Form 1040ez 2013   The cooperative will report the income to you on Form 1099-PATR or a similar form and send a copy to the IRS. Form 1040ez 2013 Form 1099-PATR may also show an alternative minimum tax adjustment that you must include on Form 6251, Alternative Minimum Tax—Individuals, if you are required to file the form. Form 1040ez 2013 For information on the alternative minimum tax, see the Instructions for Form 6251. Form 1040ez 2013 Patronage Dividends You generally report patronage dividends as income on Schedule F, lines 3a and 3b, for the tax year you receive them. Form 1040ez 2013 They include the following items. Form 1040ez 2013 Money paid as a patronage dividend, including cash advances received (for example, from a marketing cooperative). Form 1040ez 2013 The stated dollar value of qualified written notices of allocation. Form 1040ez 2013 The fair market value of other property. Form 1040ez 2013 Do not report as income on line 3b any patronage dividends you receive from expenditures that were not deductible, such as buying personal or family items, capital assets, or depreciable property. Form 1040ez 2013 You must reduce the cost or other basis of these items by the amount of such patronage dividends received. Form 1040ez 2013 Personal items include fuel purchased for personal use, basic local telephone service, and personal long distance calls. Form 1040ez 2013 If you cannot determine what the dividend is for, report it as income on lines 3a and 3b. Form 1040ez 2013 Qualified written notice of allocation. Form 1040ez 2013   If you receive a qualified written notice of allocation as part of a patronage dividend, you must generally include its stated dollar value in your income on Schedule F, lines 3a and 3b, in the year you receive it. Form 1040ez 2013 A written notice of allocation is qualified if at least 20% of the patronage dividend is paid in money or by qualified check and either of the following conditions is met. Form 1040ez 2013 The notice must be redeemable in cash for at least 90 days after it is issued, and you must have received a written notice of your right of redemption at the same time as the written notice of allocation. Form 1040ez 2013 You must have agreed to include the stated dollar value in income in the year you receive the notice by doing one of the following. Form 1040ez 2013 Signing and giving a written agreement to the cooperative. Form 1040ez 2013 Getting or keeping membership in the cooperative after it adopted a bylaw providing that membership constitutes agreement. Form 1040ez 2013 The cooperative must notify you in writing of this bylaw and give you a copy. Form 1040ez 2013 Endorsing and cashing a qualified check paid as part of the same patronage dividend. Form 1040ez 2013 You must cash the check by the 90th day after the close of the payment period for the cooperative's tax year for which the patronage dividend was paid. Form 1040ez 2013 Qualified check. Form 1040ez 2013   A qualified check is any instrument that is redeemable in money and meets both of the following requirements. Form 1040ez 2013 It is part of a patronage dividend that also includes a qualified written notice of allocation for which you met condition 2(c), above. Form 1040ez 2013 It is imprinted with a statement that endorsing and cashing it constitutes the payee's consent to include in income the stated dollar value of any written notices of allocation paid as part of the same patronage dividend. Form 1040ez 2013 Loss on redemption. Form 1040ez 2013   You can deduct on Schedule F, Part II, any loss incurred on the redemption of a qualified written notice of allocation you received in the ordinary course of your farming business. Form 1040ez 2013 The loss is the difference between the stated dollar amount of the qualified written notice you included in income and the amount you received when you redeemed it. Form 1040ez 2013 Nonqualified notice of allocation. Form 1040ez 2013   Do not include the stated dollar value of any nonqualified notice of allocation in income when you receive it. Form 1040ez 2013 Your basis in the notice is zero. Form 1040ez 2013 You must include in income for the tax year of disposition any amount you receive from its sale, redemption, or other disposition. Form 1040ez 2013 Report that amount, up to the stated dollar value of the notice, on Schedule F, lines 3a and 3b. Form 1040ez 2013 However, do not include that amount in your income if the notice resulted from buying or selling capital assets or depreciable property or from buying personal items, as explained in the following discussions. Form 1040ez 2013   If the amount you receive is more than the stated dollar value of the notice, report the excess as the type of income it represents. Form 1040ez 2013 For example, if it represents interest income, report it on your return as interest. Form 1040ez 2013 Buying or selling capital assets or depreciable property. Form 1040ez 2013   Do not include in income patronage dividends from buying capital assets or depreciable property used in your business. Form 1040ez 2013 You must, however, reduce the basis of these assets by the dividends. Form 1040ez 2013 This reduction is taken into account as of the first day of the tax year in which the dividends are received. Form 1040ez 2013 If the dividends are more than your unrecovered basis, reduce the unrecovered basis to zero and include the difference on Schedule F, line 3a, for the tax year you receive them. Form 1040ez 2013   This rule and the exceptions explained below also apply to amounts you receive from the sale, redemption, or other disposition of a nonqualified notice of allocation that resulted from buying or selling capital assets or depreciable property. Form 1040ez 2013 Example. Form 1040ez 2013 On July 1, 2012, Mr. Form 1040ez 2013 Brown, a patron of a cooperative association, bought a machine for his dairy farm business from the association for $2,900. Form 1040ez 2013 The machine has a life of 7 years under MACRS (as provided in the Table of Class Lives and Recovery Periods in Appendix B of Publication 946, Depreciation and Amortization). Form 1040ez 2013 Mr. Form 1040ez 2013 Brown files his return on a calendar year basis. Form 1040ez 2013 For 2012, he claimed a depreciation deduction of $311, using the 10. Form 1040ez 2013 71% depreciation rate from the 150% declining balance, half-year convention table (shown in Table A-14 in Appendix A of Publication 946). Form 1040ez 2013 On July 2, 2013, the cooperative association paid Mr. Form 1040ez 2013 Brown a $300 cash patronage dividend for buying the machine. Form 1040ez 2013 Mr. Form 1040ez 2013 Brown adjusts the basis of the machine and figures his depreciation deduction for 2013 (and later years) as follows. Form 1040ez 2013 Cost of machine on July 1, 2012 $2,900 Minus: 2012 depreciation $311     2013 cash dividend 300 611 Adjusted basis for  depreciation for 2013: $2,289 Depreciation rate: 1 ÷ 6½ (remaining recovery period as of 1/1/2012) = 15. Form 1040ez 2013 38% × 1. Form 1040ez 2013 5 = 23. Form 1040ez 2013 07% Depreciation deduction for 2013 ($2,289 × 23. Form 1040ez 2013 07%) $528 Exceptions. Form 1040ez 2013   If the dividends are for buying or selling capital assets or depreciable property you did not own at any time during the year you received the dividends, you must include them on Schedule F, lines 3a and 3b, unless one of the following rules applies. Form 1040ez 2013 If the dividends relate to a capital asset you held for more than 1 year for which a loss was or would have been deductible, treat them as gain from the sale or exchange of a capital asset held for more than 1 year. Form 1040ez 2013 If the dividends relate to a capital asset for which a loss was not or would not have been deductible, do not report them as income (ordinary or capital gain). Form 1040ez 2013   If the dividends are for selling capital assets or depreciable property during the year you received the dividends, treat them as an additional amount received on the sale. Form 1040ez 2013 Personal purchases. Form 1040ez 2013   Because you cannot deduct the cost of personal, living, or family items, such as supplies, equipment, or services not related to the production of farm income, you can omit from the taxable amount of patronage dividends on Schedule F, line 3b, any dividends from buying those items (and you must reduce the cost or other basis of those items by the amount of the dividends). Form 1040ez 2013 This rule also applies to amounts you receive from the sale, redemption, or other disposition of a nonqualified written notice of allocation resulting from these purchases. Form 1040ez 2013 Per-Unit Retain Certificates A per-unit retain certificate is any written notice that shows the stated dollar amount of a per-unit retain allocation made to you by the cooperative. Form 1040ez 2013 A per-unit retain allocation is an amount paid to patrons for products sold for them that is fixed without regard to the net earnings of the cooperative. Form 1040ez 2013 These allocations can be paid in money, other property, or qualified certificates. Form 1040ez 2013 Per-unit retain certificates issued by a cooperative generally receive the same tax treatment as patronage dividends, discussed earlier. Form 1040ez 2013 Qualified certificates. Form 1040ez 2013   Qualified per-unit retain certificates are those issued to patrons who have agreed to include the stated dollar amount of these certificates in income in the year of receipt. Form 1040ez 2013 The agreement may be made in writing or by getting or keeping membership in a cooperative whose bylaws or charter states that membership constitutes agreement. Form 1040ez 2013 If you receive qualified per-unit retain certificates, include the stated dollar amount of the certificates in income on Schedule F, lines 3a and 3b, for the tax year you receive them. Form 1040ez 2013 Nonqualified certificates. Form 1040ez 2013   Do not include the stated dollar value of a nonqualified per-unit retain certificate in income when you receive it. Form 1040ez 2013 Your basis in the certificate is zero. Form 1040ez 2013 You must include in income any amount you receive from its sale, redemption, or other disposition. Form 1040ez 2013 Report the amount you receive from the disposition as ordinary income on Schedule F, lines 3a and 3b, for the tax year of disposition. Form 1040ez 2013 Cancellation of Debt This section explains the general rule for including canceled debt in income and the exceptions to the general rule. Form 1040ez 2013 For more information on canceled debt, see Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Form 1040ez 2013 General Rule Generally, if your debt is canceled or forgiven, other than as a gift or bequest to you, you must include the canceled amount in gross income for tax purposes. Form 1040ez 2013 Discharge of qualified farm indebtedness (defined below) is one of the exceptions to the general rule. Form 1040ez 2013 It is excluded from taxable income (see Exclusions , later). Form 1040ez 2013 Report the canceled amount on Schedule F, line 8, if you incurred the debt in your farming business. Form 1040ez 2013 If the debt is a nonbusiness debt, report the canceled amount as other income on Form 1040, line 21. Form 1040ez 2013 Election to defer income from discharge of indebtedness. Form 1040ez 2013   You can elect to defer income from a discharge of business indebtedness that occurred after 2008 and before 2011. Form 1040ez 2013 Generally, if the election is made, the deferred income is included in gross income ratably over a 5-year period beginning in 2014 (for calendar year taxpayers) and the exclusions listed below do not apply. Form 1040ez 2013 See IRC section 108(i) and Publication 4681 for details. Form 1040ez 2013 Form 1099-C. Form 1040ez 2013   If a federal agency, financial institution, credit union, finance company, or credit card company cancels or forgives your debt of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. Form 1040ez 2013 The amount of debt canceled is shown in box 2. Form 1040ez 2013 Exceptions The following discussion covers some exceptions to the general rule for canceled debt. Form 1040ez 2013 These exceptions apply before the exclusions discussed below. Form 1040ez 2013 Price reduced after purchase. Form 1040ez 2013   If your purchase of property was financed by the seller and the seller reduces the amount of the debt at a time when you are not insolvent and the reduction does not occur in a chapter 11 bankruptcy case, the amount of the debt reduction will be treated as a reduction in the purchase price of the property. Form 1040ez 2013 Reduce your basis in the property by the amount of the reduction in the debt. Form 1040ez 2013 The rules that apply to bankruptcy and insolvency are explained below under Exclusions . Form 1040ez 2013 Deductible debt. Form 1040ez 2013   You do not realize income from a canceled debt to the extent the payment of the debt would have been a deductible expense. Form 1040ez 2013 This exception applies before the price reduction exception discussed above and the bankruptcy and insolvency exclusions discussed next. Form 1040ez 2013 Example. Form 1040ez 2013 You get accounting services for your farm on credit. Form 1040ez 2013 Later, you have trouble paying your farm debts, but you are not bankrupt or insolvent. Form 1040ez 2013 Your accountant forgives part of the amount you owe for the accounting services. Form 1040ez 2013 How you treat the canceled debt depends on your method of accounting. Form 1040ez 2013 Cash method — You do not include the canceled debt in income because payment of the debt would have been deductible as a business expense. Form 1040ez 2013 Accrual method — You include the canceled debt in income because the expense was deductible when you incurred the debt. Form 1040ez 2013 Exclusions Do not include canceled debt in income in the following situations. Form 1040ez 2013 The cancellation takes place in a bankruptcy case under title 11 of the U. Form 1040ez 2013 S. Form 1040ez 2013 Code. Form 1040ez 2013 The cancellation takes place when you are insolvent. Form 1040ez 2013 The canceled debt is a qualified farm debt. Form 1040ez 2013 The canceled debt is a qualified real property business debt (in the case of a taxpayer other than a C corporation). Form 1040ez 2013 See Publication 334, Tax Guide for Small Business, chapter 5. Form 1040ez 2013 The canceled debt is qualified principal residence indebtedness which is discharged after 2006 and before 2014. Form 1040ez 2013 The exclusions do not apply in the following situations: If a canceled debt is excluded from income because it takes place in a bankruptcy case, the exclusions in situations (2), (3), (4), and (5) do not apply. Form 1040ez 2013 If a canceled debt is excluded from income because it takes place when you are insolvent, the exclusions in situations (3) and (4) do not apply to the extent you are insolvent. Form 1040ez 2013 If a canceled debt is excluded from income because it is qualified principal residence indebtedness, the exclusion in situation (2) does not apply unless you elect to apply situation (2) instead of the exclusion for qualified principal residence indebtedness. Form 1040ez 2013 See Form 982 , later, for information on how to claim an exclusion for a canceled debt. Form 1040ez 2013 Debt. Form 1040ez 2013   For this discussion, debt includes any debt for which you are liable or that attaches to property you hold. Form 1040ez 2013 Bankruptcy and Insolvency You can exclude a canceled debt from income if you are bankrupt or to the extent you are insolvent. Form 1040ez 2013 Bankruptcy. Form 1040ez 2013   A bankruptcy case is a case under title 11 of the U. Form 1040ez 2013 S. Form 1040ez 2013 Code if you are under the jurisdiction of the court and the cancellation of the debt is granted by the court or is the result of a plan approved by the court. Form 1040ez 2013   Do not include debt canceled in a bankruptcy case in your income in the year it is canceled. Form 1040ez 2013 Instead, you must use the amount canceled to reduce your tax attributes, explained below under Reduction of tax attributes . Form 1040ez 2013 Insolvency. Form 1040ez 2013   You are insolvent to the extent your liabilities are more than the fair market value of your assets immediately before the cancellation of debt. Form 1040ez 2013   You can exclude canceled debt from gross income up to the amount by which you are insolvent. Form 1040ez 2013 If the canceled debt is more than this amount and the debt qualifies, you can apply the rules for qualified farm debt or qualified real property business debt to the difference. Form 1040ez 2013 Otherwise, you include the difference in gross income. Form 1040ez 2013 Use the amount excluded because of insolvency to reduce any tax attributes, as explained below under Reduction of tax attributes . Form 1040ez 2013 You must reduce the tax attributes under the insolvency rules before applying the rules for qualified farm debt or for qualified real property business debt. Form 1040ez 2013 Example. Form 1040ez 2013 You had a $15,000 debt that was not qualified principal residence debt canceled outside of bankruptcy. Form 1040ez 2013 Immediately before the cancellation, your liabilities totaled $80,000 and your assets totaled $75,000. Form 1040ez 2013 Since your liabilities were more than your assets, you were insolvent to the extent of $5,000 ($80,000 − $75,000). Form 1040ez 2013 You can exclude this amount from income. Form 1040ez 2013 The remaining canceled debt ($10,000) may be subject to the qualified farm debt or qualified real property business debt rules. Form 1040ez 2013 If not, you must include it in income. Form 1040ez 2013 Reduction of tax attributes. Form 1040ez 2013   If you exclude canceled debt from income in a bankruptcy case or during insolvency, you must use the excluded debt to reduce certain tax attributes. Form 1040ez 2013 Order of reduction. Form 1040ez 2013   You must use the excluded canceled debt to reduce the following tax attributes in the order listed unless you elect to reduce the basis of depreciable property first, as explained later. Form 1040ez 2013 Net operating loss (NOL). Form 1040ez 2013 Reduce any NOL for the tax year of the debt cancellation, and then any NOL carryover to that year. Form 1040ez 2013 Reduce the NOL or NOL carryover one dollar for each dollar of excluded canceled debt. Form 1040ez 2013 General business credit carryover. Form 1040ez 2013 Reduce the credit carryover to or from the tax year of the debt cancellation. Form 1040ez 2013 Reduce the carryover 331/3 cents for each dollar of excluded canceled debt. Form 1040ez 2013 Minimum tax credit. Form 1040ez 2013 Reduce the minimum tax credit available at the beginning of the tax year following the tax year of the debt cancellation. Form 1040ez 2013 Reduce the credit 331/3 cents for each dollar of excluded canceled debt. Form 1040ez 2013 Capital loss. Form 1040ez 2013 Reduce any net capital loss for the tax year of the debt cancellation, and then any capital loss carryover to that year. Form 1040ez 2013 Reduce the capital loss or loss carryover one dollar for each dollar of excluded canceled debt. Form 1040ez 2013 Basis. Form 1040ez 2013 Reduce the basis of the property you hold at the beginning of the tax year following the tax year of the debt cancellation in the following order. Form 1040ez 2013 Real property (except inventory) used in your trade or business or held for investment that secured the canceled debt. Form 1040ez 2013 Personal property (except inventory and accounts and notes receivable) used in your trade or business or held for investment that secured the canceled debt. Form 1040ez 2013 Other property (except inventory and accounts and notes receivable) used in your trade or business or held for investment. Form 1040ez 2013 Inventory and accounts and notes receivable. Form 1040ez 2013 Other property. Form 1040ez 2013 Reduce the basis one dollar for each dollar of excluded canceled debt. Form 1040ez 2013 However, the reduction cannot be more than the total basis of property and the amount of money you hold immediately after the debt cancellation minus your total liabilities immediately after the cancellation. Form 1040ez 2013 For allocation rules that apply to basis reductions for multiple canceled debts, see Regulations section 1. Form 1040ez 2013 1017-1(b)(2). Form 1040ez 2013 Also see Electing to reduce the basis of depreciable property