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Free Ohio Tax Form 1040ez

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Free Ohio Tax Form 1040ez

Free ohio tax form 1040ez 11. Free ohio tax form 1040ez   Casualties, Thefts, and Condemnations Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Casualties and TheftsDeductible losses. Free ohio tax form 1040ez Nondeductible losses. Free ohio tax form 1040ez Family pet. Free ohio tax form 1040ez Progressive deterioration. Free ohio tax form 1040ez Decline in market value of stock. Free ohio tax form 1040ez Mislaid or lost property. Free ohio tax form 1040ez Farming Losses How To Figure a Loss Deduction Limits on Losses of Personal-Use Property When Loss Is Deductible Proof of Loss Figuring a Gain Other Involuntary ConversionsCondemnation Irrigation Project Livestock Losses Tree Seedlings Postponing GainException. Free ohio tax form 1040ez Related persons. Free ohio tax form 1040ez Replacement Property Replacement Period How To Postpone Gain Disaster Area LossesWho is eligible. Free ohio tax form 1040ez Covered disaster area. Free ohio tax form 1040ez Reporting Gains and Losses Introduction This chapter explains the tax treatment of casualties, thefts, and condemnations. Free ohio tax form 1040ez A casualty occurs when property is damaged, destroyed, or lost due to a sudden, unexpected, or unusual event. Free ohio tax form 1040ez A theft occurs when property is stolen. Free ohio tax form 1040ez A condemnation occurs when private property is legally taken for public use without the owner's consent. Free ohio tax form 1040ez A casualty, theft, or condemnation may result in a deductible loss or taxable gain on your federal income tax return. Free ohio tax form 1040ez You may have a deductible loss or a taxable gain even if only a portion of your property was affected by a casualty, theft, or condemnation. Free ohio tax form 1040ez An involuntary conversion occurs when you receive money or other property as reimbursement for a casualty, theft, condemnation, disposition of property under threat of condemnation, or certain other events discussed in this chapter. Free ohio tax form 1040ez If an involuntary conversion results in a gain and you buy qualified replacement property within the specified replacement period, you can postpone reporting the gain on your income tax return. Free ohio tax form 1040ez For more information, see Postponing Gain , later. Free ohio tax form 1040ez Topics - This chapter discusses: Casualties and thefts How to figure a loss or gain Other involuntary conversions Postponing gain Disaster area losses Reporting gains and losses Drought involving property connected with a trade or business or a transaction entered into for profit Useful Items - You may want to see: Publication 523 Selling Your Home 525 Taxable and Nontaxable Income 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 544 Sales and Other Dispositions of Assets 547 Casualties, Disasters, and Thefts 584 Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property) 584-B Business Casualty, Disaster, and Theft Loss Workbook Form (and Instructions) Sch A (Form 1040) Itemized Deductions Sch D (Form 1040) Capital Gains and Losses Sch F (Form 1040) Profit or Loss From Farming 4684 Casualties and Thefts 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. Free ohio tax form 1040ez Casualties and Thefts If your property is destroyed, damaged, or stolen, you may have a deductible loss. Free ohio tax form 1040ez If the insurance or other reimbursement is more than the adjusted basis of the destroyed, damaged, or stolen property, you may have a taxable gain. Free ohio tax form 1040ez Casualty. Free ohio tax form 1040ez   A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Free ohio tax form 1040ez A sudden event is one that is swift, not gradual or progressive. Free ohio tax form 1040ez An unexpected event is one that is ordinarily unanticipated and unintended. Free ohio tax form 1040ez An unusual event is one that is not a day-to-day occurrence and that is not typical of the activity in which you were engaged. Free ohio tax form 1040ez Deductible losses. Free ohio tax form 1040ez   Deductible casualty losses can result from a number of different causes, including the following. Free ohio tax form 1040ez Airplane crashes. Free ohio tax form 1040ez Car, truck, or farm equipment accidents not resulting from your willful act or willful negligence. Free ohio tax form 1040ez Earthquakes. Free ohio tax form 1040ez Fires (but see Nondeductible losses next for exceptions). Free ohio tax form 1040ez Floods. Free ohio tax form 1040ez Freezing. Free ohio tax form 1040ez Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster as discussed under Disaster Area Losses, in Publication 547. Free ohio tax form 1040ez Lightning. Free ohio tax form 1040ez Storms, including hurricanes and tornadoes. Free ohio tax form 1040ez Terrorist attacks. Free ohio tax form 1040ez Vandalism. Free ohio tax form 1040ez Volcanic eruptions. Free ohio tax form 1040ez Nondeductible losses. Free ohio tax form 1040ez   A casualty loss is not deductible if the damage or destruction is caused by the following. Free ohio tax form 1040ez Accidentally breaking articles such as glassware or china under normal conditions. Free ohio tax form 1040ez A family pet (explained below). Free ohio tax form 1040ez A fire if you willfully set it, or pay someone else to set it. Free ohio tax form 1040ez A car, truck, or farm equipment accident if your willful negligence or willful act caused it. Free ohio tax form 1040ez The same is true if the willful act or willful negligence of someone acting for you caused the accident. Free ohio tax form 1040ez Progressive deterioration (explained below). Free ohio tax form 1040ez Family pet. Free ohio tax form 1040ez   Loss of property due to damage by a family pet is not deductible as a casualty loss unless the requirements discussed above under Casualty are met. Free ohio tax form 1040ez Example. Free ohio tax form 1040ez You keep your horse in your yard. Free ohio tax form 1040ez The ornamental fruit trees in your yard were damaged when your horse stripped the bark from them. Free ohio tax form 1040ez Some of the trees were completely girdled and died. Free ohio tax form 1040ez Because the damage was not unexpected or unusual, the loss is not deductible. Free ohio tax form 1040ez Progressive deterioration. Free ohio tax form 1040ez   Loss of property due to progressive deterioration is not deductible as a casualty loss. Free ohio tax form 1040ez This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. Free ohio tax form 1040ez Examples of damage due to progressive deterioration include damage from rust, corrosion, or termites. Free ohio tax form 1040ez However, weather-related conditions or disease may cause another type of involuntary conversion. Free ohio tax form 1040ez See Other Involuntary Conversions , later. Free ohio tax form 1040ez Theft. Free ohio tax form 1040ez   A theft is the taking and removing of money or property with the intent to deprive the owner of it. Free ohio tax form 1040ez The taking of property must be illegal under the law of the state where it occurred and it must have been done with criminal intent. Free ohio tax form 1040ez You do not need to show a conviction for theft. Free ohio tax form 1040ez   Theft includes the taking of money or property by the following means: Blackmail, Burglary, Embezzlement, Extortion, Kidnapping for ransom, Larceny, Robbery, or Threats. Free ohio tax form 1040ez The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. Free ohio tax form 1040ez Decline in market value of stock. Free ohio tax form 1040ez   You cannot deduct as a theft loss the decline in market value of stock acquired on the open market for investment if the decline is caused by disclosure of accounting fraud or other illegal misconduct by the officers or directors of the corporation that issued the stock. Free ohio tax form 1040ez However, you can deduct as a capital loss the loss you sustain when you sell or exchange the stock or the stock becomes completely worthless. Free ohio tax form 1040ez You report a capital loss on Schedule D (Form 1040). Free ohio tax form 1040ez For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. Free ohio tax form 1040ez Mislaid or lost property. Free ohio tax form 1040ez   The simple disappearance of money or property is not a theft. Free ohio tax form 1040ez However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. Free ohio tax form 1040ez Example. Free ohio tax form 1040ez A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Free ohio tax form 1040ez The diamond falls from the ring and is never found. Free ohio tax form 1040ez The loss of the diamond is a casualty. Free ohio tax form 1040ez Farming Losses You can deduct certain casualty or theft losses that occur in the business of farming. Free ohio tax form 1040ez The following is a discussion of some losses you can deduct and some you cannot deduct. Free ohio tax form 1040ez Livestock or produce bought for resale. Free ohio tax form 1040ez   Casualty or theft losses of livestock or produce bought for resale are deductible if you report your income on the cash method. Free ohio tax form 1040ez If you report your income on an accrual method, take casualty and theft losses on property bought for resale by omitting the item from the closing inventory for the year of the loss. Free ohio tax form 1040ez You cannot take a separate deduction. Free ohio tax form 1040ez Livestock, plants, produce, and crops raised for sale. Free ohio tax form 1040ez   Losses of livestock, plants, produce, and crops raised for sale are generally not deductible if you report your income on the cash method. Free ohio tax form 1040ez You have already deducted the cost of raising these items as farm expenses, so their basis is equal to zero. Free ohio tax form 1040ez   For plants with a preproductive period of more than 2 years, you may have a deductible loss if you have a tax basis in the plants. Free ohio tax form 1040ez You usually have a tax basis if you capitalized the expenses associated with these plants under the uniform capitalization rules. Free ohio tax form 1040ez The uniform capitalization rules are discussed in chapter 6. Free ohio tax form 1040ez   If you report your income on an accrual method, casualty or theft losses are deductible only if you included the items in your inventory at the beginning of your tax year. Free ohio tax form 1040ez You get the deduction by omitting the item from your inventory at the close of your tax year. Free ohio tax form 1040ez You cannot take a separate casualty or theft deduction. Free ohio tax form 1040ez Income loss. Free ohio tax form 1040ez   A loss of future income is not deductible. Free ohio tax form 1040ez Example. Free ohio tax form 1040ez A severe flood destroyed your crops. Free ohio tax form 1040ez Because you are a cash method taxpayer and already deducted the cost of raising the crops as farm expenses, this loss is not deductible, as explained above under Livestock, plants, produce, and crops raised for sale . Free ohio tax form 1040ez You estimate that the crop loss will reduce your farm income by $25,000. Free ohio tax form 1040ez This loss of future income is also not deductible. Free ohio tax form 1040ez Loss of timber. Free ohio tax form 1040ez   If you sell timber downed as a result of a casualty, treat the proceeds from the sale as a reimbursement. Free ohio tax form 1040ez If you use the proceeds to buy qualified replacement property, you can postpone reporting the gain. Free ohio tax form 1040ez See Postponing Gain , later. Free ohio tax form 1040ez Property used in farming. Free ohio tax form 1040ez   Casualty and theft losses of property used in your farm business usually result in deductible losses. Free ohio tax form 1040ez If a fire or storm destroyed your barn, or you lose by casualty or theft an animal you bought for draft, breeding, dairy, or sport, you may have a deductible loss. Free ohio tax form 1040ez See How To Figure a Loss , later. Free ohio tax form 1040ez Raised draft, breeding, dairy, or sporting animals. Free ohio tax form 1040ez   Generally, losses of raised draft, breeding, dairy, or sporting animals do not result in deductible casualty or theft losses because you have no basis in the animals. Free ohio tax form 1040ez However, you may have a basis in the animal and therefore may be able to claim a deduction if either of the following situations applies to you. Free ohio tax form 1040ez You use inventories to determine your income and you included the animals in your inventory. Free ohio tax form 1040ez You capitalized the expenses associated with the animals under the uniform capitalization rules and therefore have a tax basis in the animals subject to a casualty or theft. Free ohio tax form 1040ez When you include livestock in inventory, its last inventory value is its basis. Free ohio tax form 1040ez When you lose an inventoried animal held for draft, breeding, dairy, or sport by casualty or theft during the year, decrease ending inventory by the amount you included in inventory for the animal. Free ohio tax form 1040ez You cannot take a separate deduction. Free ohio tax form 1040ez How To Figure a Loss How you figure a deductible casualty or theft loss depends on whether the loss was to farm or personal-use property and whether the property was stolen or partly or completely destroyed. Free ohio tax form 1040ez Farm property. Free ohio tax form 1040ez   Farm property is the property you use in your farming business. Free ohio tax form 1040ez If your farm property was completely destroyed or stolen, your loss is figured as follows:      Your adjusted basis in the property     MINUS     Any salvage value     MINUS     Any insurance or other reimbursement you  receive or expect to receive      You can use the schedules in Publication 584-B to list your stolen, damaged, or destroyed business property and to figure your loss. Free ohio tax form 1040ez   If your farm property was partially damaged, use the steps shown under Personal-use property next to figure your casualty loss. Free ohio tax form 1040ez However, the deduction limits, discussed later, do not apply to farm property. Free ohio tax form 1040ez Personal-use property. Free ohio tax form 1040ez   Personal-use property is property used by you or your family members for personal purposes and not used in your farm business or for income-producing purposes. Free ohio tax form 1040ez The following items are examples of personal-use property: Your main home. Free ohio tax form 1040ez Furniture and electronics used in your main home and not used in a home office or for business purposes. Free ohio tax form 1040ez Clothing and jewelry. Free ohio tax form 1040ez An automobile used for nonbusiness purposes. Free ohio tax form 1040ez You figure the casualty or theft loss on this property by taking the following steps. Free ohio tax form 1040ez Determine your adjusted basis in the property before the casualty or theft. Free ohio tax form 1040ez Determine the decrease in fair market value of the property as a result of the casualty or theft. Free ohio tax form 1040ez From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you receive or expect to receive. Free ohio tax form 1040ez You must apply the deduction limits, discussed later, to determine your deductible loss. Free ohio tax form 1040ez    You can use Publication 584 to list your stolen or damaged personal-use property and figure your loss. Free ohio tax form 1040ez It includes schedules to help you figure the loss on your home, its contents, and your motor vehicles. Free ohio tax form 1040ez Adjusted basis. Free ohio tax form 1040ez   Adjusted basis is your basis (usually cost) increased or decreased by various events, such as improvements and casualty losses. Free ohio tax form 1040ez For more information about adjusted basis, see chapter 6. Free ohio tax form 1040ez Decrease in fair market value (FMV). Free ohio tax form 1040ez   The decrease in FMV is the difference between the property's value immediately before the casualty or theft and its value immediately afterward. Free ohio tax form 1040ez FMV is defined in chapter 10 under Payments Received or Considered Received . Free ohio tax form 1040ez Appraisal. Free ohio tax form 1040ez   To figure the decrease in FMV because of a casualty or theft, you generally need a competent appraisal. Free ohio tax form 1040ez But other measures, such as the cost of cleaning up or making repairs (discussed next) can be used to establish decreases in FMV. Free ohio tax form 1040ez   An appraisal to determine the difference between the FMV of the property immediately before a casualty or theft and immediately afterward should be made by a competent appraiser. Free ohio tax form 1040ez The appraiser must recognize the effects of any general market decline that may occur along with the casualty. Free ohio tax form 1040ez This information is needed to limit any deduction to the actual loss resulting from damage to the property. Free ohio tax form 1040ez Cost of cleaning up or making repairs. Free ohio tax form 1040ez   The cost of cleaning up after a casualty is not part of a casualty loss. Free ohio tax form 1040ez Neither is the cost of repairing damaged property after a casualty. Free ohio tax form 1040ez But you can use the cost of cleaning up or making repairs after a casualty as a measure of the decrease in FMV if you meet all the following conditions. Free ohio tax form 1040ez The repairs are actually made. Free ohio tax form 1040ez The repairs are necessary to bring the property back to its condition before the casualty. Free ohio tax form 1040ez The amount spent for repairs is not excessive. Free ohio tax form 1040ez The repairs fix the damage only. Free ohio tax form 1040ez The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. Free ohio tax form 1040ez Related expenses. Free ohio tax form 1040ez   The incidental expenses due to a casualty or theft, such as expenses for the treatment of personal injuries, temporary housing, or a rental car, are not part of your casualty or theft loss. Free ohio tax form 1040ez However, they may be deductible as farm business expenses if the damaged or stolen property is farm property. Free ohio tax form 1040ez Separate computations for more than one item of property. Free ohio tax form 1040ez   Generally, if a single casualty or theft involves more than one item of property, you must figure your loss separately for each item of property. Free ohio tax form 1040ez Then combine the losses to determine your total loss. Free ohio tax form 1040ez    There is an exception to this rule for personal-use real property. Free ohio tax form 1040ez See Exception for personal-use real property, later. Free ohio tax form 1040ez Example. Free ohio tax form 1040ez A fire on your farm damaged a tractor and the barn in which it was stored. Free ohio tax form 1040ez The tractor had an adjusted basis of $3,300. Free ohio tax form 1040ez Its FMV was $28,000 just before the fire and $10,000 immediately afterward. Free ohio tax form 1040ez The barn had an adjusted basis of $28,000. Free ohio tax form 1040ez Its FMV was $55,000 just before the fire and $25,000 immediately afterward. Free ohio tax form 1040ez You received insurance reimbursements of $2,100 on the tractor and $26,000 on the barn. Free ohio tax form 1040ez Figure your deductible casualty loss separately for the two items of property. Free ohio tax form 1040ez     Tractor Barn 1) Adjusted basis $3,300 $28,000 2) FMV before fire $28,000 $55,000 3) FMV after fire 10,000 25,000 4) Decrease in FMV  (line 2 − line 3) $18,000 $30,000 5) Loss (lesser of line 1 or line 4) $3,300 $28,000 6) Minus: Insurance 2,100 26,000 7) Deductible casualty loss $1,200 $2,000 8) Total deductible casualty loss $3,200 Exception for personal-use real property. Free ohio tax form 1040ez   In figuring a casualty loss on personal-use real property, the entire property (including any improvements, such as buildings, trees, and shrubs) is treated as one item. Free ohio tax form 1040ez Figure the loss using the smaller of the following. Free ohio tax form 1040ez The decrease in FMV of the entire property. Free ohio tax form 1040ez The adjusted basis of the entire property. Free ohio tax form 1040ez Example. Free ohio tax form 1040ez You bought a farm in 1990 for $160,000. Free ohio tax form 1040ez The adjusted basis of the residential part is now $128,000. Free ohio tax form 1040ez In 2013, a windstorm blew down shade trees and three ornamental trees planted at a cost of $7,500 on the residential part. Free ohio tax form 1040ez The adjusted basis of the residential part includes the $7,500. Free ohio tax form 1040ez The fair market value (FMV) of the residential part immediately before the storm was $400,000, and $385,000 immediately after the storm. Free ohio tax form 1040ez The trees were not covered by insurance. Free ohio tax form 1040ez 1) Adjusted basis $128,000 2) FMV before the storm $400,000 3) FMV after the storm 385,000 4) Decrease in FMV (line 2 − line 3) $15,000 5) Loss before insurance (lesser of line 1 or line 4) $15,000 6) Minus: Insurance -0- 7) Amount of loss $15,000 Insurance and other reimbursements. Free ohio tax form 1040ez   If you receive an insurance or other type of reimbursement, you must subtract the reimbursement when you figure your loss. Free ohio tax form 1040ez You do not have a casualty or theft loss to the extent you are reimbursed. Free ohio tax form 1040ez   If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. Free ohio tax form 1040ez You must reduce your loss even if you do not receive payment until a later tax year. Free ohio tax form 1040ez    Do not subtract from your loss any insurance payments you receive for living expenses if you lose the use of your main home or are denied access to it because of a casualty. Free ohio tax form 1040ez You may have to include a portion of these payments in your income. Free ohio tax form 1040ez See Insurance payments for living expenses in Publication 547 for details. Free ohio tax form 1040ez Disaster relief. Free ohio tax form 1040ez   Food, medical supplies, and other forms of assistance you receive do not reduce your casualty loss, unless they are replacements for lost or destroyed property. Free ohio tax form 1040ez Excludable cash gifts you receive also do not reduce your casualty loss if there are no limits on how you can use the money. Free ohio tax form 1040ez   Generally, disaster relief grants received under the Robert T. Free ohio tax form 1040ez Stafford Disaster Relief and Emergency Assistance Act are not included in your income. Free ohio tax form 1040ez See Federal disaster relief grants , later, under Disaster Area Losses . Free ohio tax form 1040ez   Qualified disaster relief payments for expenses you incurred as a result of a federally declared disaster are not taxable income to you. Free ohio tax form 1040ez See Qualified disaster relief payments , later, under Disaster Area Losses . Free ohio tax form 1040ez Reimbursement received after deducting loss. Free ohio tax form 1040ez   If you figure your casualty or theft loss using your expected reimbursement, you may have to adjust your tax return for the tax year in which you get your actual reimbursement. Free ohio tax form 1040ez Actual reimbursement less than expected. Free ohio tax form 1040ez   If you later receive less reimbursement than you expected, include that difference as a loss with your other losses (if any) on your return for the year in which you can reasonably expect no more reimbursement. Free ohio tax form 1040ez Actual reimbursement more than expected. Free ohio tax form 1040ez   If you later receive more reimbursement than you expected after you have claimed a deduction for the loss, you may have to include the extra reimbursement in your income for the year you receive it. Free ohio tax form 1040ez However, if any part of your original deduction did not reduce your tax for the earlier year, do not include that part of the reimbursement in your income. Free ohio tax form 1040ez Do not refigure your tax for the year you claimed the deduction. Free ohio tax form 1040ez See Recoveries in Publication 525 to find out how much extra reimbursement to include in income. Free ohio tax form 1040ez If the total of all the reimbursements you receive is more than your adjusted basis in the destroyed or stolen property, you will have a gain on the casualty or theft. Free ohio tax form 1040ez See Figuring a Gain in Publication 547 for information on how to treat a gain from the reimbursement you receive because of a casualty or theft. Free ohio tax form 1040ez Actual reimbursement same as expected. Free ohio tax form 1040ez   If you receive exactly the reimbursement you expected to receive, you do not have to include any of the reimbursement in your income and you cannot deduct any additional loss. Free ohio tax form 1040ez Lump-sum reimbursement. Free ohio tax form 1040ez   If you have a casualty or theft loss of several assets at the same time without an allocation of reimbursement to specific assets, divide the lump-sum reimbursement among the assets according to the fair market value of each asset at the time of the loss. Free ohio tax form 1040ez Figure the gain or loss separately for each asset that has a separate basis. Free ohio tax form 1040ez Adjustments to basis. Free ohio tax form 1040ez   If you have a casualty or theft loss, you must decrease your basis in the property by any insurance or other reimbursement you receive and by any deductible loss. Free ohio tax form 1040ez The result is your adjusted basis in the property. Free ohio tax form 1040ez Amounts you spend on repairs to restore your property to its pre-casualty condition increase your adjusted basis. Free ohio tax form 1040ez See Adjusted Basis in chapter 6 for more information. Free ohio tax form 1040ez Example. Free ohio tax form 1040ez You built a new silo for $25,000. Free ohio tax form 1040ez This is the basis in your silo because that is the total cost you incurred to build it. Free ohio tax form 1040ez During the year, a tornado damaged your silo and your allowable casualty loss deduction was $1,000. Free ohio tax form 1040ez In addition, your insurance company reimbursed you $4,000 for the damage and you spent $6,000 to restore the silo to its pre-casualty condition. Free ohio tax form 1040ez Your adjusted basis in the silo after the casualty is $26,000 ($25,000 - $1,000 - $4,000 + $6,000). Free ohio tax form 1040ez Deduction Limits on Losses of Personal-Use Property Casualty and theft losses of property held for personal use may be deductible if you itemize deductions on Schedule A (Form 1040). Free ohio tax form 1040ez There are two limits on the deduction for casualty or theft loss of personal-use property. Free ohio tax form 1040ez You figure these limits on Form 4684. Free ohio tax form 1040ez $100 rule. Free ohio tax form 1040ez   You must reduce each casualty or theft loss on personal-use property by $100. Free ohio tax form 1040ez This rule applies after you have subtracted any reimbursement. Free ohio tax form 1040ez 10% rule. Free ohio tax form 1040ez   You must further reduce the total of all your casualty or theft losses on personal-use property by 10% of your adjusted gross income. Free ohio tax form 1040ez Apply this rule after you reduce each loss by $100. Free ohio tax form 1040ez Adjusted gross income is on line 38 of Form 1040. Free ohio tax form 1040ez Example. Free ohio tax form 1040ez In June, you discovered that your house had been burglarized. Free ohio tax form 1040ez Your loss after insurance reimbursement was $2,000. Free ohio tax form 1040ez Your adjusted gross income for the year you discovered the burglary is $57,000. Free ohio tax form 1040ez Figure your theft loss deduction as follows: 1. Free ohio tax form 1040ez Loss after insurance $2,000 2. Free ohio tax form 1040ez Subtract $100 100 3. Free ohio tax form 1040ez Loss after $100 rule $1,900 4. Free ohio tax form 1040ez Subtract 10% (. Free ohio tax form 1040ez 10) × $57,000 AGI $5,700 5. Free ohio tax form 1040ez Theft loss deduction -0- You do not have a theft loss deduction because your loss ($1,900) is less than 10% of your adjusted gross income ($5,700). Free ohio tax form 1040ez    If you have a casualty or theft gain in addition to a loss, you will have to make a special computation before you figure your 10% limit. Free ohio tax form 1040ez See 10% Rule in Publication 547. Free ohio tax form 1040ez When Loss Is Deductible Generally, you can deduct casualty losses that are not reimbursable only in the tax year in which they occur. Free ohio tax form 1040ez You generally can deduct theft losses that are not reimbursable only in the year you discover your property was stolen. Free ohio tax form 1040ez However, losses in federally declared disaster areas are subject to different rules. Free ohio tax form 1040ez See Disaster Area Losses , later, for an exception. Free ohio tax form 1040ez If you are not sure whether part of your casualty or theft loss will be reimbursed, do not deduct that part until the tax year when you become reasonably certain that it will not be reimbursed. Free ohio tax form 1040ez Leased property. Free ohio tax form 1040ez   If you lease property from someone else, you can deduct a loss on the property in the year your liability for the loss is fixed. Free ohio tax form 1040ez This is true even if the loss occurred or the liability was paid in a different year. Free ohio tax form 1040ez You are not entitled to a deduction until your liability under the lease can be determined with reasonable accuracy. Free ohio tax form 1040ez Your liability can be determined when a claim for recovery is settled, adjudicated, or abandoned. Free ohio tax form 1040ez Example. Free ohio tax form 1040ez Robert leased a tractor from First Implement, Inc. Free ohio tax form 1040ez , for use in his farm business. Free ohio tax form 1040ez The tractor was destroyed by a tornado in June 2012. Free ohio tax form 1040ez The loss was not insured. Free ohio tax form 1040ez First Implement billed Robert for the fair market value of the tractor on the date of the loss. Free ohio tax form 1040ez Robert disagreed with the bill and refused to pay it. Free ohio tax form 1040ez First Implement later filed suit in court against Robert. Free ohio tax form 1040ez In 2013, Robert and First Implement agreed to settle the suit for $20,000, and the court entered a judgment in favor of First Implement. Free ohio tax form 1040ez Robert paid $20,000 in June 2013. Free ohio tax form 1040ez He can claim the $20,000 as a loss on his 2013 tax return. Free ohio tax form 1040ez Net operating loss (NOL). Free ohio tax form 1040ez   If your deductions, including casualty or theft loss deductions, are more than your income for the year, you may have an NOL. Free ohio tax form 1040ez An NOL can be carried back or carried forward and deducted from income in other years. Free ohio tax form 1040ez See Publication 536 for more information on NOLs. Free ohio tax form 1040ez Proof of Loss To deduct a casualty or theft loss, you must be able to prove that there was a casualty or theft. Free ohio tax form 1040ez You must have records to support the amount you claim for the loss. Free ohio tax form 1040ez Casualty loss proof. Free ohio tax form 1040ez   For a casualty loss, your records should show all the following information. Free ohio tax form 1040ez The type of casualty (car accident, fire, storm, etc. Free ohio tax form 1040ez ) and when it occurred. Free ohio tax form 1040ez That the loss was a direct result of the casualty. Free ohio tax form 1040ez That you were the owner of the property or, if you leased the property from someone else, that you were contractually liable to the owner for the damage. Free ohio tax form 1040ez Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Free ohio tax form 1040ez Theft loss proof. Free ohio tax form 1040ez   For a theft loss, your records should show all the following information. Free ohio tax form 1040ez When you discovered your property was missing. Free ohio tax form 1040ez That your property was stolen. Free ohio tax form 1040ez That you were the owner of the property. Free ohio tax form 1040ez Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Free ohio tax form 1040ez Figuring a Gain A casualty or theft may result in a taxable gain. Free ohio tax form 1040ez If you receive an insurance payment or other reimbursement that is more than your adjusted basis in the destroyed, damaged, or stolen property, you have a gain from the casualty or theft. Free ohio tax form 1040ez You generally report your gain as income in the year you receive the reimbursement. Free ohio tax form 1040ez However, depending on the type of property you receive, you may not have to report your gain. Free ohio tax form 1040ez See Postponing Gain , later. Free ohio tax form 1040ez Your gain is figured as follows: The amount you receive, minus Your adjusted basis in the property at the time of the casualty or theft. Free ohio tax form 1040ez Even if the decrease in FMV of your property is smaller than the adjusted basis of your property, use your adjusted basis to figure the gain. Free ohio tax form 1040ez Amount you receive. Free ohio tax form 1040ez   The amount you receive includes any money plus the value of any property you receive, minus any expenses you have in obtaining reimbursement. Free ohio tax form 1040ez It also includes any reimbursement used to pay off a mortgage or other lien on the damaged, destroyed, or stolen property. Free ohio tax form 1040ez Example. Free ohio tax form 1040ez A tornado severely damaged your barn. Free ohio tax form 1040ez The adjusted basis of the barn was $25,000. Free ohio tax form 1040ez Your insurance company reimbursed you $40,000 for the damaged barn. Free ohio tax form 1040ez However, you had legal expenses of $2,000 to collect that insurance. Free ohio tax form 1040ez Your insurance minus your expenses to collect the insurance is more than your adjusted basis in the barn, so you have a gain. Free ohio tax form 1040ez 1) Insurance reimbursement $40,000 2) Legal expenses 2,000 3) Amount received  (line 1 − line 2) $38,000 4) Adjusted basis 25,000 5) Gain on casualty (line 3 − line 4) $13,000 Other Involuntary Conversions In addition to casualties and thefts, other events cause involuntary conversions of property. Free ohio tax form 1040ez Some of these are discussed in the following paragraphs. Free ohio tax form 1040ez Gain or loss from an involuntary conversion of your property is usually recognized for tax purposes. Free ohio tax form 1040ez You report the gain or deduct the loss on your tax return for the year you realize it. Free ohio tax form 1040ez However, depending on the type of property you receive, you may not have to report your gain on the involuntary conversion. Free ohio tax form 1040ez See Postponing Gain , later. Free ohio tax form 1040ez Condemnation Condemnation is the process by which private property is legally taken for public use without the owner's consent. Free ohio tax form 1040ez The property may be taken by the federal government, a state government, a political subdivision, or a private organization that has the power to legally take property. Free ohio tax form 1040ez The owner receives a condemnation award (money or property) in exchange for the property taken. Free ohio tax form 1040ez A condemnation is a forced sale, the owner being the seller and the condemning authority being the buyer. Free ohio tax form 1040ez Threat of condemnation. Free ohio tax form 1040ez   Treat the sale of your property under threat of condemnation as a condemnation, provided you have reasonable grounds to believe that your property will be condemned. Free ohio tax form 1040ez Main home condemned. Free ohio tax form 1040ez   If you have a gain because your main home is condemned, you generally can exclude the gain from your income as if you had sold or exchanged your home. Free ohio tax form 1040ez For information on this exclusion, see Publication 523. Free ohio tax form 1040ez If your gain is more than the amount you can exclude, but you buy replacement property, you may be able to postpone reporting the excess gain. Free ohio tax form 1040ez See Postponing Gain , later. Free ohio tax form 1040ez (You cannot deduct a loss from the condemnation of your main home. Free ohio tax form 1040ez ) More information. Free ohio tax form 1040ez   For information on how to figure the gain or loss on condemned property, see chapter 1 in Publication 544. Free ohio tax form 1040ez Also see Postponing Gain , later, to find out if you can postpone reporting the gain. Free ohio tax form 1040ez Irrigation Project The sale or other disposition of property located within an irrigation project to conform to the acreage limits of federal reclamation laws is an involuntary conversion. Free ohio tax form 1040ez Livestock Losses Diseased livestock. Free ohio tax form 1040ez   If your livestock die from disease, or are destroyed, sold, or exchanged because of disease, even though the disease is not of epidemic proportions, treat these occurrences as involuntary conversions. Free ohio tax form 1040ez If the livestock were raised or purchased for resale, follow the rules for livestock discussed earlier under Farming Losses . Free ohio tax form 1040ez Otherwise, figure the gain or loss from these conversions using the rules discussed under Determining Gain or Loss in chapter 8. Free ohio tax form 1040ez If you replace the livestock, you may be able to postpone reporting the gain. Free ohio tax form 1040ez See Postponing Gain below. Free ohio tax form 1040ez Reporting dispositions of diseased livestock. Free ohio tax form 1040ez   If you choose to postpone reporting gain on the disposition of diseased livestock, you must attach a statement to your return explaining that the livestock were disposed of because of disease. Free ohio tax form 1040ez You must also include other information on this statement. Free ohio tax form 1040ez See How To Postpone Gain , later, under Postponing Gain . Free ohio tax form 1040ez Weather-related sales of livestock. Free ohio tax form 1040ez   If you sell or exchange livestock (other than poultry) held for draft, breeding, or dairy purposes solely because of drought, flood, or other weather-related conditions, treat the sale or exchange as an involuntary conversion. Free ohio tax form 1040ez Only livestock sold in excess of the number you normally would sell under usual business practice, in the absence of weather-related conditions, are considered involuntary conversions. Free ohio tax form 1040ez Figure the gain or loss using the rules discussed under Determining Gain or Loss in chapter 8. Free ohio tax form 1040ez If you replace the livestock, you may be able to postpone reporting the gain. Free ohio tax form 1040ez See Postponing Gain below. Free ohio tax form 1040ez Example. Free ohio tax form 1040ez It is your usual business practice to sell five of your dairy animals during the year. Free ohio tax form 1040ez This year you sold 20 dairy animals because of drought. Free ohio tax form 1040ez The sale of 15 animals is treated as an involuntary conversion. Free ohio tax form 1040ez    If you do not replace the livestock, you may be able to report the gain in the following year's income. Free ohio tax form 1040ez This rule also applies to other livestock (including poultry). Free ohio tax form 1040ez See Sales Caused by Weather-Related Conditions in chapter 3. Free ohio tax form 1040ez Tree Seedlings If, because of an abnormal drought, the failure of planted tree seedlings is greater than normally anticipated, you may have a deductible loss. Free ohio tax form 1040ez Treat the loss as a loss from an involuntary conversion. Free ohio tax form 1040ez The loss equals the previously capitalized reforestation costs you had to duplicate on replanting. Free ohio tax form 1040ez You deduct the loss on the return for the year the seedlings died. Free ohio tax form 1040ez Postponing Gain Do not report a gain if you receive reimbursement in the form of property similar or related in service or use to the destroyed, stolen, or other involuntarily converted property. Free ohio tax form 1040ez Your basis in the new property is generally the same as your adjusted basis in the property it replaces. Free ohio tax form 1040ez You must ordinarily report the gain on your stolen, destroyed, or other involuntarily converted property if you receive money or unlike property as reimbursement. Free ohio tax form 1040ez However, you can choose to postpone reporting the gain if you purchase replacement property similar or related in service or use to your destroyed, stolen, or other involuntarily converted property within a specific replacement period. Free ohio tax form 1040ez If you have a gain on damaged property, you can postpone reporting the gain if you spend the reimbursement to restore the property. Free ohio tax form 1040ez To postpone reporting all the gain, the cost of your replacement property must be at least as much as the reimbursement you receive. Free ohio tax form 1040ez If the cost of the replacement property is less than the reimbursement, you must include the gain in your income up to the amount of the unspent reimbursement. Free ohio tax form 1040ez Example 1. Free ohio tax form 1040ez In 1985, you constructed a barn to store farm equipment at a cost of $20,000. Free ohio tax form 1040ez In 1987, you added a silo to the barn at a cost of $15,000 to store grain. Free ohio tax form 1040ez In May of this year, the property was worth $100,000. Free ohio tax form 1040ez In June the barn and silo were destroyed by a tornado. Free ohio tax form 1040ez At the time of the tornado, you had an adjusted basis of $0 in the property. Free ohio tax form 1040ez You received $85,000 from the insurance company. Free ohio tax form 1040ez You had a gain of $85,000 ($85,000 – $0). Free ohio tax form 1040ez You spent $80,000 to rebuild the barn and silo. Free ohio tax form 1040ez Since this is less than the insurance proceeds received, you must include $5,000 ($85,000 – $80,000) in your income. Free ohio tax form 1040ez Example 2. Free ohio tax form 1040ez In 1970, you bought a cabin in the mountains for your personal use at a cost of $18,000. Free ohio tax form 1040ez You made no further improvements or additions to it. Free ohio tax form 1040ez When a storm destroyed the cabin this January, the cabin was worth $250,000. Free ohio tax form 1040ez You received $146,000 from the insurance company in March. Free ohio tax form 1040ez You had a gain of $128,000 ($146,000 − $18,000). Free ohio tax form 1040ez You spent $144,000 to rebuild the cabin. Free ohio tax form 1040ez Since this is less than the insurance proceeds received, you must include $2,000 ($146,000 − $144,000) in your income. Free ohio tax form 1040ez Buying replacement property from a related person. Free ohio tax form 1040ez   You cannot postpone reporting a gain from a casualty, theft, or other involuntary conversion if you buy the replacement property from a related person (discussed later). Free ohio tax form 1040ez This rule applies to the following taxpayers. Free ohio tax form 1040ez C corporations. Free ohio tax form 1040ez Partnerships in which more than 50% of the capital or profits interest is owned by C corporations. Free ohio tax form 1040ez Individuals, partnerships (other than those in (2) above), and S corporations if the total realized gain for the tax year on all involuntarily converted properties on which there are realized gains is more than $100,000. Free ohio tax form 1040ez For involuntary conversions described in (3) above, gains cannot be offset by any losses when determining whether the total gain is more than $100,000. Free ohio tax form 1040ez If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. Free ohio tax form 1040ez If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. Free ohio tax form 1040ez Exception. Free ohio tax form 1040ez   This rule does not apply if the related person acquired the property from an unrelated person within the period of time allowed for replacing the involuntarily converted property. Free ohio tax form 1040ez Related persons. Free ohio tax form 1040ez   Under this rule, related persons include, for example, a parent and child, a brother and sister, a corporation and an individual who owns more than 50% of its outstanding stock, and two partnerships in which the same C corporations own more than 50% of the capital or profits interests. Free ohio tax form 1040ez For more information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. Free ohio tax form 1040ez Death of a taxpayer. Free ohio tax form 1040ez   If a taxpayer dies after having a gain, but before buying replacement property, the gain must be reported for the year in which the decedent realized the gain. Free ohio tax form 1040ez The executor of the estate or the person succeeding to the funds from the involuntary conversion cannot postpone reporting the gain by buying replacement property. Free ohio tax form 1040ez Replacement Property You must buy replacement property for the specific purpose of replacing your property. Free ohio tax form 1040ez Your replacement property must be similar or related in service or use to the property it replaces. Free ohio tax form 1040ez You do not have to use the same funds you receive as reimbursement for your old property to acquire the replacement property. Free ohio tax form 1040ez If you spend the money you receive for other purposes, and borrow money to buy replacement property, you can still choose to postpone reporting the gain if you meet the other requirements. Free ohio tax form 1040ez Property you acquire by gift or inheritance does not qualify as replacement property. Free ohio tax form 1040ez Owner-user. Free ohio tax form 1040ez   If you are an owner-user, similar or related in service or use means that replacement property must function in the same way as the property it replaces. Free ohio tax form 1040ez Examples of property that functions in the same way as the property it replaces are a home that replaces another home, a dairy cow that replaces another dairy cow, and farm land that replaces other farm land. Free ohio tax form 1040ez A grinding mill that replaces a tractor does not qualify. Free ohio tax form 1040ez Neither does a breeding or draft animal that replaces a dairy cow. Free ohio tax form 1040ez Soil or other environmental contamination. Free ohio tax form 1040ez   If, because of soil or other environmental contamination, it is not feasible for you to reinvest your insurance money or other proceeds from destroyed or damaged livestock in property similar or related in service or use to the livestock, you can treat other property (including real property) used for farming purposes, as property similar or related in service or use to the destroyed or damaged livestock. Free ohio tax form 1040ez Weather-related conditions. Free ohio tax form 1040ez   If, because of drought, flood, or other weather-related conditions, it is not feasible for you to reinvest the insurance money or other proceeds in property similar or related in service or use to the livestock, you can treat other property (excluding real property) used for farming purposes, as property similar or related in service or use to the livestock you disposed of. Free ohio tax form 1040ez Example. Free ohio tax form 1040ez Each year you normally sell 25 cows from your beef herd. Free ohio tax form 1040ez However, this year you had to sell 50 cows. Free ohio tax form 1040ez This is because a severe drought significantly reduced the amount of hay and pasture yield needed to feed your herd for the rest of the year. Free ohio tax form 1040ez Because, as a result of the severe drought, it is not feasible for you to use the proceeds from selling the extra cows to buy new cows, you can treat other property (excluding real property) used for farming purposes, as property similar or related in service or use to the cows you sold. Free ohio tax form 1040ez Standing crop destroyed by casualty. Free ohio tax form 1040ez   If a storm or other casualty destroyed your standing crop and you use the insurance money to acquire either another standing crop or a harvested crop, this purchase qualifies as replacement property. Free ohio tax form 1040ez The costs of planting and raising a new crop qualify as replacement costs for the destroyed crop only if you use the crop method of accounting (discussed in chapter 2). Free ohio tax form 1040ez In that case, the costs of bringing the new crop to the same level of maturity as the destroyed crop qualify as replacement costs to the extent they are incurred during the replacement period. Free ohio tax form 1040ez Timber loss. Free ohio tax form 1040ez   Standing timber you bought with the proceeds from the sale of timber downed as a result of a casualty, such as high winds, earthquakes, or volcanic eruptions, qualifies as replacement property. Free ohio tax form 1040ez If you bought the standing timber within the replacement period, you can postpone reporting the gain. Free ohio tax form 1040ez Business or income-producing property located in a federally declared disaster area. Free ohio tax form 1040ez   If your destroyed business or income-producing property was located in a federally declared disaster area, any tangible replacement property you acquire for use in any business is treated as similar or related in service or use to the destroyed property. Free ohio tax form 1040ez For more information, see Disaster Area Losses in Publication 547. Free ohio tax form 1040ez Substituting replacement property. Free ohio tax form 1040ez   Once you have acquired qualified replacement property that you designate as replacement property in a statement attached to your tax return, you cannot substitute other qualified replacement property. Free ohio tax form 1040ez This is true even if you acquire the other property within the replacement period. Free ohio tax form 1040ez However, if you discover that the original replacement property was not qualified replacement property, you can, within the replacement period, substitute the new qualified replacement property. Free ohio tax form 1040ez Basis of replacement property. Free ohio tax form 1040ez   You must reduce the basis of your replacement property (its cost) by the amount of postponed gain. Free ohio tax form 1040ez In this way, tax on the gain is postponed until you dispose of the replacement property. Free ohio tax form 1040ez Replacement Period To postpone reporting your gain, you must buy replacement property within a specified period of time. Free ohio tax form 1040ez This is the replacement period. Free ohio tax form 1040ez The replacement period begins on the date your property was damaged, destroyed, stolen, sold, or exchanged. Free ohio tax form 1040ez The replacement period generally ends 2 years after the close of the first tax year in which you realize any part of your gain from the involuntary conversion. Free ohio tax form 1040ez Example. Free ohio tax form 1040ez You are a calendar year taxpayer. Free ohio tax form 1040ez While you were on vacation, farm equipment that cost $2,200 was stolen from your farm. Free ohio tax form 1040ez You discovered the theft when you returned to your farm on November 11, 2012. Free ohio tax form 1040ez Your insurance company investigated the theft and did not settle your claim until January 5, 2013, when they paid you $3,000. Free ohio tax form 1040ez You first realized a gain from the reimbursement for the theft during 2013, so you have until December 31, 2015, to replace the property. Free ohio tax form 1040ez Main home in disaster area. Free ohio tax form 1040ez   For your main home (or its contents) located in a federally declared disaster area, the replacement period ends 4 years after the close of the first tax year in which you realize any part of your gain from the involuntary conversion. Free ohio tax form 1040ez See Disaster Area Losses , later. Free ohio tax form 1040ez Property in the Midwestern disaster areas. Free ohio tax form 1040ez   For property located in the Midwestern disaster areas (defined in Table 4 in the 2008 Publication 547) that was destroyed, damaged, stolen, or condemned, the replacement period ends 5 years after the close of the first tax year in which any part of your gain is realized. Free ohio tax form 1040ez This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Midwestern disaster areas. Free ohio tax form 1040ez Property in the Kansas disaster area. Free ohio tax form 1040ez   For property located in the Kansas disaster area that was destroyed, damaged, stolen, or condemned after May 3, 2007, as a result of the Kansas storms and tornadoes, the replacement period ends 5 years after the close of the first tax year in which any part of your gain is realized. Free ohio tax form 1040ez This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Kansas disaster area. Free ohio tax form 1040ez Property in the Hurricane Katrina disaster area. Free ohio tax form 1040ez   For property located in the Hurricane Katrina disaster area that was destroyed, damaged, stolen, or condemned after August 24, 2005, as a result of Hurricane Katrina, the replacement period ends 5 years after the close of the first tax year in which any part of your gain is realized. Free ohio tax form 1040ez This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. Free ohio tax form 1040ez Weather-related sales of livestock in an area eligible for federal assistance. Free ohio tax form 1040ez   For the sale or exchange of livestock due to drought, flood, or other weather-related conditions in an area eligible for federal assistance, the replacement period ends 4 years after the close of the first tax year in which you realize any part of your gain from the sale or exchange. Free ohio tax form 1040ez The IRS may extend the replacement period on a regional basis if the weather-related conditions continue for longer than 3 years. Free ohio tax form 1040ez   For information on extensions of the replacement period because of persistent drought, see Notice 2006-82, 2006-39 I. Free ohio tax form 1040ez R. Free ohio tax form 1040ez B. Free ohio tax form 1040ez 529, available at  www. Free ohio tax form 1040ez irs. Free ohio tax form 1040ez gov/irb/2006-39_IRB/ar11. Free ohio tax form 1040ez html. Free ohio tax form 1040ez For a list of counties for which exceptional, extreme, or severe drought was reported during the 12 months ending August 31, 2013, see Notice 2013-62, available at IRS. Free ohio tax form 1040ez gov. Free ohio tax form 1040ez Condemnation. Free ohio tax form 1040ez   The replacement period for a condemnation begins on the earlier of the following dates. Free ohio tax form 1040ez The date on which you disposed of the condemned property. Free ohio tax form 1040ez The date on which the threat of condemnation began. Free ohio tax form 1040ez The replacement period generally ends 2 years after the close of the first tax year in which any part of the gain on the condemnation is realized. Free ohio tax form 1040ez But see Main home in disaster area , Property in the Midwestern disaster areas , Property in the Kansas disaster area , and Property in the Hurricane Katrina disaster area , earlier, for exceptions. Free ohio tax form 1040ez Business or investment real property. Free ohio tax form 1040ez   If real property held for use in a trade or business or for investment (not including property held primarily for sale) is condemned, the replacement period ends 3 years after the close of the first tax year in which any part of the gain on the condemnation is realized. Free ohio tax form 1040ez Extension. Free ohio tax form 1040ez   You can apply for an extension of the replacement period. Free ohio tax form 1040ez Send your written application to the Internal Revenue Service Center where you file your tax return. Free ohio tax form 1040ez See your tax return instructions for the address. Free ohio tax form 1040ez Include all the details about your need for an extension. Free ohio tax form 1040ez Make your application before the end of the replacement period. Free ohio tax form 1040ez However, you can file an application within a reasonable time after the replacement period ends if you can show a good reason for the delay. Free ohio tax form 1040ez You will get an extension of the replacement period if you can show reasonable cause for not making the replacement within the regular period. Free ohio tax form 1040ez How To Postpone Gain You postpone reporting your gain by reporting your choice on your tax return for the year you have the gain. Free ohio tax form 1040ez You have the gain in the year you receive insurance proceeds or other reimbursements that result in a gain. Free ohio tax form 1040ez Required statement. Free ohio tax form 1040ez   You should attach a statement to your return for the year you have the gain. Free ohio tax form 1040ez This statement should include all the following information. Free ohio tax form 1040ez The date and details of the casualty, theft, or other involuntary conversion. Free ohio tax form 1040ez The insurance or other reimbursement you received. Free ohio tax form 1040ez How you figured the gain. Free ohio tax form 1040ez Replacement property acquired before return filed. Free ohio tax form 1040ez   If you acquire replacement property before you file your return for the year you have the gain, your statement should also include detailed information about all the following items. Free ohio tax form 1040ez The replacement property. Free ohio tax form 1040ez The postponed gain. Free ohio tax form 1040ez The basis adjustment that reflects the postponed gain. Free ohio tax form 1040ez Any gain you are reporting as income. Free ohio tax form 1040ez Replacement property acquired after return filed. Free ohio tax form 1040ez   If you intend to buy replacement property after you file your return for the year you realize gain, your statement should also say that you are choosing to replace the property within the required replacement period. Free ohio tax form 1040ez   You should then attach another statement to your return for the year in which you buy the replacement property. Free ohio tax form 1040ez This statement should contain detailed information on the replacement property. Free ohio tax form 1040ez If you acquire part of your replacement property in one year and part in another year, you must attach a statement to each year's return. Free ohio tax form 1040ez Include in the statement detailed information on the replacement property bought in that year. Free ohio tax form 1040ez Reporting weather-related sales of livestock. Free ohio tax form 1040ez   If you choose to postpone reporting the gain on weather-related sales or exchanges of livestock, show all the following information on a statement attached to your return for the tax year in which you first realize any of the gain. Free ohio tax form 1040ez Evidence of the weather-related conditions that forced the sale or exchange of the livestock. Free ohio tax form 1040ez The gain realized on the sale or exchange. Free ohio tax form 1040ez The number and kind of livestock sold or exchanged. Free ohio tax form 1040ez The number of livestock of each kind you would have sold or exchanged under your usual business practice. Free ohio tax form 1040ez   Show all the following information and the preceding information on the return for the year in which you replace the livestock. Free ohio tax form 1040ez The dates you bought the replacement property. Free ohio tax form 1040ez The cost of the replacement property. Free ohio tax form 1040ez Description of the replacement property (for example, the number and kind of the replacement livestock). Free ohio tax form 1040ez Amended return. Free ohio tax form 1040ez   You must file an amended return (Form 1040X) for the tax year of the gain in either of the following situations. Free ohio tax form 1040ez You do not acquire replacement property within the replacement period, plus extensions. Free ohio tax form 1040ez On this amended return, you must report the gain and pay any additional tax due. Free ohio tax form 1040ez You acquire replacement property within the required replacement period, plus extensions, but at a cost less than the amount you receive from the casualty, theft, or other involuntary conversion. Free ohio tax form 1040ez On this amended return, you must report the part of the gain that cannot be postponed and pay any additional tax due. Free ohio tax form 1040ez Disaster Area Losses Special rules apply to federally declared disaster area losses. Free ohio tax form 1040ez A federally declared disaster is a disaster that occurred in an area declared by the President to be eligible for federal assistance under the Robert T. Free ohio tax form 1040ez Stafford Disaster Relief and Emergency Assistance Act. Free ohio tax form 1040ez It includes a major disaster or emergency declaration under the act. Free ohio tax form 1040ez A list of the areas warranting public or individual assistance (or both) under the Act is available at the Federal Emergency Management Agency (FEMA) web site at www. Free ohio tax form 1040ez fema. Free ohio tax form 1040ez gov. Free ohio tax form 1040ez This part discusses the special rules for when to deduct a disaster area loss and what tax deadlines may be postponed. Free ohio tax form 1040ez For other special rules, see Disaster Area Losses in Publication 547. Free ohio tax form 1040ez When to deduct the loss. Free ohio tax form 1040ez   You generally must deduct a casualty loss in the year it occurred. Free ohio tax form 1040ez However, if you have a deductible loss from a disaster that occurred in an area warranting public or individual assistance (or both), you can choose to deduct that loss on your return or amended return for the tax year immediately preceding the tax year in which the disaster happened. Free ohio tax form 1040ez If you make this choice, the loss is treated as having occurred in the preceding year. Free ohio tax form 1040ez    Claiming a qualifying disaster loss on the previous year's return may result in a lower tax for that year, often producing or increasing a cash refund. Free ohio tax form 1040ez   You must make the choice to take your casualty loss for the disaster in the preceding year by the later of the following dates. Free ohio tax form 1040ez The due date (without extensions) for filing your tax return for the tax year in which the disaster actually occurred. Free ohio tax form 1040ez The due date (with extensions) for the return for the preceding tax year. Free ohio tax form 1040ez Federal disaster relief grants. Free ohio tax form 1040ez   Do not include post-disaster relief grants received under the Robert T. Free ohio tax form 1040ez Stafford Disaster Relief and Emergency Assistance Act in your income if the grant payments are made to help you meet necessary expenses or serious needs for medical, dental, housing, personal property, transportation, or funeral expenses. Free ohio tax form 1040ez Do not deduct casualty losses or medical expenses to the extent they are specifically reimbursed by these disaster relief grants. Free ohio tax form 1040ez If the casualty loss was specifically reimbursed by the grant and you received the grant after the year in which you deducted the casualty loss, see Reimbursement received after deducting loss , earlier. Free ohio tax form 1040ez Unemployment assistance payments under the Act are taxable unemployment compensation. Free ohio tax form 1040ez Qualified disaster relief payments. Free ohio tax form 1040ez   Qualified disaster relief payments are not included in the income of individuals to the extent any expenses compensated by these payments are not otherwise compensated for by insurance or other reimbursement. Free ohio tax form 1040ez These payments are not subject to income tax, self-employment tax, or employment taxes (social security, Medicare, and federal unemployment taxes). Free ohio tax form 1040ez No withholding applies to these payments. Free ohio tax form 1040ez   Qualified disaster relief payments include payments you receive (regardless of the source) for the following expenses. Free ohio tax form 1040ez Reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a federally declared disaster. Free ohio tax form 1040ez Reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence due to a federally declared disaster. Free ohio tax form 1040ez (A personal residence can be a rented residence or one you own. Free ohio tax form 1040ez ) Reasonable and necessary expenses incurred for the repair or replacement of the contents of a personal residence due to a federally declared disaster. Free ohio tax form 1040ez   Qualified disaster relief payments include amounts paid by a federal, state, or local government in connection with a federally declared disaster to individuals affected by the disaster. Free ohio tax form 1040ez    Qualified disaster relief payments do not include: Payments for expenses otherwise paid for by insurance or other reimbursements, or Income replacement payments, such as payments of lost wages, lost business income, or unemployment compensation. Free ohio tax form 1040ez Qualified disaster mitigation payments. Free ohio tax form 1040ez   Qualified disaster mitigation payments made under the Robert T. Free ohio tax form 1040ez Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act (as in effect on April 15, 2005) are not included in income. Free ohio tax form 1040ez These are payments you, as a property owner, receive to reduce the risk of future damage to your property. Free ohio tax form 1040ez You cannot increase your basis in property, or take a deduction or credit, for expenditures made with respect to those payments. Free ohio tax form 1040ez Sale of property under hazard mitigation program. Free ohio tax form 1040ez   Generally, if you sell or otherwise transfer property, you must recognize any gain or loss for tax purposes unless the property is your main home. Free ohio tax form 1040ez You report the gain or deduct the loss on your tax return for the year you realize it. Free ohio tax form 1040ez (You cannot deduct a loss on personal-use property unless the loss resulted from a casualty, as discussed earlier. Free ohio tax form 1040ez ) However, if you sell or otherwise transfer property to the Federal Government, a state or local government, or an Indian tribal government under a hazard mitigation program, you can choose to postpone reporting the gain if you buy qualifying replacement property within a certain period of time. Free ohio tax form 1040ez See Postponing Gain , earlier, for the rules that apply. Free ohio tax form 1040ez Other federal assistance programs. Free ohio tax form 1040ez    For more information about other federal assistance programs, see Crop Insurance and Crop Disaster Payments and Feed Assistance and Payments in chapter 3 earlier. Free ohio tax form 1040ez Postponed tax deadlines. Free ohio tax form 1040ez   The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a federally declared disaster. Free ohio tax form 1040ez The tax deadlines the IRS may postpone include those for filing income, excise, and employment tax returns, paying income, excise, and employment taxes, and making contributions to a traditional IRA or Roth IRA. Free ohio tax form 1040ez   If any tax deadline is postponed, the IRS will publicize the postponement in your area and publish a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). Free ohio tax form 1040ez Go to http://www. Free ohio tax form 1040ez irs. Free ohio tax form 1040ez gov/uac/Tax-Relief-in-Disaster-Situations to find out if a tax deadline has been postponed for your area. Free ohio tax form 1040ez Who is eligible. Free ohio tax form 1040ez   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. Free ohio tax form 1040ez Any individual whose main home is located in a covered disaster area (defined next). Free ohio tax form 1040ez Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. Free ohio tax form 1040ez Any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a covered disaster area. Free ohio tax form 1040ez Any individual, business entity, or sole proprietorship whose records are needed to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. Free ohio tax form 1040ez The main home or principal place of business does not have to be located in the covered disaster area. Free ohio tax form 1040ez Any estate or trust that has tax records necessary to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. Free ohio tax form 1040ez The spouse on a joint return with a taxpayer who is eligible for postponements. Free ohio tax form 1040ez Any individual, business entity, or sole proprietorship not located in a covered disaster area, but whose necessary records to meet a postponed tax deadline are located in the covered disaster area. Free ohio tax form 1040ez Any individual visiting the covered disaster area who was killed or injured as a result of the disaster. Free ohio tax form 1040ez Any other person determined by the IRS to be affected by a federally declared disaster. Free ohio tax form 1040ez Covered disaster area. Free ohio tax form 1040ez   This is an area of a federally declared disaster area in which the IRS has decided to postpone tax deadlines for up to 1 year. Free ohio tax form 1040ez Abatement of interest and penalties. Free ohio tax form 1040ez   The IRS may abate the interest and penalties on the underpaid income tax for the length of any postponement of tax deadlines. Free ohio tax form 1040ez Reporting Gains and Losses You will have to file one or more of the following forms to report your gains or losses from involuntary conversions. Free ohio tax form 1040ez Form 4684. Free ohio tax form 1040ez   Use this form to report your gains and losses from casualties and thefts. Free ohio tax form 1040ez Form 4797. Free ohio tax form 1040ez   Use this form to report involuntary conversions (other than from casualty or theft) of property used in your trade or business and capital assets held in connection with a trade or business or a transaction entered into for profit. Free ohio tax form 1040ez Also use this form if you have a gain from a casualty or theft on trade, business or income-producing property held for more than 1 year and you have to recapture some or all of your gain as ordinary income. Free ohio tax form 1040ez Form 8949. Free ohio tax form 1040ez   Use this form to report gain from an involuntary conversion (other than from casualty or theft) of personal-use property. Free ohio tax form 1040ez Schedule A (Form 1040). Free ohio tax form 1040ez   Use this form to deduct your losses from casualties and thefts of personal-use property and income-producing property, that you reported on Form 4684. Free ohio tax form 1040ez Schedule D (Form 1040). Free ohio tax form 1040ez   Use this form to carry over the following gains. Free ohio tax form 1040ez Net gain shown on Form 4797 from an involuntary conversion of business property held for more than 1 year. Free ohio tax form 1040ez Net gain shown on Form 4684 from the casualty or theft of personal-use property. Free ohio tax form 1040ez    Also use this form to figure the overall gain or loss from transactions reported on Form 8949. Free ohio tax form 1040ez Schedule F (Form 1040). Free ohio tax form 1040ez   Use this form to deduct your losses from casualty or theft of livestock or produce bought for sale under Other expenses in Part II, line 32, if you use the cash method of accounting and have not otherwise deducted these losses. Free ohio tax form 1040ez Prev  Up  Next   Home   More Online Publications
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Understanding your CP259H Notice

We sent you this notice because our records indicate you are a tax-exempt political organization and you did not file a required Form 990/990-EZ, Return of Organization Exempt From Income Tax.

Printable samples of this notice (PDF)

Tax publications you may find useful

How to get help

Calling the 1-800 number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).
 


What you need to do

  • Disregard this notice if you have filed the return within the last four weeks using the same name and EIN listed on the notice.
  • Otherwise, file your required Form 990 or Form 990-EZ immediately according to the instructions on the notice.
    • If you don't think you need to file, complete the Response form enclosed with your notice and mail it to us using the envelope provided.
    • If you filed more than four weeks ago or used a different name or EIN, complete the Response form enclosed with your notice and mail it to us in the envelope provided along with a signed and dated copy of the return.

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Answers to Common Questions

Which political organizations must file a Form 990 or Form 990-EZ?
A tax-exempt political organization must file Form 990 or 990-EZ if it has gross receipts of $25,000 or more, unless excepted. A political organization that is a qualified state or local political organization must file Form 990 or 990-EZ only if it has gross receipts of $100,000 or more. Political organizations may not submit Form 990-N.

When is Form 990 or Form 990-EZ due?
Form 990 or 990-EZ is due by the 15th day of the 5th month after the end of the tax year. Thus, for a calendar year taxpayer, Form 990 or Form 990-EZ is due on May 15 of the following year. If any due date falls on a Saturday, Sunday or legal holiday, the organization can file the return on the next business day.

Can I get help over the phone?
If you have questions and/or need help completing the form, please call 1-877-829-5500. Personal assistance is available Monday through Friday, 7:00 a.m. to 7:00 p.m. CT.

Where can I go for more information about tax-exempt organizations?
For more information on tax-exempt organizations see Tax Information for Charities & Other Non-Profits.


Tips for next year

Review the political organization resources at Tax Information for Political Organizations.


Understanding your notice

Reading your notice
Your notice may look different from the sample because the information contained in your notice is tailored to your situation.

Notice CP259H, Page 1

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Notice CP259H, Page 3

Notice CP259H, Page 4

Page Last Reviewed or Updated: 29-Mar-2014

The Free Ohio Tax Form 1040ez

Free ohio tax form 1040ez 4. Free ohio tax form 1040ez   Unrelated Business Taxable Income Table of Contents IncomeExclusions Dues of Agricultural Organizations and Business Leagues DeductionsDirectly Connected Exploitation of Exempt Activity—Advertising Sales Modifications Partnership Income or Loss S Corporation Income or Loss Special Rules for Foreign Organizations Special Rules for Social Clubs, VEBAs, SUBs, and GLSOsIncome that is set aside. Free ohio tax form 1040ez Special Rules for Veterans' Organizations Income From Controlled OrganizationsAddition to tax for valuation misstatements. Free ohio tax form 1040ez Net unrelated income. Free ohio tax form 1040ez Net unrelated loss. Free ohio tax form 1040ez Control. Free ohio tax form 1040ez Income from property financed with qualified 501(c)(3) bonds. Free ohio tax form 1040ez Disposition of property received from taxable subsidiary and used in unrelated business. Free ohio tax form 1040ez Income From Debt-Financed Property Debt-Financed PropertyAcquisition Indebtedness Computation of Debt-Financed Income Deductions for Debt-Financed Property Allocation Rules How to Get Tax Help The term “unrelated business taxable income” generally means the gross income derived from any unrelated trade or business regularly conducted by the exempt organization, less the deductions directly connected with carrying on the trade or business. Free ohio tax form 1040ez If an organization regularly carries on two or more unrelated business activities, its unrelated business taxable income is the total of gross income from all such activities less the total allowable deductions attributable to all the activities. Free ohio tax form 1040ez In computing unrelated business taxable income, gross income and deductions are subject to the modifications and special rules explained in this chapter. Free ohio tax form 1040ez Whether a particular item of income or expense falls within any of these modifications or special rules must be determined by all the facts and circumstances in each specific case. Free ohio tax form 1040ez For example, if the organization received a payment termed rent that is in fact a return of profits by a person operating the property for the benefit of the organization, or that is a share of the profits retained by the organization as a partner or joint venturer, the payment is not within the income exclusion for rents, discussed later under Exclusions. Free ohio tax form 1040ez Income Generally, unrelated business income is taxable, but there are exclusions and special rules that must be considered when figuring the income. Free ohio tax form 1040ez Exclusions The following types of income (and deductions directly connected with the income) are generally excluded when figuring unrelated business taxable income. Free ohio tax form 1040ez Dividends, interest, annuities and other investment income. Free ohio tax form 1040ez   All dividends, interest, annuities, payments with respect to securities loans, income from notional principal contracts, and other income from an exempt organization's ordinary and routine investments that the IRS determines are substantially similar to these types of income are excluded in computing unrelated business taxable income. Free ohio tax form 1040ez Exception for insurance activity income of a controlled foreign corporation. Free ohio tax form 1040ez   This exclusion does not apply to income from certain insurance activities of an exempt organization's controlled foreign corporation. Free ohio tax form 1040ez The income is not excludable dividend income, but instead is unrelated business taxable income to the extent it would be so treated if the exempt organization had earned it directly. Free ohio tax form 1040ez Certain exceptions to this rule apply. Free ohio tax form 1040ez For more information, see section 512(b)(17). Free ohio tax form 1040ez Other exceptions. Free ohio tax form 1040ez   This exclusion does not apply to unrelated debt-financed income (discussed under Income From Debt-Financed Property, later), to interest or annuities received from a controlled corporation (discussed under Income From Controlled Organizations, later). Free ohio tax form 1040ez Income from lending securities. Free ohio tax form 1040ez   Payments received with respect to a security loan are excluded in computing unrelated business taxable income only if the loan is made under an agreement that:    Provides for the return to the exempt organization of securities identical to the securities loaned, Requires payments to the organization of amounts equivalent to all interest, dividends, and other distributions that the owner of the securities is entitled to receive during the period of the loan, Does not reduce the organization's risk of loss or opportunity for gain on the securities, Contains reasonable procedures to implement the obligation of the borrower to furnish collateral to the organization with a fair market value each business day during the period of the loan in an amount not less than the fair market value of the securities at the close of the preceding business day, and Permits the organization to terminate the loan upon notice of not more than 5 business days. Free ohio tax form 1040ez   Payments with respect to securities loans include: Amounts in respect of dividends, interest, and other distributions, Fees based on the period of time the loan is in effect and the fair market value of the security during that period, Income from collateral security for the loan, and Income from the investment of collateral security. Free ohio tax form 1040ez The payments are considered to be from the securities loaned and not from collateral security or the investment of collateral security from the loans. Free ohio tax form 1040ez Any deductions that are directly connected with collateral security for the loan, or with the investment of collateral security, are considered deductions that are directly connected with the securities loaned. Free ohio tax form 1040ez Royalties. Free ohio tax form 1040ez   Royalties, including overriding royalties, are excluded in computing unrelated business taxable income. Free ohio tax form 1040ez   To be considered a royalty, a payment must relate to the use of a valuable right. Free ohio tax form 1040ez Payments for trademarks, trade names, or copyrights are ordinarily considered royalties. Free ohio tax form 1040ez Similarly, payments for the use of a professional athlete's name, photograph, likeness, or facsimile signature are ordinarily considered royalties. Free ohio tax form 1040ez However, royalties do not include payments for personal services. Free ohio tax form 1040ez Therefore, payments for personal appearances and interviews are not excluded as royalties and must be included in figuring unrelated business taxable income. Free ohio tax form 1040ez   Unrelated business taxable income does not include royalty income received from licensees by an exempt organization that is the legal and beneficial owner of patents assigned to it by inventors for specified percentages of future royalties. Free ohio tax form 1040ez   Mineral royalties are excluded whether measured by production or by gross or taxable income from the mineral property. Free ohio tax form 1040ez However, the exclusion does not apply to royalties that stem from an arrangement whereby the organization owns a working interest in a mineral property and is liable for its share of the development and operating costs under the terms of its agreement with the operator of the property. Free ohio tax form 1040ez To the extent they are not treated as loans under section 636 (relating to income tax treatment of mineral production payments), payments for mineral production are treated in the same manner as royalty payments for the purpose of computing unrelated business taxable income. Free ohio tax form 1040ez To the extent they are treated as loans, any payments for production that are the equivalent of interest are treated as interest and are excluded. Free ohio tax form 1040ez Exceptions. Free ohio tax form 1040ez   This exclusion does not apply to debt-financed income (discussed under Income From Debt-Financed Property, later) or to royalties received from a controlled corporation (discussed under Income From Controlled Organizations, later). Free ohio tax form 1040ez Rents. Free ohio tax form 1040ez   Rents from real property, including elevators and escalators, are excluded in computing unrelated business taxable income. Free ohio tax form 1040ez Rents from personal property are not excluded. Free ohio tax form 1040ez However, special rules apply to “mixed leases” of both real and personal property. Free ohio tax form 1040ez Mixed leases. Free ohio tax form 1040ez   In a mixed lease, all of the rents are excluded if the rents attributable to the personal property are not more than 10% of the total rents under the lease, as determined when the personal property is first placed in service by the lessee. Free ohio tax form 1040ez If the rents attributable to personal property are more than 10% but not more than 50% of the total rents, only the rents attributable to the real property are excluded. Free ohio tax form 1040ez If the rents attributable to the personal property are more than 50% of the total rents, none of the rents are excludable. Free ohio tax form 1040ez   Property is placed in service when the lessee first may use it under the terms of a lease. Free ohio tax form 1040ez For example, property subject to a lease entered into on November 1, for a term starting on January 1 of the next year, is considered placed in service on January 1, regardless of when the lessee first actually uses it. Free ohio tax form 1040ez   If separate leases are entered into for real and personal property and the properties have an integrated use (for example, one or more leases for real property and another lease or leases for personal property to be used on the real property), all the leases will be considered as one lease. Free ohio tax form 1040ez   The rent attributable to the personal property must be recomputed, and the treatment of the rents must be redetermined, if: The rent attributable to all the leased personal property increases by 100% or more because additional or substitute personal property is placed in service, or The lease is modified to change the rent charged (whether or not the amount of rented personal property changes). Free ohio tax form 1040ez Any change in the treatment of rents resulting from the recomputation is effective only for the period beginning with the event that caused the recomputation. Free ohio tax form 1040ez Exception for rents based on net profit. Free ohio tax form 1040ez   The exclusion for rents does not apply if the amount of the rent depends on the income or profits derived by any person from the leased property, other than an amount based on a fixed percentage of the gross receipts or sales. Free ohio tax form 1040ez Exception for income from personal services. Free ohio tax form 1040ez   Payment for occupying space when personal services are also rendered to the occupant does not constitute rent from real property. Free ohio tax form 1040ez Therefore, the exclusion does not apply to transactions such as renting hotel rooms, rooms in boarding houses or tourist homes, and space in parking lots or warehouses. Free ohio tax form 1040ez Other exceptions. Free ohio tax form 1040ez   This exclusion does not apply to unrelated debt-financed income (discussed under Income From Debt-Financed Property, later), or to interest, annuities, royalties and rents received from a controlled corporation (discussed under Income From Controlled Organizations, later), investment income (dividends, interest, rents, etc. Free ohio tax form 1040ez ) received by organizations described in sections 501(c)(7), 501(c)(9), 501(c)(17), and 501(c)(20). Free ohio tax form 1040ez See Special Rules for Social Clubs, VEBAs, SUBs, and GLSOs, discussed later for more information. Free ohio tax form 1040ez Income from research. Free ohio tax form 1040ez   A tax-exempt organization may exclude income from research grants or contracts from unrelated business taxable income. Free ohio tax form 1040ez However, the extent of the exclusion depends on the nature of the organization and the type of research. Free ohio tax form 1040ez   Income from research for the United States, any of its agencies or instrumentalities, or a state or any of its political subdivisions is excluded when computing unrelated business taxable income. Free ohio tax form 1040ez   For a college, university, or hospital, all income from research, whether fundamental or applied, is excluded in computing unrelated business taxable income. Free ohio tax form 1040ez   When an organization is operated primarily to conduct fundamental research (as distinguished from applied research) and the results are freely available to the general public, all income from research performed for any person is excluded in computing unrelated business taxable income. Free ohio tax form 1040ez   The term research, for this purpose, does not include activities of a type normally conducted as an incident to commercial or industrial operations, such as testing or inspecting materials or products, or designing or constructing equipment, buildings, etc. Free ohio tax form 1040ez In addition, the term fundamental research does not include research conducted for the primary purpose of commercial or industrial application. Free ohio tax form 1040ez Gains and losses from disposition of property. Free ohio tax form 1040ez   Also excluded from unrelated business taxable income are gains or losses from the sale, exchange, or other disposition of property other than: Stock in trade or other property of a kind that would properly be includable in inventory if on hand at the close of the tax year, Property held primarily for sale to customers in the ordinary course of a trade or business, or Cutting of timber that an organization has elected to consider as a sale or exchange of the timber. Free ohio tax form 1040ez   It should be noted that the last exception relates only to cut timber. Free ohio tax form 1040ez The sale, exchange, or other disposition of standing timber is excluded from the computation of unrelated business income, unless it constitutes property held for sale to customers in the ordinary course of business. Free ohio tax form 1040ez Lapse or termination of options. Free ohio tax form 1040ez   Any gain from the lapse or termination of options to buy or sell securities is excluded from unrelated business taxable income. Free ohio tax form 1040ez The exclusion applies only if the option is written in connection with the exempt organization's investment activities. Free ohio tax form 1040ez Therefore, this exclusion is not available if the organization is engaged in the trade or business of writing options or the options are held by the organization as inventory or for sale to customers in the ordinary course of a trade or business. Free ohio tax form 1040ez Exception. Free ohio tax form 1040ez   This exclusion does not apply to unrelated debt-financed income, discussed later under Income From Debt-Financed Property. Free ohio tax form 1040ez Gain or loss on disposition of certain brownfield property. Free ohio tax form 1040ez   Gain or loss from the qualifying sale, exchange, or other disposition of a qualifying brownfield property (as defined in section 512(b)(19)(C)), which was acquired by the organization after December 31, 2005 and before January 1, 2011, is excluded from unrelated business taxable income and is excepted from the debt-financed rules for such property. Free ohio tax form 1040ez See sections 512(b)(19) and 514(b)(1)(E). Free ohio tax form 1040ez Income from services provided under federal license. Free ohio tax form 1040ez   There is a further exclusion from unrelated business taxable income of income from a trade or business conducted by a religious order or by an educational organization maintained by the order. Free ohio tax form 1040ez   This exclusion applies only if the following requirements are met. Free ohio tax form 1040ez The trade or business must have been operated by the order or by the institution before May 27, 1959. Free ohio tax form 1040ez The trade or business must provide services under a license issued by a federal regulatory agency. Free ohio tax form 1040ez More than 90% of the net income from the business for the tax year must be devoted to religious, charitable, or educational purposes that constitute the basis for the religious order's exemption. Free ohio tax form 1040ez The rates or other charges for these services must be fully competitive with the rates or other charges of similar taxable businesses. Free ohio tax form 1040ez Rates or other charges for these services will be considered as fully competitive if they are neither materially higher nor materially lower than the rates charged by similar businesses operating in the same general area. Free ohio tax form 1040ez Exception. Free ohio tax form 1040ez    This exclusion does not apply to unrelated debt-financed income (discussed under Income From Debt-Financed Property, later). Free ohio tax form 1040ez Member income of mutual or cooperative electric companies. Free ohio tax form 1040ez   Income of a mutual or cooperative electric company described in section 501(c)(12) which is treated as member income under subparagraph (H) of that section is excluded from unrelated business taxable income. Free ohio tax form 1040ez Dues of Agricultural Organizations and Business Leagues Dues received from associate members by organizations exempt under section 501(c)(5) or section 501(c)(6) may be treated as gross income from an unrelated trade or business if the associate member category exists for the principal purpose of producing unrelated business income. Free ohio tax form 1040ez For example, if an organization creates an associate member category solely to allow associate members to purchase insurance through the organization, the associate member dues may be unrelated business income. Free ohio tax form 1040ez Exception. Free ohio tax form 1040ez   Associate member dues received by an agricultural or horticultural organization are not treated as gross income from an unrelated trade or business, regardless of their purpose, if they are not more than the annual limit. Free ohio tax form 1040ez The limit on dues paid by an associate member is $148 for 2011. Free ohio tax form 1040ez   If the required annual dues are more than the limit, the entire amount is treated as income from an unrelated business unless the associate member category was formed or availed of for the principal purpose of furthering the organization's exempt purposes. Free ohio tax form 1040ez Deductions To qualify as allowable deductions in computing unrelated business taxable income, the expenses, depreciation, and similar items generally must be allowable income tax deductions that are directly connected with carrying on an unrelated trade or business. Free ohio tax form 1040ez They cannot be directly connected with excluded income. Free ohio tax form 1040ez For an exception to the “directly connected” requirement, see Charitable contributions deduction, under Modifications, later. Free ohio tax form 1040ez Directly Connected To be directly connected with the conduct of an unrelated business, deductions must have a proximate and primary relationship to carrying on that business. Free ohio tax form 1040ez For an exception, see Expenses attributable to exploitation of exempt activities, later. Free ohio tax form 1040ez Expenses attributable solely to unrelated business. Free ohio tax form 1040ez   Expenses, depreciation, and similar items attributable solely to the conduct of an unrelated business are proximately and primarily related to that business and qualify for deduction to the extent that they are otherwise allowable income tax deductions. Free ohio tax form 1040ez   For example, salaries of personnel employed full-time to conduct the unrelated business and depreciation of a building used entirely in the conduct of that business are deductible to the extent otherwise allowable. Free ohio tax form 1040ez Expenses attributable to dual use of facilities or personnel. Free ohio tax form 1040ez   When facilities or personnel are used both to conduct exempt functions and to conduct an unrelated trade or business, expenses, depreciation, and similar items attributable to the facilities or personnel must be allocated between the two uses on a reasonable basis. Free ohio tax form 1040ez The part of an item allocated to the unrelated trade or business is proximately and primarily related to that business and is allowable as a deduction in computing unrelated business taxable income if the expense is otherwise an allowable income tax deduction. Free ohio tax form 1040ez Example 1. Free ohio tax form 1040ez A school recognized as a tax-exempt organization contracts with an individual to conduct a summer tennis camp. Free ohio tax form 1040ez The school provides the tennis courts, housing, and dining facilities. Free ohio tax form 1040ez The contracted individual hires the instructors, recruits campers, and provides supervision. Free ohio tax form 1040ez The income the school receives from this activity is from a dual use of the facilities and personnel. Free ohio tax form 1040ez The school, in computing its unrelated business taxable income, may deduct an allocable part of the expenses attributable to the facilities and personnel. Free ohio tax form 1040ez Example 2. Free ohio tax form 1040ez An exempt organization with gross income from an unrelated trade or business pays its president $90,000 a year. Free ohio tax form 1040ez The president devotes approximately 10% of his time to the unrelated business. Free ohio tax form 1040ez To figure the organization's unrelated business taxable income, a deduction of $9,000 ($90,000 × 10%) is allowed for the salary paid to its president. Free ohio tax form 1040ez Expenses attributable to exploitation of exempt activities. Free ohio tax form 1040ez   Generally, expenses, depreciation, and similar items attributable to the conduct of an exempt activity are not deductible in computing unrelated business taxable income from an unrelated trade or business that exploits the exempt activity. Free ohio tax form 1040ez (See Exploitation of exempt functions under Not substantially related in chapter 3. Free ohio tax form 1040ez ) This is because they do not have a proximate and primary relationship to the unrelated trade or business, and therefore, they do not qualify as directly connected with that business. Free ohio tax form 1040ez Exception. Free ohio tax form 1040ez   Expenses, depreciation, and similar items may be treated as directly connected with the conduct of the unrelated business if all the following statements are true. Free ohio tax form 1040ez The unrelated business exploits the exempt activity. Free ohio tax form 1040ez The unrelated business is a type normally conducted for profit by taxable organizations. Free ohio tax form 1040ez The exempt activity is a type normally conducted by taxable organizations in carrying on that type of business. Free ohio tax form 1040ez The amount treated as directly connected is the smaller of: The excess of these expenses, depreciation, and similar items over the income from, or attributable to, the exempt activity; or The gross unrelated business income reduced by all other expenses, depreciation, and other items that are actually directly connected. Free ohio tax form 1040ez   The application of these rules to an advertising activity that exploits an exempt publishing activity is explained next. Free ohio tax form 1040ez Exploitation of Exempt Activity—Advertising Sales The sale of advertising in a periodical of an exempt organization that contains editorial material related to the accomplishment of the organization's exempt purpose is an unrelated business that exploits an exempt activity, the circulation and readership of the periodical. Free ohio tax form 1040ez Therefore, in addition to direct advertising costs, exempt activity costs (expenses, depreciation, and similar expenses attributable to the production and distribution of the editorial or readership content) can be treated as directly connected with the conduct of the advertising activity. Free ohio tax form 1040ez (See Expenses attributable to exploitation of exempt activities under Directly Connected, earlier. Free ohio tax form 1040ez ) Figuring unrelated business taxable income (UBTI). Free ohio tax form 1040ez   The UBTI of an advertising activity is the amount shown in the following chart. Free ohio tax form 1040ez IF gross advertising income is . Free ohio tax form 1040ez . Free ohio tax form 1040ez . Free ohio tax form 1040ez THEN UBTI is . Free ohio tax form 1040ez . Free ohio tax form 1040ez . Free ohio tax form 1040ez More than direct advertising costs The excess advertising income, reduced (but not below zero) by the excess, if any, of readership costs over circulation income. Free ohio tax form 1040ez Equal to or less than direct advertising costs Zero. Free ohio tax form 1040ez   • Circulation income and readership costs are not taken into account. Free ohio tax form 1040ez   • Any excess advertising costs reduce (but not below zero) UBTI from any other unrelated business activity. Free ohio tax form 1040ez   The terms used in the chart are explained in the following discussions. Free ohio tax form 1040ez Periodical Income Gross advertising income. Free ohio tax form 1040ez   This is all the income from the unrelated advertising activities of an exempt organization periodical. Free ohio tax form 1040ez Circulation income. Free ohio tax form 1040ez   This is all the income from the production, distribution, or circulation of an exempt organization's periodical (other than gross advertising income). Free ohio tax form 1040ez It includes all amounts from the sale or distribution of the readership content of the periodical, such as income from subscriptions. Free ohio tax form 1040ez It also includes allocable membership receipts if the right to receive the periodical is associated with a membership or similar status in the organization. Free ohio tax form 1040ez Allocable membership receipts. Free ohio tax form 1040ez   This is the part of membership receipts (dues, fees, or other charges associated with membership) equal to the amount that would have been charged and paid for the periodical if: The periodical was published by a taxable organization, The periodical was published for profit, and The member was an unrelated party dealing with the taxable organization at arm's length. Free ohio tax form 1040ez   The amount used to allocate membership receipts is the amount shown in the following chart. Free ohio tax form 1040ez   For this purpose, the total periodical costs are the sum of the direct advertising costs and the readership costs, explained under Periodical Costs, later. Free ohio tax form 1040ez The cost of other exempt activities means the total expenses incurred by the organization in connection with its other exempt activities, not offset by any income earned by the organization from those activities. Free ohio tax form 1040ez IF . Free ohio tax form 1040ez . Free ohio tax form 1040ez . Free ohio tax form 1040ez THEN the amount used to allocate membership receipts is . Free ohio tax form 1040ez . Free ohio tax form 1040ez . Free ohio tax form 1040ez 20% or more of the total circulation consists of sales to nonmembers The subscription price charged nonmembers. Free ohio tax form 1040ez The above condition does not apply, and 20% or more of the members pay reduced dues because they do not receive the periodical The reduction in dues for a member not receiving the periodical. Free ohio tax form 1040ez Neither of the above conditions applies The membership receipts multiplied by this fraction:   Total periodical costs Total periodical costs Plus Cost of other exempt activities Example 1. Free ohio tax form 1040ez U is an exempt scientific organization with 10,000 members who pay annual dues of $15. Free ohio tax form 1040ez One of U's activities is publishing a monthly periodical distributed to all of its members. Free ohio tax form 1040ez U also distributes 5,000 additional copies of its periodical to nonmembers, who subscribe for $10 a year. Free ohio tax form 1040ez Since the nonmember circulation of U's periodical represents one-third (more than 20%) of its total circulation, the subscription price charged to nonmembers is used to determine the part of U's membership receipts allocable to the periodical. Free ohio tax form 1040ez Thus, U's allocable membership receipts are $100,000 ($10 times 10,000 members), and U's total circulation income for the periodical is $150,000 ($100,000 from members plus $50,000 from sales to nonmembers). Free ohio tax form 1040ez Example 2. Free ohio tax form 1040ez Assume the same facts except that U sells only 500 copies of its periodical to nonmembers, at a price of $10 a year. Free ohio tax form 1040ez Assume also that U's members may elect not to receive the periodical, in which case their dues are reduced from $15 a year to $6 a year, and that only 3,000 members elect to receive the periodical and pay the full dues of $15 a year. Free ohio tax form 1040ez U's stated subscription price of $9 to members consistently results in an excess of total income (including gross advertising income) attributable to the periodical over total costs of the periodical. Free ohio tax form 1040ez Since the 500 copies of the periodical distributed to nonmembers represent only 14% of the 3,500 copies distributed, the $10 subscription price charged to nonmembers is not used to determine the part of membership receipts allocable to the periodical. Free ohio tax form 1040ez Instead, since 70% of the members elect not to receive the periodical and pay $9 less per year in dues, the $9 price is used to determine the subscription price charged to members. Free ohio tax form 1040ez Thus, the allocable membership receipts will be $9 a member, or $27,000 ($9 times 3,000 copies). Free ohio tax form 1040ez U's total circulation income is $32,000 ($27,000 plus the $5,000 from nonmember subscriptions). Free ohio tax form 1040ez Periodical Costs Direct advertising costs. Free ohio tax form 1040ez   These are expenses, depreciation, and similar items of deduction directly connected with selling and publishing advertising in the periodical. Free ohio tax form 1040ez   Examples of allowable deductions under this classification include agency commissions and other direct selling costs, such as transportation and travel expenses, office salaries, promotion and research expenses, and office overhead directly connected with the sale of advertising lineage in the periodical. Free ohio tax form 1040ez Also included are other deductions commonly classified as advertising costs under standard account classifications, such as artwork and copy preparation, telephone, telegraph, postage, and similar costs directly connected with advertising. Free ohio tax form 1040ez   In addition, direct advertising costs include the part of mechanical and distribution costs attributable to advertising lineage. Free ohio tax form 1040ez For this purpose, the general account classifications of items includable in mechanical and distribution costs ordinarily employed in business-paper and consumer-publication accounting provide a guide for the computation. Free ohio tax form 1040ez Accordingly, the mechanical and distribution costs include the part of the costs and other expenses of composition, press work, binding, mailing (including paper and wrappers used for mailing), and bulk postage attributable to the advertising lineage of the publication. Free ohio tax form 1040ez   In the absence of specific and detailed records, the part of mechanical and distribution costs attributable to the periodical's advertising lineage can be based on the ratio of advertising lineage to total lineage in the periodical, if this allocation is reasonable. Free ohio tax form 1040ez Readership costs. Free ohio tax form 1040ez   These are all expenses, depreciation, and similar items that are directly connected with the production and distribution of the readership content of the periodical. Free ohio tax form 1040ez Costs partly attributable to other activities. Free ohio tax form 1040ez   Deductions properly attributable to exempt activities other than publishing the periodical may not be allocated to the periodical. Free ohio tax form 1040ez When expenses are attributable both to the periodical and to the organization's other activities, an allocation must be made on a reasonable basis. Free ohio tax form 1040ez The method of allocation will vary with the nature of the item, but once adopted, should be used consistently. Free ohio tax form 1040ez Allocations based on dollar receipts from various exempt activities generally are not reasonable since receipts usually do not accurately reflect the costs associated with specific activities that an exempt organization conducts. Free ohio tax form 1040ez Consolidated Periodicals If an exempt organization publishes more than one periodical to produce income, it may treat all of them (but not less than all) as one in determining unrelated business taxable income from selling advertising. Free ohio tax form 1040ez It treats the gross income from all the periodicals, and the deductions directly connected with them, on a consolidated basis. Free ohio tax form 1040ez Consolidated treatment, once adopted, must be followed consistently and is binding. Free ohio tax form 1040ez This treatment can be changed only with the consent of the Internal Revenue Service. Free ohio tax form 1040ez An exempt organization's periodical is published to produce income if: The periodical generates gross advertising income to the organization equal to at least 25% of its readership costs, and Publishing the periodical is an activity engaged in for profit. Free ohio tax form 1040ez Whether the publication of a periodical is an activity engaged in for profit can be determined only by all the facts and circumstances in each case. Free ohio tax form 1040ez The facts and circumstances must show that the organization carries on the activity for economic profit, although there may not be a profit in a particular year. Free ohio tax form 1040ez For example, if an organization begins publishing a new periodical whose total costs exceed total income in the start-up years because of lack of advertising sales, that does not mean that the organization did not have as its objective an economic profit. Free ohio tax form 1040ez The organization may establish that it had this objective by showing it can reasonably expect advertising sales to increase, so that total income will exceed costs within a reasonable time. Free ohio tax form 1040ez Example. Free ohio tax form 1040ez Y, an exempt trade association, publishes three periodicals that it distributes to its members: a weekly newsletter, a monthly magazine, and a quarterly journal. Free ohio tax form 1040ez Both the monthly magazine and the quarterly journal contain advertising that accounts for gross advertising income equal to more than 25% of their respective readership costs. Free ohio tax form 1040ez Similarly, the total income attributable to each periodical has exceeded the total deductions attributable to each periodical for substantially all the years they have been published. Free ohio tax form 1040ez The newsletter carries no advertising and its annual subscription price is not intended to cover the cost of publication. Free ohio tax form 1040ez The newsletter is a service that Y distributes to all of its members in an effort to keep them informed of changes occurring in the business world. Free ohio tax form 1040ez It is not engaged in for profit. Free ohio tax form 1040ez Under these circumstances, Y may consolidate the income and deductions from the monthly and quarterly journals in computing its unrelated business taxable income. Free ohio tax form 1040ez It may not consolidate the income and deductions from the newsletter with the income and deductions of its other periodicals, since the newsletter is not published for the production of income. Free ohio tax form 1040ez Modifications Net operating loss deduction. Free ohio tax form 1040ez   The net operating loss (NOL) deduction (as provided in section 172) is allowed in computing unrelated business taxable income. Free ohio tax form 1040ez However, the NOL for any tax year, the carrybacks and carryovers of NOLs, and the NOL deduction are determined without taking into account any amount of income or deduction that has been specifically excluded in computing unrelated business taxable income. Free ohio tax form 1040ez For example, a loss from an unrelated trade or business is not diminished because dividend income was received. Free ohio tax form 1040ez   If this were not done, organizations would, in effect, be taxed on their exempt income, since unrelated business losses then would be offset by dividends, interest, and other excluded income. Free ohio tax form 1040ez This would reduce the loss that could be applied against unrelated business income of prior or future tax years. Free ohio tax form 1040ez Therefore, to preserve the immunity of exempt income, all NOL computations are limited to those items of income and deductions that affect the unrelated business taxable income. Free ohio tax form 1040ez   In line with this concept, an NOL carryback or carryover is allowed only from a tax year for which the organization is subject to tax on unrelated business income. Free ohio tax form 1040ez   For example, if an organization just became subject to the tax last year, its NOL for that year is not a carryback to a prior year when it had no unrelated business taxable income, nor is its NOL carryover to succeeding years reduced by the related income of those prior years. Free ohio tax form 1040ez   However, in determining the span of years for which an NOL may be carried back or forward, the tax years for which the organization is not subject to the tax on unrelated business income are counted. Free ohio tax form 1040ez For example, if an organization was subject to the tax for 2009 and had an NOL for that year, the last tax year to which any part of that loss may be carried over is 2029, regardless of whether the organization was subject to the unrelated business income tax in any of the intervening years. Free ohio tax form 1040ez   For more details on the NOL deduction, including property eligible for an extended carryback period, see sections 172 and 1400N, Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts, and Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. Free ohio tax form 1040ez Charitable contributions deduction. Free ohio tax form 1040ez   An exempt organization is allowed to deduct its charitable contributions in computing its unrelated business taxable income whether or not the contributions are directly connected with the unrelated business. Free ohio tax form 1040ez   To be deductible, the contribution must be paid to another qualified organization. Free ohio tax form 1040ez For example, an exempt university that operates an unrelated business may deduct a contribution made to another university for educational work, but may not claim a deduction for contributions of amounts spent for carrying out its own educational program. Free ohio tax form 1040ez   For purposes of the deduction, a distribution by a trust made under the trust instrument to a beneficiary, which itself is a qualified organization, is treated the same as a contribution. Free ohio tax form 1040ez Deduction limits. Free ohio tax form 1040ez   An exempt organization that is subject to the unrelated business income tax at corporate rates is allowed a deduction for charitable contributions up to 10% of its unrelated business taxable income computed without regard to the deduction for contributions. Free ohio tax form 1040ez See the Instructions for Form 990-T for more information. Free ohio tax form 1040ez    An exempt trust that is subject to the unrelated business income tax at trust rates generally is allowed a deduction for charitable contributions in the same amounts as allowed for individuals. Free ohio tax form 1040ez However, the limit on the deduction is determined in relation to the trust's unrelated business taxable income computed without regard to the deduction, rather than in relation to adjusted gross income. Free ohio tax form 1040ez   Contributions in excess of the limits just described may be carried over to the next 5 tax years. Free ohio tax form 1040ez A contribution carryover is not allowed, however, to the extent that it increases an NOL carryover. Free ohio tax form 1040ez Suspension of deduction limits for farmers and ranchers. Free ohio tax form 1040ez   The limitations discussed above are temporarily suspended for certain qualified conservation contributions of property used in agriculture or livestock production. Free ohio tax form 1040ez See the Instructions for Form 990-T for details. Free ohio tax form 1040ez Specific deduction. Free ohio tax form 1040ez   In computing unrelated business taxable income, a specific deduction of $1,000 is allowed. Free ohio tax form 1040ez However, the specific deduction is not allowed in computing an NOL or the NOL deduction. Free ohio tax form 1040ez   Generally, the deduction is limited to $1,000 regardless of the number of unrelated businesses in which the organization is engaged. Free ohio tax form 1040ez Exception. Free ohio tax form 1040ez   An exception is provided in the case of a diocese, province of a religious order, or a convention or association of churches that may claim a specific deduction for each parish, individual church, district, or other local unit. Free ohio tax form 1040ez In these cases, the specific deduction for each local unit is limited to the lower of: $1,000, or Gross income derived from an unrelated trade or business regularly conducted by the local unit. Free ohio tax form 1040ez   This exception applies only to parishes, districts, or other local units that are not separate legal entities, but are components of a larger entity (diocese, province, convention, or association) filing Form 990-T. Free ohio tax form 1040ez The parent organization must file a return reporting the unrelated business gross income and related deductions of all units that are not separate legal entities. Free ohio tax form 1040ez The local units cannot file separate returns. Free ohio tax form 1040ez However, each local unit that is separately incorporated must file its own return and cannot include, or be included with, any other entity. Free ohio tax form 1040ez See Title-holding corporations in chapter 1 for a discussion of the only situation in which more than one legal entity may be included on the same Form 990-T. Free ohio tax form 1040ez Example. Free ohio tax form 1040ez X is an association of churches and is divided into local units A, B, C, and D. Free ohio tax form 1040ez Last year, A, B, C, and D derived gross income of, respectively, $1,200, $800, $1,500, and $700 from unrelated businesses that they regularly conduct. Free ohio tax form 1040ez X may claim a specific deduction of $1,000 with respect to A, $800 with respect to B, $1,000 with respect to C, and $700 with respect to D. Free ohio tax form 1040ez Partnership Income or Loss An organization may have unrelated business income or loss as a member of a partnership, rather than through direct business dealings with the public. Free ohio tax form 1040ez If so, it must treat its share of the partnership income or loss as if it had conducted the business activity in its own capacity as a corporation or trust. Free ohio tax form 1040ez No distinction is made between limited and general partners. Free ohio tax form 1040ez The organization is required to notify the partnership of its tax-exempt status. Free ohio tax form 1040ez Thus, if an organization is a member of a partnership regularly engaged in a trade or business that is an unrelated trade or business with respect to the organization, the organization must include in its unrelated business taxable income its share of the partnership's gross income from the unrelated trade or business (whether or not distributed), and the deductions attributable to it. Free ohio tax form 1040ez The partnership income and deductions to be included in the organization's unrelated business taxable income are figured the same way as any income and deductions from an unrelated trade or business conducted directly by the organization. Free ohio tax form 1040ez The partnership is required to provide the organization this information on Schedule K-1. Free ohio tax form 1040ez Example. Free ohio tax form 1040ez An exempt educational organization is a partner in a partnership that operates a factory. Free ohio tax form 1040ez The partnership also holds stock in a corporation. Free ohio tax form 1040ez The exempt organization must include its share of the gross income from operating the factory in its unrelated business taxable income but may exclude its share of any dividends the partnership received from the corporation. Free ohio tax form 1040ez Different tax years. Free ohio tax form 1040ez   If the exempt organization and the partnership of which it is a member have different tax years, the partnership items that enter into the computation of the organization's unrelated business taxable income must be based on the income and deductions of the partnership for the partnership's tax year that ends within or with the organization's tax year. Free ohio tax form 1040ez S Corporation Income or Loss An organization that owns S corporation stock must take into account its share of the S corporation's income, deductions, or losses in figuring unrelated business taxable income, regardless of the actual source or nature of the income, deductions, and losses. Free ohio tax form 1040ez For example, the organization's share of the S corporation's interest and dividend income will be taxable, even though interest and dividends are normally excluded from unrelated business taxable income. Free ohio tax form 1040ez The organization must also take into account its gain or loss on the sale or other disposition of the S corporation stock in figuring unrelated business taxable income. Free ohio tax form 1040ez Special Rules for Foreign Organizations The unrelated business taxable income of a foreign organization exempt from tax under section 501(a) consists of the organization's: Unrelated business taxable income derived from sources within the United States but not effectively connected with the conduct of a trade or business within the United States, and Unrelated business taxable income effectively connected with the conduct of a trade or business within the United States, whether or not this income is derived from sources within the United States. Free ohio tax form 1040ez To determine whether income realized by a foreign organization is derived from sources within the United States or is effectively connected with the conduct of a trade or business within the United States, see sections 861 through 865 and the related regulations. Free ohio tax form 1040ez Special Rules for Social Clubs, VEBAs, SUBs, and GLSOs The following discussion applies to: Social clubs described in section 501(c)(7), Voluntary employees' beneficiary associations (VEBAs) described in section 501(c)(9), Supplemental unemployment compensation benefit trusts (SUBs) described in section 501(c)(17), and Group legal services organizations (GLSOs) described in section 501(c)(20). Free ohio tax form 1040ez These organizations must figure unrelated business taxable income under special rules. Free ohio tax form 1040ez Unlike other exempt organizations, they cannot exclude their investment income (dividends, interest, rents, etc. Free ohio tax form 1040ez ). Free ohio tax form 1040ez (See Exclusions under Income, earlier. Free ohio tax form 1040ez ) Therefore, they are generally subject to unrelated business income tax on this income. Free ohio tax form 1040ez The unrelated business taxable income of these organizations includes all gross income, less deductions directly connected with the production of that income, except that gross income for this purpose does not include exempt function income. Free ohio tax form 1040ez The dividends received by a corporation are not allowed in computing unrelated business taxable income because it is not an expense incurred in the production of income. Free ohio tax form 1040ez Losses from nonexempt activities. Free ohio tax form 1040ez   Losses from nonexempt activities of these organizations cannot be used to offset investment income unless the activities were undertaken with the intent to make a profit. Free ohio tax form 1040ez Example. Free ohio tax form 1040ez A private golf and country club that is a qualified tax-exempt social club has nonexempt function income from interest and from the sale of food and beverages to nonmembers. Free ohio tax form 1040ez The club sells food and beverages as a service to members and their guests rather than for the purpose of making a profit. Free ohio tax form 1040ez Therefore, any loss resulting from sales to nonmembers cannot be used to offset the club's interest income. Free ohio tax form 1040ez Modifications. Free ohio tax form 1040ez   The unrelated business taxable income is modified by any NOL or charitable contributions deduction and by the specific deduction (described earlier under Deductions). Free ohio tax form 1040ez Exempt function income. Free ohio tax form 1040ez   This is gross income from dues, fees, charges or similar items paid by members for goods, facilities, or services to the members or their dependents or guests, to further the organization's exempt purposes. Free ohio tax form 1040ez Exempt function income also includes income set aside for qualified purposes. Free ohio tax form 1040ez Income that is set aside. Free ohio tax form 1040ez   This is income set aside to be used for religious, charitable, scientific, literary, or educational purposes or for the prevention of cruelty to children or animals. Free ohio tax form 1040ez In addition, for a VEBA, SUB, or GLSO, it is income set aside to provide for the payment of life, sick, accident, or other benefits. Free ohio tax form 1040ez   However, any amounts set aside by a VEBA or SUB that exceed the organization's qualified asset account limit (determined under section 419A) are unrelated business income. Free ohio tax form 1040ez Special rules apply to the treatment of existing reserves for post-retirement medical or life insurance benefits. Free ohio tax form 1040ez These rules are explained in section 512(a)(3)(E)(ii). Free ohio tax form 1040ez   Income derived from an unrelated trade or business may not be set aside and therefore cannot be exempt function income. Free ohio tax form 1040ez In addition, any income set aside and later spent for other purposes must be included in unrelated business taxable income. Free ohio tax form 1040ez   Set-aside income is generally excluded from gross income only if it is set aside in the tax year in which it is otherwise includible in gross income. Free ohio tax form 1040ez However, income set aside on or before the date for filing Form 990-T, including extensions of time, may, at the election of the organization, be treated as having been set aside in the tax year for which the return was filed. Free ohio tax form 1040ez The income set aside must have been includible in gross income for that earlier year. Free ohio tax form 1040ez Nonrecognition of gain. Free ohio tax form 1040ez   If the organization sells property used directly in performing an exempt function and purchases other property used directly in performing an exempt function, any gain on the sale is recognized only to the extent that the sales price of the old property exceeds the cost of the new property. Free ohio tax form 1040ez The purchase of the new property must be made within 1 year before the date of sale of the old property or within 3 years after the date of sale. Free ohio tax form 1040ez   This rule also applies to gain from an involuntary conversion of the property resulting from its destruction in whole or in part, theft, seizure, requisition, or condemnation. Free ohio tax form 1040ez Special Rules for Veterans' Organizations Unrelated business taxable income of a veterans' organization that is exempt under section 501(c)(19) does not include the net income from insurance business that is properly set aside. Free ohio tax form 1040ez The organization may set aside income from payments received for life, sick, accident, or health insurance for the organization's members or their dependents for the payment of insurance benefits or reasonable costs of insurance administration, or for use exclusively for religious, charitable, scientific, literary, or educational purposes, or the prevention of cruelty to children or animals. Free ohio tax form 1040ez For details, see section 512(a)(4) and the regulations under that section. Free ohio tax form 1040ez Income From Controlled Organizations The exclusions for interest, annuities, royalties, and rents, explained earlier in this chapter under Income, may not apply to a payment of these items received by a controlling organization from its controlled organization. Free ohio tax form 1040ez The payment is included in the controlling organization's unrelated business taxable income to the extent it reduced the net unrelated income (or increased the net unrelated loss) of the controlled organization. Free ohio tax form 1040ez All deductions of the controlling organization directly connected with the amount included in its unrelated business taxable income are allowed. Free ohio tax form 1040ez Excess qualifying specified payments. Free ohio tax form 1040ez   Excess qualifying specified payments received or accrued from a controlled entity are included in a controlling exempt organization's unrelated business taxable income only on the amount that exceeds that which would have been paid or accrued if the payments had been determined under section 482. Free ohio tax form 1040ez Qualifying specified payments means any payments of interest, annuities, royalties, or rents received or accrued from the controlled organization pursuant to a binding written contract in effect on August 17, 2006, or to a contract which is a renewal, under substantially similar terms of a binding written contract in effect on August 17, 2006, and the payments are received or accrued before January 1, 2012. Free ohio tax form 1040ez   If a controlled participant is not required to file a U. Free ohio tax form 1040ez S. Free ohio tax form 1040ez income tax return, the participant must ensure that the copy or copies of the Regulations section 1. Free ohio tax form 1040ez 482-7 Cost Sharing Arrangement Statement and any updates are attached to Schedule M of any Form 5471, Information Return of U. Free ohio tax form 1040ez S. Free ohio tax form 1040ez Persons With Respect To Certain Foreign Corporations, any Form 5472, Information Return of a 25% Foreign-Owned U. Free ohio tax form 1040ez S. Free ohio tax form 1040ez Corporation or a Foreign Corporation Engaged in a U. Free ohio tax form 1040ez S. Free ohio tax form 1040ez Trade or Business, or any Form 8865, Return of U. Free ohio tax form 1040ez S. Free ohio tax form 1040ez Persons With Respect to Certain Foreign Partnerships, filed for that participant. Free ohio tax form 1040ez Addition to tax for valuation misstatements. Free ohio tax form 1040ez   Under section 512(b)(13)(E)(ii), the tax imposed on a controlling organization will be increased by 20 percent of the excess qualifying specified payments that are determined with or without any amendments or supplements, whichever is larger. Free ohio tax form 1040ez See section 512(b)(13)(E)(ii) for more information. Free ohio tax form 1040ez Net unrelated income. Free ohio tax form 1040ez   This is: For an exempt organization, its unrelated business taxable income, or For a nonexempt organization, the part of its taxable income that would be unrelated business taxable income if it were exempt and had the same exempt purposes as the controlling organization. Free ohio tax form 1040ez Net unrelated loss. Free ohio tax form 1040ez   This is: For an exempt organization, its NOL, or For a nonexempt organization, the part of its NOL that would be its NOL if it were exempt and had the same exempt purposes as the controlling organization. Free ohio tax form 1040ez Control. Free ohio tax form 1040ez   An organization is controlled if: For a corporation, the controlling organization owns (by vote or value) more than 50% of the stock, For a partnership, the controlling organization owns more than 50% of the profits or capital interests, or For any other organization, the controlling organization owns more than 50% of the beneficial interest. Free ohio tax form 1040ez For this purpose, constructive ownership of stock (determined under section 318) or other interests is taken into account. Free ohio tax form 1040ez   As a result, an exempt parent organization is treated as controlling any subsidiary in which it holds more than 50% of the voting power or value, whether directly (as in the case of a first-tier subsidiary) or indirectly (as in the case of a second-tier subsidiary). Free ohio tax form 1040ez Income from property financed with qualified 501(c)(3) bonds. Free ohio tax form 1040ez If any part of a 501(c)(3) organization's property financed with qualified 501(c)(3) bonds is used in a trade or business of any person other than a section 501(c)(3) organization or a governmental unit, and such use is not consistent with the requirements for qualified 501(c)(3) bonds under section 145, the section 501(c)(3) organization is considered to have received unrelated business income in the amount of the greater of the actual rental income or the fair rental value of the property for the period it is used. Free ohio tax form 1040ez No deduction is allowed for interest on the private activity bond. Free ohio tax form 1040ez See sections 150(b)(3) and (c) for more information. Free ohio tax form 1040ez Disposition of property received from taxable subsidiary and used in unrelated business. Free ohio tax form 1040ez A taxable 80%-owned subsidiary corporation of one or more tax-exempt entities is generally subject to tax on a distribution in liquidation of its assets to its exempt parent (or parents). Free ohio tax form 1040ez The assets are treated as if sold at fair market value. Free ohio tax form 1040ez Tax-exempt entities include organizations described in sections 501(a), 529, and 115, charitable remainder trusts, U. Free ohio tax form 1040ez S. Free ohio tax form 1040ez and foreign governments, Indian tribal governments, international organizations, and similar non-taxable organizations. Free ohio tax form 1040ez A taxable corporation that transfers substantially all of its assets to a tax-exempt entity in a transaction that otherwise qualifies for nonrecognition treatment must recognize gain on the transaction as if it sold the assets at fair market value. Free ohio tax form 1040ez However, such a transfer is not taxable if it qualifies as a like-kind exchange under section 1031 or an involuntary conversion under section 1033. Free ohio tax form 1040ez In such a case the built-in appreciation is preserved in the replacement property received in the transaction. Free ohio tax form 1040ez A corporation that changes status from taxable to tax-exempt is treated generally as if it transferred all of its assets to a tax-exempt entity immediately before the change in status (thus subjecting it to the tax on a deemed sale for fair market value). Free ohio tax form 1040ez This rule does not apply where the taxable corporation becomes exempt within 3 years of formation, or had previously been exempt and within several years (generally a period of 3 years) regains exemption, unless the principal purpose of the transactions is to avoid the tax on the change in status. Free ohio tax form 1040ez In the transactions described above, the taxable event is deferred for property that the tax-exempt entity immediately uses in an unrelated business. Free ohio tax form 1040ez If the parent later disposes of the property, then any gain (not in excess of the amount not recognized) is included in the parent's unrelated business taxable income. Free ohio tax form 1040ez If there is partial use of the assets in unrelated business, then there is partial recognition of gain or loss. Free ohio tax form 1040ez Property is treated as disposed if the tax-exempt entity no longer uses it in an unrelated business. Free ohio tax form 1040ez Losses on the transfer of assets to a tax-exempt entity are disallowed if part of a plan with a principal purpose of recognizing losses. Free ohio tax form 1040ez Income From Debt-Financed Property Investment income that would otherwise be excluded from an exempt organization's unrelated business taxable income (see Exclusions under Income earlier) must be included to the extent it is derived from debt-financed property. Free ohio tax form 1040ez The amount of income included is proportionate to the debt on the property. Free ohio tax form 1040ez Debt-Financed Property In general, the term “debt-financed property” means any property held to produce income (including gain from its disposition) for which there is an acquisition indebtedness at any time during the tax year (or during the 12-month period before the date of the property's disposal, if it was disposed of during the tax year). Free ohio tax form 1040ez It includes rental real estate, tangible personal property, and corporate stock. Free ohio tax form 1040ez Acquisition Indebtedness For any debt-financed property, acquisition indebtedness is the unpaid amount of debt incurred by an organization: When acquiring or improving the property, Before acquiring or improving the property if the debt would not have been incurred except for the acquisition or improvement, and After acquiring or improving the property if: The debt would not have been incurred except for the acquisition or improvement, and Incurring the debt was reasonably foreseeable when the property was acquired or improved. Free ohio tax form 1040ez The facts and circumstances of each situation determine whether incurring a debt was reasonably foreseeable. Free ohio tax form 1040ez That an organization may not have foreseen the need to incur a debt before acquiring or improving the property does not necessarily mean that incurring the debt later was not reasonably foreseeable. Free ohio tax form 1040ez Example 1. Free ohio tax form 1040ez Y, an exempt scientific organization, mortgages its laboratory to replace working capital used in remodeling an office building that Y rents to an insurance company for nonexempt purposes. Free ohio tax form 1040ez The debt is acquisition indebtedness since the debt, though incurred after the improvement of the office building, would not have been incurred without the improvement, and the debt was reasonably foreseeable when, to make the improvement, Y reduced its working capital below the amount necessary to continue current operations. Free ohio tax form 1040ez Example 2. Free ohio tax form 1040ez X, an exempt organization, forms a partnership with A and B. Free ohio tax form 1040ez The partnership agreement provides that all three partners will share equally in the profits of the partnership, each will invest $3 million, and X will be a limited partner. Free ohio tax form 1040ez X invests $1 million of its own funds in the partnership and $2 million of borrowed funds. Free ohio tax form 1040ez The partnership buys as its sole asset an office building that it leases to the public for nonexempt purposes. Free ohio tax form 1040ez The office building costs the partnership $24 million, of which $15 million is borrowed from Y bank. Free ohio tax form 1040ez The loan is secured by a mortgage on the entire office building. Free ohio tax form 1040ez By agreement with Y bank, X is not personally liable for payment of the mortgage. Free ohio tax form 1040ez X has acquisition indebtedness of $7 million. Free ohio tax form 1040ez This amount is the $2 million debt X incurred in acquiring the partnership interest, plus the $5 million that is X's allocable part of the partnership's debt incurred to buy the office building (one-third of $15 million). Free ohio tax form 1040ez Example 3. Free ohio tax form 1040ez A labor union advanced funds, from existing resources and without any borrowing, to its tax-exempt subsidiary title-holding company. Free ohio tax form 1040ez The subsidiary used the funds to pay a debt owed to a third party that was previously incurred in acquiring two income-producing office buildings. Free ohio tax form 1040ez Neither the union nor the subsidiary has incurred any further debt in acquiring or improving the property. Free ohio tax form 1040ez The union has no outstanding debt on the property. Free ohio tax form 1040ez The subsidiary's debt to the union is represented by a demand note on which the subsidiary makes payments whenever it has the available cash. Free ohio tax form 1040ez The books of the union and the subsidiary list the outstanding debt as interorganizational indebtedness. Free ohio tax form 1040ez Although the subsidiary's books show a debt to the union, it is not the type subject to the debt-financed property rules. Free ohio tax form 1040ez In this situation, the very nature of the title-holding company and the parent-subsidiary relationship shows this debt to be merely a matter of accounting between the two organizations. Free ohio tax form 1040ez Accordingly, the debt is not acquisition indebtedness. Free ohio tax form 1040ez Change in use of property. Free ohio tax form 1040ez   If an organization converts property that is not debt-financed property to a use that results in its treatment as debt-financed property, the outstanding principal debt on the property is thereafter treated as acquisition indebtedness. Free ohio tax form 1040ez Example. Free ohio tax form 1040ez Four years ago a university borrowed funds to acquire an apartment building as housing for married students. Free ohio tax form 1040ez Last year, the university rented the apartment building to the public for nonexempt purposes. Free ohio tax form 1040ez The outstanding principal debt becomes acquisition indebtedness as of the time the building was first rented to the public. Free ohio tax form 1040ez Continued debt. Free ohio tax form 1040ez   If an organization sells property and, without paying off debt that would be acquisition indebtedness if the property were debt-financed property, buys property that is otherwise debt-financed property, the unpaid debt is acquisition indebtedness for the new property. Free ohio tax form 1040ez This is true even if the original property was not debt-financed property. Free ohio tax form 1040ez Example. Free ohio tax form 1040ez To house its administration offices, an exempt organization bought a building using $600,000 of its own funds and $400,000 of borrowed funds secured by a pledge of its securities. Free ohio tax form 1040ez The office building was not debt-financed property. Free ohio tax form 1040ez The organization later sold the building for $1 million without repaying the $400,000 loan. Free ohio tax form 1040ez It used the sale proceeds to buy an apartment building it rents to the general public. Free ohio tax form 1040ez The unpaid debt of $400,000 is acquisition indebtedness with respect to the apartment building. Free ohio tax form 1040ez Property acquired subject to mortgage or lien. Free ohio tax form 1040ez   If property (other than certain gifts, bequests, and devises) is acquired subject to a mortgage, the outstanding principal debt secured by that mortgage is treated as acquisition indebtedness even if the organization did not assume or agree to pay the debt. Free ohio tax form 1040ez Example. Free ohio tax form 1040ez An exempt organization paid $50,000 for real property valued at $150,000 and subject to a $100,000 mortgage. Free ohio tax form 1040ez The $100,000 of outstanding principal debt is acquisition indebtedness, as though the organization had borrowed $100,000 to buy the property. Free ohio tax form 1040ez Liens similar to a mortgage. Free ohio tax form 1040ez   In determining acquisition indebtedness, a lien similar to a mortgage is treated as a mortgage. Free ohio tax form 1040ez A lien is similar to a mortgage if title to property is encumbered by the lien for a creditor's benefit. Free ohio tax form 1040ez However, when state law provides that a lien for taxes or assessments attaches to property before the taxes or assessments become due and payable, the lien is not treated as a mortgage until after the taxes or assessments have become due and payable and the organization has had an opportunity to pay the lien in accordance with state law. Free ohio tax form 1040ez Liens similar to mortgages include (but are not limited to): Deeds of trust, Conditional sales contracts, Chattel mortgages, Security interests under the Uniform Commercial Code, Pledges, Agreements to hold title in escrow, and Liens for taxes or assessments (other than those discussed earlier in this paragraph). Free ohio tax form 1040ez Exception for property acquired by gift, bequest, or devise. Free ohio tax form 1040ez   If property subject to a mortgage is acquired by gift, bequest, or devise, the outstanding principal debt secured by the mortgage is not treated as acquisition indebtedness during the 10-year period following the date the organization receives the property. Free ohio tax form 1040ez However, this applies to a gift of property only if:    The mortgage was placed on the property more than 5 years before the date the organization received it, and The donor held the property for more than 5 years before the date the organization received it. Free ohio tax form 1040ez   This exception does not apply if an organization assumes and agrees to pay all or part of the debt secured by the mortgage or makes any payment for the equity in the property owned by the donor or decedent (other than a payment under an annuity obligation excluded from the definition of acquisition indebtedness, discussed under Debt That Is Not Acquisition Indebtedness, later). Free ohio tax form 1040ez   Whether an organization has assumed and agreed to pay all or part of a debt in order to acquire the property is determined by the facts and circumstances of each situation. Free ohio tax form 1040ez Modifying existing debt. Free ohio tax form 1040ez   Extending, renewing, or refinancing an existing debt is considered a continuation of that debt to the extent its outstanding principal does not increase. Free ohio tax form 1040ez When the principal of the modified debt is more than the outstanding principal of the old debt, the excess is treated as a separate debt. Free ohio tax form 1040ez Extension or renewal. Free ohio tax form 1040ez   In general, any modification or substitution of the terms of a debt by an organization is considered an extension or renewal of the original debt, rather than the start of a new one, to the extent that the outstanding principal of the debt does not increase. Free ohio tax form 1040ez   The following are examples of acts resulting in the extension or renewal of a debt: Substituting liens to secure the debt, Substituting obligees whether or not with the organization's consent, Renewing, extending, or accelerating the payment terms of the debt, and Adding, deleting, or substituting sureties or other primary or secondary obligors. Free ohio tax form 1040ez Debt increase. Free ohio tax form 1040ez   If the outstanding principal of a modified debt is more than that of the unmodified debt, and only part of the refinanced debt is acquisition indebtedness, the payments on the refinanced debt must be allocated between the old debt and the excess. Free ohio tax form 1040ez Example. Free ohio tax form 1040ez An organization has an outstanding principal debt of $500,000 that is treated as acquisition indebtedness. Free ohio tax form 1040ez The organization borrows another $100,000, which is not acquisition indebtedness, from the same lender, resulting in a $600,000 note for the total obligation. Free ohio tax form 1040ez A payment of $60,000 on the total obligation would reduce the acquisition indebtedness by $50,000 ($60,000 x $500,000/$600,000) and the excess debt by $10,000. Free ohio tax form 1040ez Debt That Is Not Acquisition Indebtedness Certain debt and obligations are not acquisition indebtedness. Free ohio tax form 1040ez These include the following. Free ohio tax form 1040ez Debts incurred in performing an exempt purpose. Free ohio tax form 1040ez Annuity obligations. Free ohio tax form 1040ez Securities loans. Free ohio tax form 1040ez Real property debts of qualified organizations. Free ohio tax form 1040ez Certain Federal financing. Free ohio tax form 1040ez Debt incurred in performing exempt purpose. Free ohio tax form 1040ez   A debt incurred in performing an exempt purpose is not acquisition indebtedness. Free ohio tax form 1040ez For example, acquisition indebtedness does not include the debt an exempt credit union incurs in accepting deposits from its members or the debt an exempt organization incurs in accepting payments from its members to provide them with insurance, retirement, or other benefits. Free ohio tax form 1040ez Annuity obligation. Free ohio tax form 1040ez   The organization's obligation to pay an annuity is not acquisition indebtedness if the annuity meets all the following requirements. Free ohio tax form 1040ez It must be the sole consideration (other than a mortgage on property acquired by gift, bequest, or devise that meets the exception discussed under Property acquired subject to mortgage or lien, earlier in this chapter) issued in exchange for the property received. Free ohio tax form 1040ez Its present value, at the time of exchange, must be less than 90% of the value of the prior owner's equity in the property received. Free ohio tax form 1040ez It must be payable over the lives of either one or two individuals living when issued. Free ohio tax form 1040ez It must be payable under a contract that: Does not guarantee a minimum nor specify a maximum number of payments, and Does not provide for any adjustment of the amount of the annuity payments based on the income received from the transferred property or any other property. Free ohio tax form 1040ez Example. Free ohio tax form 1040ez X, an exempt organization, receives property valued at $100,000 from donor A, a male age 60. Free ohio tax form 1040ez In return X promises to pay A $6,000 a year for the rest of A's life, with neither a minimum nor maximum number of payments specified. Free ohio tax form 1040ez The amounts paid under the annuity are not dependent on the income derived from the property transferred to X. Free ohio tax form 1040ez The present value of this annuity is $81,156, determined from IRS valuation tables. Free ohio tax form 1040ez Since the value of the annuity is less than 90 percent of A's $100,000 equity in the property transferred and the annuity meets all the other requirements just discussed, the obligation to make annuity payments is not acquisition indebtedness. Free ohio tax form 1040ez Securities loans. Free ohio tax form 1040ez   Acquisition indebtedness does not include an obligation of the exempt organization to return collateral security provided by the borrower of the exempt organization's securities under a securities loan agreement (discussed under Exclusions earlier in this chapter). Free ohio tax form 1040ez This transaction is not treated as the borrowing by the exempt organization of the collateral furnished by the borrower (usually a broker) of the securities. Free ohio tax form 1040ez   However, if the exempt organization incurred debt to buy the loaned securities, any income from the securities (including income from