Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Free Online Tax Extension Form

Form 1040nr EzFree Federal And State Tax Filing2010 Federal Tax Forms And InstructionsH&r Block 2011 Tax Software DownloadFree State Tax Usa1040 ComEz Form Online2011 Tax Tables Federal2012 Form 1040ezIrs Forms 1040Form 1040ez1040-xIrs 1040 Ez OnlineTurbotax 2010 DownloadIrs 2012 Tax Forms 1040ez Instructions1040 Ez Tax Form 2011Form 1040 For 2011 Tax Year2011 Tax Prep1040ez CalculatorWww Freetaxusa ComFile State Income Tax FreeAmend Tax ReturnTaxes Due 20122011 Irs Form 1040Amended 2010 Tax ReturnStatetaxformsAmended Tax Return 2012How To Do An Amended Tax ReturnState Tax Return 2013Do I Need To File Taxes If I Was UnemployedFree State Tax FilingHow To Amend My TaxesI Need To File My 2010 TaxesIrs InstructionsFiling Taxes In 2014H And R Block Amended ReturnHow Do I Fill Out A 1040xTurbotax 20111040ez Printable Tax FormsForms To File 2012 Taxes

Free Online Tax Extension Form

Free online tax extension form 34. Free online tax extension form   Child Tax Credit Table of Contents Introduction Useful Items - You may want to see: Qualifying Child Amount of CreditLimits on the Credit Claiming the Credit Additional Child Tax Credit Completing Schedule 8812 (Form 1040A or 1040)Part I Parts II–IV Introduction The child tax credit is a credit that may reduce your tax by as much as $1,000 for each of your qualifying children. Free online tax extension form The additional child tax credit is a credit you may be able to take if you are not able to claim the full amount of the child tax credit. Free online tax extension form This chapter explains the following. Free online tax extension form Who is a qualifying child. Free online tax extension form The amount of the credit. Free online tax extension form How to claim the credit. Free online tax extension form The child tax credit and the additional child tax credit should not be confused with the child and dependent care credit discussed in chapter 32. Free online tax extension form If you have no tax. Free online tax extension form   Credits, such as the child tax credit or the credit for child and dependent care expenses, are used to reduce tax. Free online tax extension form If your tax on Form 1040, line 46, or Form 1040A, line 28, is zero, do not figure the child tax credit because there is no tax to reduce. Free online tax extension form However, you may qualify for the additional child tax credit on line 65 (Form 1040) or line 39 (Form 1040A). Free online tax extension form Useful Items - You may want to see: Publication 972 Child Tax Credit Form (and Instructions) Schedule 8812 (Form 1040A or 1040) Child Tax Credit W-4 Employee's Withholding Allowance Certificate Qualifying Child A qualifying child for purposes of the child tax credit is a child who: Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Was under age 17 at the end of 2013, Did not provide over half of his or her own support for 2013, Lived with you for more than half of 2013 (see Exceptions to time lived with you , later), Is claimed as a dependent on your return, Does not file a joint return for the year (or files it only as a claim for refund), and Was a U. Free online tax extension form S. Free online tax extension form citizen, a U. Free online tax extension form S. Free online tax extension form national, or a resident of the United States. Free online tax extension form If the child was adopted, see Adopted child , later. Free online tax extension form For each qualifying child you must check the box on Form 1040 or Form 1040A, line 6c. Free online tax extension form Example 1. Free online tax extension form Your son turned 17 on December 30, 2013. Free online tax extension form He is a citizen of the United States and you claimed him as a dependent on your return. Free online tax extension form He is not a qualifying child for the child tax credit because he was not under age 17 at the end of 2013. Free online tax extension form Example 2. Free online tax extension form Your daughter turned 8 years old in 2013. Free online tax extension form She is not a citizen of the United States, has an ITIN, and lived in Mexico all of 2013. Free online tax extension form She is not a qualifying child for the child tax credit because she was not a resident of the United States for 2013. Free online tax extension form Filers who have certain child dependents with an Individual Taxpayer Identification Number (ITIN). Free online tax extension form   If you are claiming a child tax credit or additional child tax credit for a child you identified on your tax return with an ITIN instead of an SSN, you must complete Part I of Schedule 8812 (Form 1040A or 1040). Free online tax extension form   Although a child may be your dependent, you may only claim a child tax credit or additional child tax credit for a dependent who is a citizen, national, or resident of the United States. Free online tax extension form To be treated as a resident of the United States, a child generally will need to meet the requirements of the substantial presence test. Free online tax extension form For more information about the substantial presence test, see Publication 519, U. Free online tax extension form S. Free online tax extension form Tax Guide for Aliens. Free online tax extension form Adopted child. Free online tax extension form   An adopted child is always treated as your own child. Free online tax extension form An adopted child includes a child lawfully placed with you for legal adoption. Free online tax extension form   If you are a U. Free online tax extension form S. Free online tax extension form citizen or U. Free online tax extension form S. Free online tax extension form national and your adopted child lived with you all year as a member of your household in 2013, that child meets condition (7) above to be a qualifying child for the child tax credit. Free online tax extension form Exceptions to time lived with you. Free online tax extension form   A child is considered to have lived with you for more than half of 2013 if the child was born or died in 2013 and your home was this child's home for more than half the time he or she was alive. Free online tax extension form Temporary absences by you or the child for special circumstances, such as for school, vacation, business, medical care, military service, or detention in a juvenile facility, count as time the child lived with you. Free online tax extension form   There are also exceptions for kidnapped children and children of divorced or separated parents. Free online tax extension form For details, see Residency Test in chapter 3. Free online tax extension form Qualifying child of more than one person. Free online tax extension form   A special rule applies if your qualifying child is the qualifying child of more than one person. Free online tax extension form For details, see Special Rule for Qualifying Child of More Than One Person in chapter 3. Free online tax extension form Amount of Credit The maximum amount you can claim for the credit is $1,000 for each qualifying child. Free online tax extension form Limits on the Credit You must reduce your child tax credit if either (1) or (2) applies. Free online tax extension form The amount on Form 1040, line 46, or Form 1040A, line 28, is less than the credit. Free online tax extension form If this amount is zero, you cannot take this credit because there is no tax to reduce. Free online tax extension form But you may be able to take the additional child tax credit. Free online tax extension form See Additional Child Tax Credit , later. Free online tax extension form Your modified adjusted gross income (AGI) is more than the amount shown below for your filing status. Free online tax extension form Married filing jointly - $110,000. Free online tax extension form Single, head of household, or qualifying widow(er) - $75,000. Free online tax extension form Married filing separately - $55,000. Free online tax extension form Modified AGI. Free online tax extension form   For purposes of the child tax credit, your modified AGI is your AGI plus the following amounts that may apply to you. Free online tax extension form Any amount excluded from income because of the exclusion of income from  Puerto Rico. Free online tax extension form On the dotted line next to Form 1040, line 38, enter the amount excluded and identify it as “EPRI. Free online tax extension form ” Also attach a copy of any Form(s) 499R-2/W-2PR to your return. Free online tax extension form Any amount on line 45 or line 50 of Form 2555, Foreign Earned Income. Free online tax extension form Any amount on line 18 of Form 2555-EZ, Foreign Earned Income Exclusion. Free online tax extension form Any amount on line 15 of Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa. Free online tax extension form   If you do not have any of the above, your modified AGI is the same as your AGI. Free online tax extension form AGI. Free online tax extension form   Your AGI is the amount on Form 1040, line 38, or Form 1040A, line 22. Free online tax extension form Claiming the Credit To claim the child tax credit, you must file Form 1040 or Form 1040A. Free online tax extension form You cannot claim the child tax credit on Form 1040EZ. Free online tax extension form You must provide the name and identification number (usually a social security number) on your tax return for each qualifying child. Free online tax extension form If you claim the child tax credit with a child identified by an ITIN, you must also file Schedule 8812. Free online tax extension form To figure your credit, first review the Child Tax Credit Worksheet in your Form 1040 or 1040A instructions. Free online tax extension form If you are instructed to use Publication 972, you may not use the worksheet in your tax return instructions; instead, you must use Publication 972 to figure the credit. Free online tax extension form If you are not instructed to use Publication 972, you may use the Child Tax Credit Worksheet in your Form 1040 or 1040A instructions or Publication 972 to figure the credit. Free online tax extension form Additional Child Tax Credit This credit is for certain individuals who get less than the full amount of the child tax credit. Free online tax extension form The additional child tax credit may give you a refund even if you do not owe any tax. Free online tax extension form How to claim the additional child tax credit. Free online tax extension form   To claim the additional child tax credit, follow the steps below. Free online tax extension form Make sure you figured the amount, if any, of your child tax credit. Free online tax extension form See Claiming the Credit , earlier. Free online tax extension form If you answered “Yes” on line 9 or line 10 of the Child Tax Credit Worksheet in the Form 1040 or Form 1040A instructions, or line 13 of the Child Tax Credit Worksheet in Publication 972, use Parts II through IV of Schedule 8812 to see if you can take the additional child tax credit. Free online tax extension form If you have an additional child tax credit on line 13 of Schedule 8812, carry it to Form 1040, line 65, or Form 1040A, line 39. Free online tax extension form Completing Schedule 8812 (Form 1040A or 1040) Schedule 8812 contains four parts, but can really be thought of as two sections. Free online tax extension form Part I is distinct and separate from Parts II–IV. Free online tax extension form If all your children are identified by social security numbers or IRS adoption taxpayer identification numbers and you are not claiming the additional child tax credit, you do not need to complete or attach Schedule 8812 to your tax return. Free online tax extension form Part I You only need to complete Part I if you are claiming the child tax credit for a child identified by an IRS individual taxpayer identification number (ITIN). Free online tax extension form When completing Part I, only answer the questions with regard to children identified by an ITIN; you do not need to complete Part I of Schedule 8812 for any child that is identified by a social security number (SSN) or an IRS adoption taxpayer identification number (ATIN). Free online tax extension form If all the children for whom you checked the box in column 4 of line 6c on your Form 1040 or Form 1040A are identified by an SSN or an ATIN, you do not need to complete Part I of Schedule 8812. Free online tax extension form Parts II–IV Parts II–IV help you figure your additional child tax credit. Free online tax extension form Generally, you should only complete Parts II–IV if you are instructed to do so after completing the Child Tax Credit Worksheet in your tax return instructions or Publication 972. Free online tax extension form See How to claim the additional child tax credit , earlier. Free online tax extension form Prev  Up  Next   Home   More Online Publications
Español

Pipeline and Hazardous Materials Safety Administration

The Pipeline and Hazardous Materials Safety Administration regulates the transport of hazardous materials.

Contact the Agency or Department

Website: Pipeline and Hazardous Materials Safety Administration

Address: 1200 New Jersey Ave SE
East Building, 2nd Floor

Washington, DC 20590

Phone Number: (202) 366-4433

Toll-free: (800) 424-8802 (To report an accident to the National Response Center)

The Free Online Tax Extension Form

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