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Free Tax Amendment

Free tax amendment 12. Free tax amendment   How To Get Tax Help Table of Contents Low Income Taxpayer Clinics Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. Free tax amendment Free help with your tax return. Free tax amendment   You can get free help preparing your return nationwide from IRS-certified volunteers. Free tax amendment The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. Free tax amendment The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Free tax amendment Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Free tax amendment In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. Free tax amendment To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. Free tax amendment gov, download the IRS2Go app, or call 1-800-906-9887. Free tax amendment   As part of the TCE program, AARP offers the Tax-Aide counseling program. Free tax amendment To find the nearest AARP Tax-Aide site, visit AARP's website at www. Free tax amendment aarp. Free tax amendment org/money/taxaide or call 1-888-227-7669. Free tax amendment For more information on these programs, go to IRS. Free tax amendment gov and enter “VITA” in the search box. Free tax amendment Internet. Free tax amendment    IRS. Free tax amendment gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. Free tax amendment Download the free IRS2Go app from the iTunes app store or from Google Play. Free tax amendment Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Free tax amendment Check the status of your 2013 refund with the Where's My Refund? application on IRS. Free tax amendment gov or download the IRS2Go app and select the Refund Status option. Free tax amendment The IRS issues more than 9 out of 10 refunds in less than 21 days. Free tax amendment Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. Free tax amendment You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. Free tax amendment The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Free tax amendment Use the Interactive Tax Assistant (ITA) to research your tax questions. Free tax amendment No need to wait on the phone or stand in line. Free tax amendment The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. Free tax amendment When you reach the response screen, you can print the entire interview and the final response for your records. Free tax amendment New subject areas are added on a regular basis. Free tax amendment  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. Free tax amendment gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. Free tax amendment You can use the IRS Tax Map, to search publications and instructions by topic or keyword. Free tax amendment The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. Free tax amendment When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. Free tax amendment Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. Free tax amendment You can also ask the IRS to mail a return or an account transcript to you. Free tax amendment Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. Free tax amendment gov or by calling 1-800-908-9946. Free tax amendment Tax return and tax account transcripts are generally available for the current year and the past three years. Free tax amendment Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. Free tax amendment Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. Free tax amendment If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. Free tax amendment Check the status of your amended return using Where's My Amended Return? Go to IRS. Free tax amendment gov and enter Where's My Amended Return? in the search box. Free tax amendment You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Free tax amendment It can take up to 3 weeks from the date you mailed it to show up in our system. Free tax amendment Make a payment using one of several safe and convenient electronic payment options available on IRS. Free tax amendment gov. Free tax amendment Select the Payment tab on the front page of IRS. Free tax amendment gov for more information. Free tax amendment Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. Free tax amendment Figure your income tax withholding with the IRS Withholding Calculator on IRS. Free tax amendment gov. Free tax amendment Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. Free tax amendment Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. Free tax amendment gov. Free tax amendment Request an Electronic Filing PIN by going to IRS. Free tax amendment gov and entering Electronic Filing PIN in the search box. Free tax amendment Download forms, instructions and publications, including accessible versions for people with disabilities. Free tax amendment Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. Free tax amendment gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. Free tax amendment An employee can answer questions about your tax account or help you set up a payment plan. Free tax amendment Before you visit, check the Office Locator on IRS. Free tax amendment gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. Free tax amendment If you have a special need, such as a disability, you can request an appointment. Free tax amendment Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Free tax amendment Apply for an Employer Identification Number (EIN). Free tax amendment Go to IRS. Free tax amendment gov and enter Apply for an EIN in the search box. Free tax amendment Read the Internal Revenue Code, regulations, or other official guidance. Free tax amendment Read Internal Revenue Bulletins. Free tax amendment Sign up to receive local and national tax news and more by email. Free tax amendment Just click on “subscriptions” above the search box on IRS. Free tax amendment gov and choose from a variety of options. Free tax amendment Phone. Free tax amendment    You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Free tax amendment Download the free IRS2Go app from the iTunes app store or from Google Play. Free tax amendment Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. Free tax amendment gov, or download the IRS2Go app. Free tax amendment Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Free tax amendment The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Free tax amendment Most VITA and TCE sites offer free electronic filing. Free tax amendment Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. Free tax amendment Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. Free tax amendment Call the automated Where's My Refund? information hotline to check the status of your 2013 refund 24 hours a day, 7 days a week at 1-800-829-1954. Free tax amendment If you e-file, you can start checking on the status of your return within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. Free tax amendment The IRS issues more than 9 out of 10 refunds in less than 21 days. Free tax amendment Where's My Refund? will give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. Free tax amendment Before you call this automated hotline, have your 2013 tax return handy so you can enter your social security number, your filing status, and the exact whole dollar amount of your refund. Free tax amendment The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Free tax amendment Note, the above information is for our automated hotline. Free tax amendment Our live phone and walk-in assistors can research the status of your refund only if it's been 21 days or more since you filed electronically or more than 6 weeks since you mailed your paper return. Free tax amendment Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. Free tax amendment You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Free tax amendment It can take up to 3 weeks from the date you mailed it to show up in our system. Free tax amendment Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, publications, and prior-year forms and instructions (limited to 5 years). Free tax amendment You should receive your order within 10 business days. Free tax amendment Call TeleTax, 1-800-829-4477, to listen to pre-recorded messages covering general and business tax information. Free tax amendment If, between January and April 15, you still have questions about the Form 1040, 1040A, or 1040EZ (like filing requirements, dependents, credits, Schedule D, pensions and IRAs or self-employment taxes), call 1-800-829-1040. Free tax amendment Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. Free tax amendment The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. Free tax amendment These individuals can also contact the IRS through relay services such as the Federal Relay Service. Free tax amendment Walk-in. Free tax amendment   You can find a selection of forms, publications and services — in-person. Free tax amendment Products. Free tax amendment You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Free tax amendment Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. Free tax amendment Services. Free tax amendment You can walk in to your local TAC for face-to-face tax help. Free tax amendment An employee can answer questions about your tax account or help you set up a payment plan. Free tax amendment Before visiting, use the Office Locator tool on IRS. Free tax amendment gov, or choose the Contact Us option on the IRS2Go app and search Local Offices for days and hours of operation, and services provided. Free tax amendment   Please contact the office for times when assistance will be available. Free tax amendment Mail. Free tax amendment   You can send your order for forms, instructions, and publications to the address below. Free tax amendment You should receive a response within 10 business days after your request is received. Free tax amendment Internal Revenue Service 1201 N. Free tax amendment Mitsubishi Motorway Bloomington, IL 61705-6613   Taxpayer Advocate Service. Free tax amendment   The Taxpayer Advocate Service Is here to help you. Free tax amendment The Taxpayer Advocate Service (TAS) is your voice at the IRS. Free tax amendment Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. Free tax amendment   What can TAS do for you? We can offer you free help with IRS problems that you can't resolve on your own. Free tax amendment We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. Free tax amendment You face (or your business is facing) an immediate threat of adverse action. Free tax amendment You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. Free tax amendment   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. Free tax amendment Here's why we can help: TAS is an independent organization within the IRS. Free tax amendment Our advocates know how to work with the IRS. Free tax amendment Our services are free and tailored to meet your needs. Free tax amendment We have offices in every state, the District of Columbia, and Puerto Rico. Free tax amendment   How can you reach us? If you think TAS can help you, call your local advocate, whose number is in your local directory and at Taxpayer Advocate, or call us toll-free at 1-877-777-4778. Free tax amendment  TAS also works to resolve large-scale, systemic problems that affect many taxpayers. Free tax amendment If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System. Free tax amendment Low Income Taxpayer Clinics Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals and tax collection disputes. Free tax amendment Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Free tax amendment Visit Taxpayer Advocate or see IRS Publication 4134, Low Income Taxpayer Clinic List. Free tax amendment Prev  Up  Next   Home   More Online Publications
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Understanding Your CP268 Notice

We made changes to your return because we believe there is a miscalculation on your return. You have a potential overpayment credit because of this miscalculation.


What you need to do

  • Read and review your notice carefully ― it will explain the change
  • Compare our changes to the information on your tax return
  • Call the toll-free number listed on your notice within 30 days to request a refund check or to apply the credit to other types of tax or tax periods
  • Correct your copy of your tax return for your records

You may want to...


Answers to Common Questions

  • What do I do if I find an uncredited or misapplied payment?
    Contact us at the toll-free number listed on your notice with your information. Our representative will discuss the issue with you and provide further instructions.

  • What choices do I have about what to do with my overpayment?
    You can have your overpayment credit refunded to you or you can have it applied to other taxes or tax periods.

  • When can I expect to receive my refund?
    You will receive it in four to six weeks if you respond to your notice within 30 days and if you owe no other taxes or debts we’re required to collect.

  • What can I do if I don't receive my refund in four to six weeks?
    Call us at the toll-free number listed on the top right corner of your notice.

  • What do I do if I need to make a correction to my account?
    Contact us at the toll-free number listed on your notice with your information. Our representative will discuss the issue with you and provide further instructions.

  • What do I need to do next year to get my refund through a direct deposit?
    Complete a Form 8050, Direct Deposit of Corporate Tax Refund and attach it to your return next year when you file your Form 1120, U.S. Corporation Income Tax Return, or your Form 1120S, U.S. Income Tax Return for an S Corporation.

  •  


  • Tips for next year

    Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions for which you may qualify. In many cases, you can file free. Learn more about how to file electronically here.


    Understanding your notice

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

    Notice CP268, Page 1

    Notice CP268, Page 2

    Notice CP268, Page 3

Page Last Reviewed or Updated: 30-Jan-2014

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Free Tax Amendment

Free tax amendment 9. Free tax amendment   Dispositions of Property Used in Farming Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Section 1231 Gains and LossesNonrecaptured section 1231 losses. Free tax amendment Depreciation RecaptureSection 1245 Property Section 1250 Property Installment Sale Other Dispositions Other GainsExceptions. Free tax amendment Amount to report as ordinary income. Free tax amendment Applicable percentage. Free tax amendment Amount to report as ordinary income. Free tax amendment Applicable percentage. Free tax amendment Introduction When you dispose of property used in your farm business, your taxable gain or loss is usually treated as ordinary income (which is taxed at the same rates as wages and interest income) or capital gain (which is generally taxed at lower rates) under the rules for section 1231 transactions. Free tax amendment 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 tax amendment Any gain remaining after applying the depreciation recapture rules is a section 1231 gain, which may be taxed as a capital gain. Free tax amendment Gains and losses from property used in farming are reported on Form 4797, Sales of Business Property. Free tax amendment Table 9-1 contains examples of items reported on Form 4797 and refers to the part of that form on which they first should be reported. Free tax amendment Topics - This chapter discusses: Section 1231 gains and losses Depreciation recapture Other gains Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. Free tax amendment Section 1231 Gains and Losses Section 1231 gains and losses are the taxable gains and losses from section 1231 transactions (explained below). Free tax amendment Their treatment as ordinary or capital gains depends on whether you have a net gain or a net loss from all of your section 1231 transactions in the tax year. Free tax amendment Table 9-1. Free tax amendment Where to First Report Certain Items on Form 4797 Type of property Held 1 year  or less Held more than  1 year 1 Depreciable trade or business property:       a Sold or exchanged at a gain Part II Part III (1245, 1250)   b Sold or exchanged at a loss Part II Part I 2 Farmland held less than 10 years for which soil, water, or land clearing expenses were deducted:       a Sold at a gain Part II Part III (1252)   b Sold at a loss Part II Part I 3 All other farmland Part II Part I 4 Disposition of cost-sharing payment property described in section 126 Part II Part III (1255) 5 Cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 24 mos. Free tax amendment Held 24 mos. Free tax amendment  or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised cattle and horses sold at a gain Part II Part I 6 Livestock other than cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 12 mos. Free tax amendment Held 12 mos. Free tax amendment   or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised livestock sold at a gain Part II Part I 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 tax amendment Do not take that gain into account as section 1231 gain. Free tax amendment Section 1231 transactions. Free tax amendment   Gain or loss on the following transactions is subject to section 1231 treatment. Free tax amendment Sale or exchange of cattle and horses. Free tax amendment The cattle and horses must be held for draft, breeding, dairy, or sporting purposes and held for 24 months or longer. Free tax amendment Sale or exchange of other livestock. Free tax amendment This livestock must be held for draft, breeding, dairy, or sporting purposes and held for 12 months or longer. Free tax amendment Other livestock includes hogs, mules, sheep, goats, donkeys, and other fur-bearing animals. Free tax amendment Other livestock does not include poultry. Free tax amendment Sale or exchange of depreciable personal property. Free tax amendment This property must be used in your business and held longer than 1 year. Free tax amendment Generally, property held for the production of rents or royalties is considered to be used in a trade or business. Free tax amendment Examples of depreciable personal property include farm machinery and trucks. Free tax amendment It also includes amortizable section 197 intangibles. Free tax amendment Sale or exchange of real estate. Free tax amendment This property must be used in your business and held longer than 1 year. Free tax amendment Examples are your farm or ranch (including barns and sheds). Free tax amendment Sale or exchange of unharvested crops. Free tax amendment The crop and land must be sold, exchanged, or involuntarily converted at the same time and to the same person, and the land must have been held longer than 1 year. Free tax amendment You cannot keep any right or option to reacquire the land directly or indirectly (other than a right customarily incident to a mortgage or other security transaction). Free tax amendment Growing crops sold with a leasehold on the land, even if sold to the same person in a single transaction, are not included. Free tax amendment Distributive share of partnership gains and losses. Free tax amendment Your distributive share must be from the sale or exchange of property listed above and held longer than 1 year (or for the required period for certain livestock). Free tax amendment Cutting or disposal of timber. Free tax amendment Special rules apply if you owned the timber longer than 1 year and elect to treat timber cutting as a sale or exchange, or you enter into a cutting contract, as described in chapter 8 under Timber . Free tax amendment Condemnation. Free tax amendment The condemned property (defined in chapter 11) must have been held longer than 1 year. Free tax amendment 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 tax amendment It cannot be property held for personal use. Free tax amendment Casualty or theft. Free tax amendment The casualty or theft must have affected business property, property held for the production of rents or royalties, or investment property (such as notes and bonds). Free tax amendment You must have held the property longer than 1 year. Free tax amendment 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 tax amendment Section 1231 does not apply to personal casualty gains and losses. Free tax amendment See chapter 11 for information on how to treat those gains and losses. Free tax amendment If the property is not held for the required holding period, the transaction is not subject to section 1231 treatment, and any gain or loss is ordinary income reported in Part II of Form 4797. Free tax amendment See Table 9-1. Free tax amendment Property for sale to customers. Free tax amendment   A sale, exchange, or involuntary conversion of property held mainly for sale to customers is not a section 1231 transaction. Free tax amendment 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 tax amendment Treatment as ordinary or capital. Free tax amendment   To determine the treatment of section 1231 gains and losses, combine all of your section 1231 gains and losses for the year. Free tax amendment If you have a net section 1231 loss, it is an ordinary loss. Free tax amendment If you have a net section 1231 gain, it is ordinary income up to your nonrecaptured section 1231 losses from previous years, explained next. Free tax amendment The rest, if any, is long-term capital gain. Free tax amendment Nonrecaptured section 1231 losses. Free tax amendment   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 by treating the gain as ordinary income. Free tax amendment These losses are applied against your net section 1231 gain beginning with the earliest loss in the 5-year period. Free tax amendment Example. Free tax amendment In 2013, Ben has a $2,000 net section 1231 gain. Free tax amendment 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 tax amendment From 2008 through 2012 he had the following section 1231 gains and losses. Free tax amendment 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 tax amendment 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 His remaining net section 1231 loss from 2010 is completely recaptured in 2013. Free tax amendment 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 it is otherwise nontaxable) as ordinary income. Free tax amendment 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 tax amendment For more information, see chapter 3 of Publication 544. Free tax amendment 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. Free tax amendment Any recognized gain that is more than the part that is ordinary income is a section 1231 gain. Free tax amendment See Treatment as ordinary or capital under Section 1231 Gains and Losses , earlier. Free tax amendment 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 tax amendment Personal property (either tangible or intangible). Free tax amendment Other tangible property (except buildings and their structural components) used as any of the following. Free tax amendment See Buildings and structural components below. Free tax amendment An integral part of manufacturing, production, or extraction, or of furnishing certain services. Free tax amendment A research facility in any of the activities in (a). Free tax amendment A facility in any of the activities in (a) above, for the bulk storage of fungible commodities (discussed later). Free tax amendment That part of real property (not included in (2)) with an adjusted basis reduced by (but not limited to) the following. Free tax amendment Amortization of certified pollution control facilities. Free tax amendment The section 179 expense deduction. Free tax amendment Deduction for clean-fuel vehicles and certain refueling property. Free tax amendment Expenditures to remove architectural and transportation barriers to the handicapped and elderly. Free tax amendment Certain reforestation expenditures (as described under Reforestation Costs in chapter 7. Free tax amendment Single purpose agricultural (livestock) or horticultural structures. Free tax amendment Storage facilities (except buildings and their structural components) used in distributing petroleum or any primary product of petroleum. Free tax amendment Buildings and structural components. Free tax amendment   Section 1245 property does not include buildings and structural components. Free tax amendment The term building includes a house, barn, warehouse, or garage. Free tax amendment The term structural component includes walls, floors, windows, doors, central air conditioning systems, light fixtures, etc. Free tax amendment   Do not treat a structure that is essentially machinery or equipment as a building or structural component. Free tax amendment 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 tax amendment   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 tax amendment Structures such as oil and gas storage tanks, grain storage bins, and silos are not treated as buildings, but as section 1245 property. Free tax amendment Facility for bulk storage of fungible commodities. Free tax amendment   This is a facility used mainly for the bulk storage of fungible commodities. Free tax amendment Bulk storage means storage of a commodity in a large mass before it is used. Free tax amendment For example, if a facility is used to store oranges that have been sorted and boxed, it is not used for bulk storage. Free tax amendment To be fungible, a commodity must be such that one part may be used in place of another. Free tax amendment 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 tax amendment The depreciation (which includes any section 179 deduction claimed) and amortization allowed or allowable on the property. Free tax amendment The gain realized on the disposition (the amount realized from the disposition minus the adjusted basis of the property). Free tax amendment For any other disposition of section 1245 property, ordinary income is the lesser of (1) above or the amount by which its fair market value (FMV) is more than its adjusted basis. Free tax amendment For details, see chapter 3 of Publication 544. Free tax amendment Use Part III of Form 4797 to figure the ordinary income part of the gain. Free tax amendment Depreciation claimed on other property or claimed by other taxpayers. Free tax amendment   Depreciation and amortization include the amounts you claimed on the section 1245 property as well as the following depreciation and amortization amounts. Free tax amendment Amounts you claimed on property you exchanged for, or converted to, your section 1245 property in a like-kind exchange or involuntary conversion. Free tax amendment For details on exchanges of property that are not taxable, see Like-Kind Exchanges in chapter 8. Free tax amendment 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 and part of the transfer is a sale or exchange). Free tax amendment Example. Free tax amendment Jeff Free paid $120,000 for a tractor in 2012. Free tax amendment On February 23, 2013, he traded it for a chopper and paid an additional $30,000. Free tax amendment To figure his depreciation deduction on the chopper for the current year, Jeff continues to use the basis of the tractor as he would have before the trade. Free tax amendment Jeff can also depreciate the additional $30,000 for the chopper. Free tax amendment Depreciation and amortization. Free tax amendment   Depreciation and amortization deductions that must be recaptured as ordinary income include (but are not limited to) the following items. Free tax amendment See Depreciation Recapture in chapter 3 of Publication 544 for more details. Free tax amendment Ordinary depreciation deductions. Free tax amendment Section 179 deduction (see chapter 7). Free tax amendment Any special depreciation allowance. Free tax amendment Amortization deductions for all the following costs. Free tax amendment Acquiring a lease. Free tax amendment Lessee improvements. Free tax amendment Pollution control facilities. Free tax amendment Reforestation expenses. Free tax amendment Section 197 intangibles. Free tax amendment Qualified disaster expenses. Free tax amendment Franchises, trademarks, and trade names acquired before August 11, 1993. Free tax amendment Example. Free tax amendment You file your returns on a calendar year basis. Free tax amendment In February 2011, you bought and placed in service for 100% use in your farming business a light-duty truck (5-year property) that cost $10,000. Free tax amendment You used the half-year convention and your MACRS deductions for the truck were $1,500 in 2011 and $2,550 in 2012. Free tax amendment You did not claim the section 179 expense deduction for the truck. Free tax amendment You sold it in May 2013 for $7,000. Free tax amendment The MACRS deduction in 2013, the year of sale, is $893 (½ of $1,785). Free tax amendment Figure the gain treated as ordinary income as follows. Free tax amendment 1) Amount realized $7,000 2) Cost (February 2011) $10,000   3) Depreciation allowed or allowable (MACRS deductions: $1,500 + $2,550 + $893) 4,943   4) Adjusted basis (subtract line 3 from line 2) $5,057 5) Gain realized (subtract line 4 from line 1) 1,943 6) Gain treated as ordinary income (lesser of line 3 or line 5) $1,943 Depreciation allowed or allowable. Free tax amendment   You generally use the greater of the depreciation allowed or allowable when figuring the part of gain to report as ordinary income. Free tax amendment 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 tax amendment 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 tax amendment This treatment applies only when figuring what part of the gain is treated as ordinary income under the rules for section 1245 depreciation recapture. Free tax amendment Disposition of plants and animals. Free tax amendment   If you elect not to use the uniform capitalization rules (see chapter 6), you must treat any plant you produce as section 1245 property. Free tax amendment If you have a gain on the property's disposition, you must recapture the pre-productive expenses you would have capitalized if you had not made the election by treating the gain, up to the amount of these expenses, as ordinary income. Free tax amendment For section 1231 transactions, show these expenses as depreciation on Form 4797, Part III, line 22. Free tax amendment For plant sales that are reported on Schedule F (1040), Profit or Loss From Farming, this recapture rule does not change the reporting of income because the gain is already ordinary income. Free tax amendment You can use the farm-price method or the unit-livestock-price method discussed in  chapter 2 to figure these expenses. Free tax amendment Example. Free tax amendment Janet Maple sold her apple orchard in 2013 for $80,000. Free tax amendment Her adjusted basis at the time of sale was $60,000. Free tax amendment She bought the orchard in 2006, but the trees did not produce a crop until 2009. Free tax amendment Her pre-productive expenses were $6,000. Free tax amendment She elected not to use the uniform capitalization rules. Free tax amendment Janet must treat $6,000 of the gain as ordinary income. Free tax amendment Section 1250 Property Section 1250 property includes all real property subject to an allowance for depreciation that is not and never has been section 1245 property. Free tax amendment It includes buildings and structural components that are not section 1245 property (discussed earlier). Free tax amendment It includes a leasehold of land or section 1250 property subject to an allowance for depreciation. Free tax amendment A fee simple interest in land is not section 1250 property because, like land, it is not depreciable. Free tax amendment Gain on the disposition of section 1250 property is treated as ordinary income to the extent of additional depreciation allowed or allowable. Free tax amendment To determine the additional depreciation on section 1250 property, see Depreciation Recapture in chapter 3 of Publication 544. Free tax amendment You will not have additional depreciation if any of the following apply to the property disposed of. Free tax amendment 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 and you have held the property longer than 1 year. Free tax amendment You chose the alternate ACRS (straight line) method for the property, which was a type of 15-, 18-, or 19-year real property covered by the section 1250 rules. Free tax amendment The property was nonresidential real property placed in service after 1986 (or after July 31, 1986, if the choice to use MACRS was made) and you held it longer than 1 year. Free tax amendment These properties are depreciated using the straight line method. Free tax amendment Installment Sale 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 tax amendment This applies even if no payments are received in that year. Free tax amendment If the gain is more than the depreciation recapture income, report the rest of the gain using the rules of the installment method. Free tax amendment For this purpose, include the recapture income in your installment sale basis to determine your gross profit on the installment sale. Free tax amendment If you dispose of more than one asset in a single transaction, you must separately figure the gain on each asset so that it may be properly reported. Free tax amendment To do this, allocate the selling price and the payments you receive in the year of sale to each asset. Free tax amendment Report any depreciation recapture income in the year of sale before using the installment method for any remaining gain. Free tax amendment For more information on installment sales, see chapter 10. Free tax amendment Other Dispositions Chapter 3 of Publication 544 discusses the tax treatment of the following transfers of depreciable property. Free tax amendment By gift. Free tax amendment At death. Free tax amendment In like-kind exchanges. Free tax amendment In involuntary conversions. Free tax amendment Publication 544 also explains how to handle a single transaction involving multiple properties. Free tax amendment Other Gains This section discusses gain on the disposition of farmland for which you were allowed either of the following. Free tax amendment Deductions for soil and water conservation expenditures (section 1252 property). Free tax amendment Exclusions from income for certain cost sharing payments (section 1255 property). Free tax amendment Section 1252 property. Free tax amendment   If you disposed of farmland you held more than 1 year and less than 10 years at a gain and you were allowed deductions for soil and water conservation expenses for the land, as discussed in chapter 5, you must treat part of the gain as ordinary income and treat the balance as section 1231 gain. Free tax amendment Exceptions. Free tax amendment   Do not treat gain on the following transactions as gain on section 1252 property. Free tax amendment Disposition of farmland by gift. Free tax amendment Transfer of farm property at death (except for income in respect of a decedent). Free tax amendment For more information, see Regulations section 1. Free tax amendment 1252-2. Free tax amendment Amount to report as ordinary income. Free tax amendment   You report as ordinary income the lesser of the following amounts. Free tax amendment Your gain (determined by subtracting the adjusted basis from the amount realized from a sale, exchange, or involuntary conversion, or the FMV for all other dispositions). Free tax amendment The total deductions allowed for soil and water conservation expenses multiplied by the applicable percentage, discussed next. Free tax amendment Applicable percentage. Free tax amendment   The applicable percentage is based on the length of time you held the land. Free tax amendment If you dispose of your farmland within 5 years after the date you acquired it, the percentage is 100%. Free tax amendment If you dispose of the land within the 6th through 9th year after you acquired it, the applicable percentage is reduced by 20% a year for each year or part of a year you hold the land after the 5th year. Free tax amendment If you dispose of the land 10 or more years after you acquired it, the percentage is 0%, and the entire gain is a section 1231 gain. Free tax amendment Example. Free tax amendment You acquired farmland on January 19, 2005. Free tax amendment On October 3, 2013, you sold the land at a $30,000 gain. Free tax amendment Between January 1 and October 3, 2013, you incur soil and water conservation expenditures of $15,000 for the land that are fully deductible in 2013. Free tax amendment The applicable percentage is 40% since you sold the land within the 8th year after you acquired it. Free tax amendment You treat $6,000 (40% of $15,000) of the $30,000 gain as ordinary income and the $24,000 balance as a section 1231 gain. Free tax amendment Section 1255 property. Free tax amendment   If you receive certain cost-sharing payments on property and you exclude those payments from income (as discussed in chapter 3), you may have to treat part of any gain as ordinary income and treat the balance as a section 1231 gain. Free tax amendment If you chose not to exclude these payments, you will not have to recognize ordinary income under this provision. Free tax amendment Amount to report as ordinary income. Free tax amendment   You report as ordinary income the lesser of the following amounts. Free tax amendment The applicable percentage of the total excluded cost-sharing payments. Free tax amendment The gain on the disposition of the property. Free tax amendment You do not report ordinary income under this rule to the extent the gain is recognized as ordinary income under sections 1231 through 1254, 1256, and 1257. Free tax amendment However, if applicable, gain reported under this rule must be reported regardless of any contrary provisions (including nonrecognition provisions) under any other section. Free tax amendment Applicable percentage. Free tax amendment   The applicable percentage of the excluded cost-sharing payments to be reported as ordinary income is based on the length of time you hold the property after receiving the payments. Free tax amendment If the property is held less than 10 years after you receive the payments, the percentage is 100%. Free tax amendment After 10 years, the percentage is reduced by 10% a year, or part of a year, until the rate is 0%. Free tax amendment Form 4797, Part III. Free tax amendment   Use Form 4797, Part III, to figure the ordinary income part of a gain from the sale, exchange, or involuntary conversion of section 1252 property and section 1255 property. Free tax amendment Prev  Up  Next   Home   More Online Publications