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How Do I File My 2012 Tax Return

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How Do I File My 2012 Tax Return

How do i file my 2012 tax return Publication 936 - Introductory Material Table of Contents Reminders IntroductionOrdering forms and publications. How do i file my 2012 tax return Tax questions. How do i file my 2012 tax return Useful Items - You may want to see: Reminders Future developments. How do i file my 2012 tax return  For the latest information about developments related to Publication 936, Home Mortgage Interest Deduction, such as legislation enacted after it was published, go to www. How do i file my 2012 tax return irs. How do i file my 2012 tax return gov/pub936. How do i file my 2012 tax return Photographs of missing children. How do i file my 2012 tax return  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. How do i file my 2012 tax return Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. How do i file my 2012 tax return You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. How do i file my 2012 tax return Introduction This publication discusses the rules for deducting home mortgage interest. How do i file my 2012 tax return Part I contains general information on home mortgage interest, including points and mortgage insurance premiums. How do i file my 2012 tax return It also explains how to report deductible interest on your tax return. How do i file my 2012 tax return Part II explains how your deduction for home mortgage interest may be limited. How do i file my 2012 tax return It contains Table 1, which is a worksheet you can use to figure the limit on your deduction. How do i file my 2012 tax return Comments and suggestions. How do i file my 2012 tax return   We welcome your comments about this publication and your suggestions for future editions. How do i file my 2012 tax return   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. How do i file my 2012 tax return NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. How do i file my 2012 tax return Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. How do i file my 2012 tax return   You can send your comments from www. How do i file my 2012 tax return irs. How do i file my 2012 tax return gov/formspubs. How do i file my 2012 tax return Click on “More Information” and then on “Comment on Tax Forms and Publications. How do i file my 2012 tax return ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. How do i file my 2012 tax return Ordering forms and publications. How do i file my 2012 tax return   Visit www. How do i file my 2012 tax return irs. How do i file my 2012 tax return gov/formspubs to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. How do i file my 2012 tax return Internal Revenue Service 1201 N. How do i file my 2012 tax return Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. How do i file my 2012 tax return   If you have a tax question, check the information available on IRS. How do i file my 2012 tax return gov or call 1-800-829-1040. How do i file my 2012 tax return We cannot answer tax questions sent to either of the above addresses. How do i file my 2012 tax return Useful Items - You may want to see: Publication 523 Selling Your Home 527 Residential Rental Property 530 Tax Information for Homeowners 535 Business Expenses   See How To Get Tax Help near the end of this publication, for information about getting these publications. How do i file my 2012 tax return Prev  Up  Next   Home   More Online Publications
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Industry Issue Resolution Program

The IRS offers a number of programs and tools to assist taxpayers in resolving contentious and industry-specific tax issues. In addition to the Industry Issue Resolution Program, other programs available include:

The Industry Issue Resolution (IIR) Program resolves frequently disputed or burdensome tax issues that affect a significant number of business taxpayers through the issuance of guidance. IRS solicits suggestions for issues from taxpayers, representatives and associations for the IIR Program. For each issue selected for the program, a resolution team of IRS, Chief Counsel and Treasury personnel is assembled to gather and analyze relevant information for the issue and develop and recommend guidance.

IIR Program:

Issues Submitted/Selected for IIR Program:

 

New IIR Selection dated 11-19-2012 - 2012 Issue Selected for the IIR Program
IR-2010-40 dated 04-02-2010 - 2009/2010 Issues Reviewed/Selected for the IIR Program
IR-2008-110 dated 09-25-2008 - 2008 Issues Reviewed/Selected for the IIR Program 
 IR-2007-39 dated 02-22-2007 - 2006 Issues Reviewed/Selected for the IIR Program
 IR 2005-81 dated 08-08-2005 - 2005 Issues Reviewed/Selected for the IIR Program 
 IR-2004-154 dated 12-21-2004 - 2004 Issues Reviewed/Selected for the IIR Program - 2nd Review 
 IR-2004-100 dated 07-29-2004 - 2004 Issues Reviewed/Selected for the IIR Program - 1st Review 
 IR-2003-92 dated 07-24-2003 - 2003 Issues Reviewed/Selected for the IIR Program 

IIR Guidance Issued

Page Last Reviewed or Updated: 04-Sep-2013

The How Do I File My 2012 Tax Return

How do i file my 2012 tax return 2. How do i file my 2012 tax return   Ordinary or Capital Gain or Loss Table of Contents IntroductionSection 1231 transactions. How do i file my 2012 tax return Topics - This chapter discusses: Useful Items - You may want to see: Capital Assets Noncapital AssetsCommodities derivative dealer. How do i file my 2012 tax return Sales and Exchanges Between Related PersonsGain Is Ordinary Income Nondeductible Loss Other DispositionsSale of a Business Dispositions of Intangible Property Subdivision of Land Timber Precious Metals and Stones, Stamps, and Coins Coal and Iron Ore Conversion Transactions Introduction You must classify your gains and losses as either ordinary or capital (and your capital gains or losses as either short-term or long-term). How do i file my 2012 tax return You must do this to figure your net capital gain or loss. How do i file my 2012 tax return For individuals, a net capital gain may be taxed at a different tax rate than ordinary income. How do i file my 2012 tax return See Capital Gains Tax Rates in chapter 4. How do i file my 2012 tax return Your deduction for a net capital loss may be limited. How do i file my 2012 tax return See Treatment of Capital Losses in chapter 4. How do i file my 2012 tax return Capital gain or loss. How do i file my 2012 tax return   Generally, you will have a capital gain or loss if you sell or exchange a capital asset. How do i file my 2012 tax return You also may have a capital gain if your section 1231 transactions result in a net gain. How do i file my 2012 tax return Section 1231 transactions. How do i file my 2012 tax return   Section 1231 transactions are sales and exchanges of property held longer than 1 year and either used in a trade or business or held for the production of rents or royalties. How do i file my 2012 tax return They also include certain involuntary conversions of business or investment property, including capital assets. How do i file my 2012 tax return See Section 1231 Gains and Losses in chapter 3 for more information. How do i file my 2012 tax return Topics - This chapter discusses: Capital assets Noncapital assets Sales and exchanges between  related persons Other dispositions Useful Items - You may want to see: Publication 550 Investment Income and Expenses Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 4797 Sales of Business Property 8594 Asset Acquisition Statement Under Section 1060 8949 Sales and Other Dispositions of Capital Assets See chapter 5 for information about getting publications and forms. How do i file my 2012 tax return Capital Assets Almost everything you own and use for personal purposes, pleasure, or investment is a capital asset. How do i file my 2012 tax return For exceptions, see Noncapital Assets, later. How do i file my 2012 tax return The following items are examples of capital assets. How do i file my 2012 tax return Stocks and bonds. How do i file my 2012 tax return A home owned and occupied by you and your family. How do i file my 2012 tax return Timber grown on your home property or investment property, even if you make casual sales of the timber. How do i file my 2012 tax return Household furnishings. How do i file my 2012 tax return A car used for pleasure or commuting. How do i file my 2012 tax return Coin or stamp collections. How do i file my 2012 tax return Gems and jewelry. How do i file my 2012 tax return Gold, silver, and other metals. How do i file my 2012 tax return Personal-use property. How do i file my 2012 tax return   Generally, property held for personal use is a capital asset. How do i file my 2012 tax return Gain from a sale or exchange of that property is a capital gain. How do i file my 2012 tax return Loss from the sale or exchange of that property is not deductible. How do i file my 2012 tax return You can deduct a loss relating to personal-use property only if it results from a casualty or theft. How do i file my 2012 tax return Investment property. How do i file my 2012 tax return   Investment property (such as stocks and bonds) is a capital asset, and a gain or loss from its sale or exchange is a capital gain or loss. How do i file my 2012 tax return This treatment does not apply to property used to produce rental income. How do i file my 2012 tax return See Business assets, later, under Noncapital Assets. How do i file my 2012 tax return Release of restriction on land. How do i file my 2012 tax return   Amounts you receive for the release of a restrictive covenant in a deed to land are treated as proceeds from the sale of a capital asset. How do i file my 2012 tax return Noncapital Assets A noncapital asset is property that is not a capital asset. How do i file my 2012 tax return The following kinds of property are not capital assets. How do i file my 2012 tax return Stock in trade, inventory, and other property you hold mainly for sale to customers in your trade or business. How do i file my 2012 tax return Inventories are discussed in Publication 538, Accounting Periods and Methods. How do i file my 2012 tax return But, see the Tip below. How do i file my 2012 tax return Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of any properties described in (1), above. How do i file my 2012 tax return Depreciable property used in your trade or business or as rental property (including section 197 intangibles defined later), even if the property is fully depreciated (or amortized). How do i file my 2012 tax return Sales of this type of property are discussed in chapter 3. How do i file my 2012 tax return Real property used in your trade or business or as rental property, even if the property is fully depreciated. How do i file my 2012 tax return A copyright; a literary, musical, or artistic composition; a letter; a memorandum; or similar property (such as drafts of speeches, recordings, transcripts, manuscripts, drawings, or photographs): Created by your personal efforts, Prepared or produced for you (in the case of a letter, memorandum, or similar property), or Received from a person who created the property or for whom the property was prepared under circumstances (for example, by gift) entitling you to the basis of the person who created the property, or for whom it was prepared or produced. How do i file my 2012 tax return But, see the Tip below. How do i file my 2012 tax return U. How do i file my 2012 tax return S. How do i file my 2012 tax return Government publications you got from the government for free or for less than the normal sales price or that you acquired under circumstances entitling you to the basis of someone who got the publications for free or for less than the normal sales price. How do i file my 2012 tax return Any commodities derivative financial instrument (discussed later) held by a commodities derivatives dealer unless it meets both of the following requirements. How do i file my 2012 tax return It is established to the satisfaction of the IRS that the instrument has no connection to the activities of the dealer as a dealer. How do i file my 2012 tax return The instrument is clearly identified in the dealer's records as meeting (a) by the end of the day on which it was acquired, originated, or entered into. How do i file my 2012 tax return Any hedging transaction (defined later) that is clearly identified as a hedging transaction by the end of the day on which it was acquired, originated, or entered into. How do i file my 2012 tax return Supplies of a type you regularly use or consume in the ordinary course of your trade or business. How do i file my 2012 tax return You can elect to treat as capital assets certain self-created musical compositions or copyrights you sold or exchanged. How do i file my 2012 tax return See chapter 4 of Publication 550 for details. How do i file my 2012 tax return Property held mainly for sale to customers. How do i file my 2012 tax return   Stock in trade, inventory, and other property you hold mainly for sale to customers in your trade or business are not capital assets. How do i file my 2012 tax return Inventories are discussed in Publication 538. How do i file my 2012 tax return Business assets. How do i file my 2012 tax return   Real property and depreciable property used in your trade or business or as rental property (including section 197 intangibles defined later under Dispositions of Intangible Property) are not capital assets. How do i file my 2012 tax return The sale or disposition of business property is discussed in chapter 3. How do i file my 2012 tax return Letters and memoranda. How do i file my 2012 tax return   Letters, memoranda, and similar property (such as drafts of speeches, recordings, transcripts, manuscripts, drawings, or photographs) are not treated as capital assets (as discussed earlier) if your personal efforts created them or if they were prepared or produced for you. How do i file my 2012 tax return Nor is this property a capital asset if your basis in it is determined by reference to the person who created it or the person for whom it was prepared. How do i file my 2012 tax return For this purpose, letters and memoranda addressed to you are considered prepared for you. How do i file my 2012 tax return If letters or memoranda are prepared by persons under your administrative control, they are considered prepared for you whether or not you review them. How do i file my 2012 tax return Commodities derivative financial instrument. How do i file my 2012 tax return   A commodities derivative financial instrument is a commodities contract or other financial instrument for commodities (other than a share of corporate stock, a beneficial interest in a partnership or trust, a note, bond, debenture, or other evidence of indebtedness, or a section 1256 contract) the value or settlement price of which is calculated or determined by reference to a specified index (as defined in section 1221(b) of the Internal Revenue Code). How do i file my 2012 tax return Commodities derivative dealer. How do i file my 2012 tax return   A commodities derivative dealer is a person who regularly offers to enter into, assume, offset, assign, or terminate positions in commodities derivative financial instruments with customers in the ordinary course of a trade or business. How do i file my 2012 tax return Hedging transaction. How do i file my 2012 tax return   A hedging transaction is any transaction you enter into in the normal course of your trade or business primarily to manage any of the following. How do i file my 2012 tax return Risk of price changes or currency fluctuations involving ordinary property you hold or will hold. How do i file my 2012 tax return Risk of interest rate or price changes or currency fluctuations for borrowings you make or will make, or ordinary obligations you incur or will incur. How do i file my 2012 tax return Sales and Exchanges Between Related Persons This section discusses the rules that may apply to the sale or exchange of property between related persons. How do i file my 2012 tax return If these rules apply, gains may be treated as ordinary income and losses may not be deductible. How do i file my 2012 tax return See Transfers to Spouse in chapter 1 for rules that apply to spouses. How do i file my 2012 tax return Gain Is Ordinary Income If a gain is recognized on the sale or exchange of property to a related person, the gain may be ordinary income even if the property is a capital asset. How do i file my 2012 tax return It is ordinary income if the sale or exchange is a depreciable property transaction or a controlled partnership transaction. How do i file my 2012 tax return Depreciable property transaction. How do i file my 2012 tax return   Gain on the sale or exchange of property, including a leasehold or a patent application, that is depreciable property in the hands of the person who receives it is ordinary income if the transaction is either directly or indirectly between any of the following pairs of entities. How do i file my 2012 tax return A person and the person's controlled entity or entities. How do i file my 2012 tax return A taxpayer and any trust in which the taxpayer (or his or her spouse) is a beneficiary unless the beneficiary's interest in the trust is a remote contingent interest; that is, the value of the interest computed actuarially is 5% or less of the value of the trust property. How do i file my 2012 tax return An executor and a beneficiary of an estate unless the sale or exchange is in satisfaction of a pecuniary bequest (a bequest for a sum of money). How do i file my 2012 tax return An employer (or any person related to the employer under rules (1), (2), or (3)) and a welfare benefit fund (within the meaning of section 419(e) of the Internal Revenue Code) that is controlled directly or indirectly by the employer (or any person related to the employer). How do i file my 2012 tax return Controlled entity. How do i file my 2012 tax return   A person's controlled entity is either of the following. How do i file my 2012 tax return A corporation in which more than 50% of the value of all outstanding stock, or a partnership in which more than 50% of the capital interest or profits interest, is directly or indirectly owned by or for that person. How do i file my 2012 tax return An entity whose relationship with that person is one of the following. How do i file my 2012 tax return A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest or profits interest in the partnership. How do i file my 2012 tax return Two corporations that are members of the same controlled group as defined in section 1563(a) of the Internal Revenue Code, except that “more than 50%” is substituted for “at least 80%” in that definition. How do i file my 2012 tax return Two S corporations, if the same persons own more than 50% in value of the outstanding stock of each corporation. How do i file my 2012 tax return Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. How do i file my 2012 tax return Controlled partnership transaction. How do i file my 2012 tax return   A gain recognized in a controlled partnership transaction may be ordinary income. How do i file my 2012 tax return The gain is ordinary income if it results from the sale or exchange of property that, in the hands of the party who receives it, is a noncapital asset such as trade accounts receivable, inventory, stock in trade, or depreciable or real property used in a trade or business. How do i file my 2012 tax return   A controlled partnership transaction is a transaction directly or indirectly between either of the following pairs of entities. How do i file my 2012 tax return A partnership and a person who directly or indirectly owns more than 50% of the capital interest or profits interest in the partnership. How do i file my 2012 tax return Two partnerships, if the same persons directly or indirectly own more than 50% of the capital interests or profits interests in both partnerships. How do i file my 2012 tax return Determining ownership. How do i file my 2012 tax return   In the transactions under Depreciable property transaction and Controlled partnership transaction, earlier, use the following rules to determine the ownership of stock or a partnership interest. How do i file my 2012 tax return Stock or a partnership interest directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. How do i file my 2012 tax return (However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more in value of the stock of the corporation. How do i file my 2012 tax return ) An individual is considered as owning the stock or partnership interest directly or indirectly owned by or for his or her family. How do i file my 2012 tax return Family includes only brothers, sisters, half-brothers, half-sisters, spouse, ancestors, and lineal descendants. How do i file my 2012 tax return For purposes of applying (1) or (2), above, stock or a partnership interest constructively owned by a person under (1) is treated as actually owned by that person. How do i file my 2012 tax return But stock or a partnership interest constructively owned by an individual under (2) is not treated as owned by the individual for reapplying (2) to make another person the constructive owner of that stock or partnership interest. How do i file my 2012 tax return Nondeductible Loss A loss on the sale or exchange of property between related persons is not deductible. How do i file my 2012 tax return This applies to both direct and indirect transactions, but not to distributions of property from a corporation in a complete liquidation. How do i file my 2012 tax return For the list of related persons, see Related persons next. How do i file my 2012 tax return If a sale or exchange is between any of these related persons and involves the lump-sum sale of a number of blocks of stock or pieces of property, the gain or loss must be figured separately for each block of stock or piece of property. How do i file my 2012 tax return The gain on each item is taxable. How do i file my 2012 tax return The loss on any item is nondeductible. How do i file my 2012 tax return Gains from the sales of any of these items may not be offset by losses on the sales of any of the other items. How do i file my 2012 tax return Related persons. How do i file my 2012 tax return   The following is a list of related persons. How do i file my 2012 tax return Members of a family, including only brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. How do i file my 2012 tax return ), and lineal descendants (children, grandchildren, etc. How do i file my 2012 tax return ). How do i file my 2012 tax return An individual and a corporation if the individual directly or indirectly owns more than 50% in value of the outstanding stock of the corporation. How do i file my 2012 tax return Two corporations that are members of the same controlled group as defined in section 267(f) of the Internal Revenue Code. How do i file my 2012 tax return A trust fiduciary and a corporation if the trust or the grantor of the trust directly or indirectly owns more than 50% in value of the outstanding stock of the corporation. How do i file my 2012 tax return A grantor and fiduciary, and the fiduciary and beneficiary, of any trust. How do i file my 2012 tax return Fiduciaries of two different trusts, and the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. How do i file my 2012 tax return A tax-exempt educational or charitable organization and a person who directly or indirectly controls the organization, or a member of that person's family. How do i file my 2012 tax return A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest or profits interest in the partnership. How do i file my 2012 tax return Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. How do i file my 2012 tax return Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. How do i file my 2012 tax return An executor and a beneficiary of an estate unless the sale or exchange is in satisfaction of a pecuniary bequest. How do i file my 2012 tax return Two partnerships if the same persons directly or indirectly own more than 50% of the capital interests or profits interests in both partnerships. How do i file my 2012 tax return A person and a partnership if the person directly or indirectly owns more than 50% of the capital interest or profits interest in the partnership. How do i file my 2012 tax return Partnership interests. How do i file my 2012 tax return   The nondeductible loss rule does not apply to a sale or exchange of an interest in the partnership between the related persons described in (12) or (13) above. How do i file my 2012 tax return Controlled groups. How do i file my 2012 tax return   Losses on transactions between members of the same controlled group described in (3) earlier are deferred rather than denied. How do i file my 2012 tax return   For more information, see section 267(f) of the Internal Revenue Code. How do i file my 2012 tax return Ownership of stock or partnership interests. How do i file my 2012 tax return   In determining whether an individual directly or indirectly owns any of the outstanding stock of a corporation or an interest in a partnership for a loss on a sale or exchange, the following rules apply. How do i file my 2012 tax return Stock or a partnership interest directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. How do i file my 2012 tax return (However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more in value of the stock of the corporation. How do i file my 2012 tax return ) An individual is considered as owning the stock or partnership interest directly or indirectly owned by or for his or her family. How do i file my 2012 tax return Family includes only brothers, sisters, half-brothers, half-sisters, spouse, ancestors, and lineal descendants. How do i file my 2012 tax return An individual owning (other than by applying (2)) any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. How do i file my 2012 tax return For purposes of applying (1), (2), or (3), stock or a partnership interest constructively owned by a person under (1) is treated as actually owned by that person. How do i file my 2012 tax return But stock or a partnership interest constructively owned by an individual under (2) or (3) is not treated as owned by the individual for reapplying either (2) or (3) to make another person the constructive owner of that stock or partnership interest. How do i file my 2012 tax return Indirect transactions. How do i file my 2012 tax return   You cannot deduct your loss on the sale of stock through your broker if under a prearranged plan a related person or entity buys the same stock you had owned. How do i file my 2012 tax return This does not apply to a cross-trade between related parties through an exchange that is purely coincidental and is not prearranged. How do i file my 2012 tax return Property received from a related person. How do i file my 2012 tax return   If, in a purchase or exchange, you received property from a related person who had a loss that was not allowable and you later sell or exchange the property at a gain, you recognize the gain only to the extent it is more than the loss previously disallowed to the related person. How do i file my 2012 tax return This rule applies only to the original transferee. How do i file my 2012 tax return Example 1. How do i file my 2012 tax return Your brother sold stock to you for $7,600. How do i file my 2012 tax return His cost basis was $10,000. How do i file my 2012 tax return His loss of $2,400 was not deductible. How do i file my 2012 tax return You later sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900 ($10,500 − $7,600). How do i file my 2012 tax return Your recognized gain is only $500, the gain that is more than the $2,400 loss not allowed to your brother. How do i file my 2012 tax return Example 2. How do i file my 2012 tax return Assume the same facts as in Example 1, except that you sell the stock for $6,900 instead of $10,500. How do i file my 2012 tax return Your recognized loss is only $700 ($7,600 − $6,900). How do i file my 2012 tax return You cannot deduct the loss not allowed to your brother. How do i file my 2012 tax return Other Dispositions This section discusses rules for determining the treatment of gain or loss from various dispositions of property. How do i file my 2012 tax return Sale of a Business The sale of a business usually is not a sale of one asset. How do i file my 2012 tax return Instead, all the assets of the business are sold. How do i file my 2012 tax return Generally, when this occurs, each asset is treated as being sold separately for determining the treatment of gain or loss. How do i file my 2012 tax return A business usually has many assets. How do i file my 2012 tax return When sold, these assets must be classified as capital assets, depreciable property used in the business, real property used in the business, or property held for sale to customers, such as inventory or stock in trade. How do i file my 2012 tax return The gain or loss on each asset is figured separately. How do i file my 2012 tax return The sale of capital assets results in capital gain or loss. How do i file my 2012 tax return The sale of real property or depreciable property used in the business and held longer than 1 year results in gain or loss from a section 1231 transaction (discussed in chapter 3). How do i file my 2012 tax return The sale of inventory results in ordinary income or loss. How do i file my 2012 tax return Partnership interests. How do i file my 2012 tax return   An interest in a partnership or joint venture is treated as a capital asset when sold. How do i file my 2012 tax return The part of any gain or loss from unrealized receivables or inventory items will be treated as ordinary gain or loss. How do i file my 2012 tax return For more information, see Disposition of Partner's Interest in Publication 541. How do i file my 2012 tax return Corporation interests. How do i file my 2012 tax return   Your interest in a corporation is represented by stock certificates. How do i file my 2012 tax return When you sell these certificates, you usually realize capital gain or loss. How do i file my 2012 tax return For information on the sale of stock, see chapter 4 in Publication 550. How do i file my 2012 tax return Corporate liquidations. How do i file my 2012 tax return   Corporate liquidations of property generally are treated as a sale or exchange. How do i file my 2012 tax return Gain or loss generally is recognized by the corporation on a liquidating sale of its assets. How do i file my 2012 tax return Gain or loss generally is recognized also on a liquidating distribution of assets as if the corporation sold the assets to the distributee at fair market value. How do i file my 2012 tax return   In certain cases in which the distributee is a corporation in control of the distributing corporation, the distribution may not be taxable. How do i file my 2012 tax return For more information, see section 332 of the Internal Revenue Code and the related regulations. How do i file my 2012 tax return Allocation of consideration paid for a business. How do i file my 2012 tax return   The sale of a trade or business for a lump sum is considered a sale of each individual asset rather than of a single asset. How do i file my 2012 tax return Except for assets exchanged under any nontaxable exchange rules, both the buyer and seller of a business must use the residual method (explained later) to allocate the consideration to each business asset transferred. How do i file my 2012 tax return This method determines gain or loss from the transfer of each asset and how much of the consideration is for goodwill and certain other intangible property. How do i file my 2012 tax return It also determines the buyer's basis in the business assets. How do i file my 2012 tax return Consideration. How do i file my 2012 tax return   The buyer's consideration is the cost of the assets acquired. How do i file my 2012 tax return The seller's consideration is the amount realized (money plus the fair market value of property received) from the sale of assets. How do i file my 2012 tax return Residual method. How do i file my 2012 tax return   The residual method must be used for any transfer of a group of assets that constitutes a trade or business and for which the buyer's basis is determined only by the amount paid for the assets. How do i file my 2012 tax return This applies to both direct and indirect transfers, such as the sale of a business or the sale of a partnership interest in which the basis of the buyer's share of the partnership assets is adjusted for the amount paid under section 743(b) of the Internal Revenue Code. How do i file my 2012 tax return Section 743(b) applies if a partnership has an election in effect under section 754 of the Internal Revenue Code. How do i file my 2012 tax return   A group of assets constitutes a trade or business if either of the following applies. How do i file my 2012 tax return Goodwill or going concern value could, under any circumstances, attach to them. How do i file my 2012 tax return The use of the assets would constitute an active trade or business under section 355 of the Internal Revenue Code. How do i file my 2012 tax return   The residual method provides for the consideration to be reduced first by the amount of Class I assets (defined below). How do i file my 2012 tax return The consideration remaining after this reduction must be allocated among the various business assets in a certain order. How do i file my 2012 tax return See Classes of assets next for the complete order. How do i file my 2012 tax return Classes of assets. How do i file my 2012 tax return   The following definitions are the classifications for deemed or actual asset acquisitions. How do i file my 2012 tax return Allocate the consideration among the assets in the following order. How do i file my 2012 tax return The amount allocated to an asset, other than a Class VII asset, cannot exceed its fair market value on the purchase date. How do i file my 2012 tax return The amount you can allocate to an asset also is subject to any applicable limits under the Internal Revenue Code or general principles of tax law. How do i file my 2012 tax return Class I assets are cash and general deposit accounts (including checking and savings accounts but excluding certificates of deposit). How do i file my 2012 tax return Class II assets are certificates of deposit, U. How do i file my 2012 tax return S. How do i file my 2012 tax return Government securities, foreign currency, and actively traded personal property, including stock and securities. How do i file my 2012 tax return Class III assets are accounts receivable, other debt instruments, and assets that you mark to market at least annually for federal income tax purposes. How do i file my 2012 tax return However, see section 1. How do i file my 2012 tax return 338-6(b)(2)(iii) of the regulations for exceptions that apply to debt instruments issued by persons related to a target corporation, contingent debt instruments, and debt instruments convertible into stock or other property. How do i file my 2012 tax return Class IV assets are property of a kind that would properly be included in inventory if on hand at the end of the tax year or property held by the taxpayer primarily for sale to customers in the ordinary course of business. How do i file my 2012 tax return Class V assets are all assets other than Class I, II, III, IV, VI, and VII assets. How do i file my 2012 tax return    Note. How do i file my 2012 tax return Furniture and fixtures, buildings, land, vehicles, and equipment, which constitute all or part of a trade or business are generally Class V assets. How do i file my 2012 tax return Class VI assets are section 197 intangibles (other than goodwill and going concern value). How do i file my 2012 tax return Class VII assets are goodwill and going concern value (whether the goodwill or going concern value qualifies as a section 197 intangible). How do i file my 2012 tax return   If an asset described in one of the classifications described above can be included in more than one class, include it in the lower numbered class. How do i file my 2012 tax return For example, if an asset is described in both Class II and Class IV, choose Class II. How do i file my 2012 tax return Example. How do i file my 2012 tax return The total paid in the sale of the assets of Company SKB is $21,000. How do i file my 2012 tax return No cash or deposit accounts or similar accounts were sold. How do i file my 2012 tax return The company's U. How do i file my 2012 tax return S. How do i file my 2012 tax return Government securities sold had a fair market value of $3,200. How do i file my 2012 tax return The only other asset transferred (other than goodwill and going concern value) was inventory with a fair market value of $15,000. How do i file my 2012 tax return Of the $21,000 paid for the assets of Company SKB, $3,200 is allocated to U. How do i file my 2012 tax return S. How do i file my 2012 tax return Government securities, $15,000 to inventory assets, and the remaining $2,800 to goodwill and going concern value. How do i file my 2012 tax return Agreement. How do i file my 2012 tax return   The buyer and seller may enter into a written agreement as to the allocation of any consideration or the fair market value of any of the assets. How do i file my 2012 tax return This agreement is binding on both parties unless the IRS determines the amounts are not appropriate. How do i file my 2012 tax return Reporting requirement. How do i file my 2012 tax return   Both the buyer and seller involved in the sale of business assets must report to the IRS the allocation of the sales price among section 197 intangibles and the other business assets. How do i file my 2012 tax return Use Form 8594, Asset Acquisition Statement Under Section 1060, to provide this information. How do i file my 2012 tax return Generally, the buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. How do i file my 2012 tax return See the Instructions for Form 8594. How do i file my 2012 tax return Dispositions of Intangible Property Intangible property is any personal property that has value but cannot be seen or touched. How do i file my 2012 tax return It includes such items as patents, copyrights, and the goodwill value of a business. How do i file my 2012 tax return Gain or loss on the sale or exchange of amortizable or depreciable intangible property held longer than 1 year (other than an amount recaptured as ordinary income) is a section 1231 gain or loss. How do i file my 2012 tax return The treatment of section 1231 gain or loss and the recapture of amortization and depreciation as ordinary income are explained in chapter 3. How do i file my 2012 tax return See chapter 8 of Publication 535, Business Expenses, for information on amortizable intangible property and chapter 1 of Publication 946, How To Depreciate Property, for information on intangible property that can and cannot be depreciated. How do i file my 2012 tax return Gain or loss on dispositions of other intangible property is ordinary or capital depending on whether the property is a capital asset or a noncapital asset. How do i file my 2012 tax return The following discussions explain special rules that apply to certain dispositions of intangible property. How do i file my 2012 tax return Section 197 Intangibles Section 197 intangibles are certain intangible assets acquired after August 10, 1993 (after July 25, 1991, if chosen), and held in connection with the conduct of a trade or business or an activity entered into for profit whose costs are amortized over 15 years. How do i file my 2012 tax return They include the following assets. How do i file my 2012 tax return Goodwill. How do i file my 2012 tax return Going concern value. How do i file my 2012 tax return Workforce in place. How do i file my 2012 tax return Business books and records, operating systems, and other information bases. How do i file my 2012 tax return Patents, copyrights, formulas, processes, designs, patterns, know how, formats, and similar items. How do i file my 2012 tax return Customer-based intangibles. How do i file my 2012 tax return Supplier-based intangibles. How do i file my 2012 tax return Licenses, permits, and other rights granted by a governmental unit. How do i file my 2012 tax return Covenants not to compete entered into in connection with the acquisition of a business. How do i file my 2012 tax return Franchises, trademarks, and trade names. How do i file my 2012 tax return See chapter 8 of Publication 535 for a description of each intangible. How do i file my 2012 tax return Dispositions. How do i file my 2012 tax return   You cannot deduct a loss from the disposition or worthlessness of a section 197 intangible you acquired in the same transaction (or series of related transactions) as another section 197 intangible you still hold. How do i file my 2012 tax return Instead, you must increase the adjusted basis of your retained section 197 intangible by the nondeductible loss. How do i file my 2012 tax return If you retain more than one section 197 intangible, increase each intangible's adjusted basis. How do i file my 2012 tax return Figure the increase by multiplying the nondeductible loss by a fraction, the numerator (top number) of which is the retained intangible's adjusted basis on the date of the loss and the denominator (bottom number) of which is the total adjusted basis of all retained intangibles on the date of the loss. How do i file my 2012 tax return   In applying this rule, members of the same controlled group of corporations and commonly controlled businesses are treated as a single entity. How do i file my 2012 tax return For example, a corporation cannot deduct a loss on the sale of a section 197 intangible if, after the sale, a member of the same controlled group retains other section 197 intangibles acquired in the same transaction as the intangible sold. How do i file my 2012 tax return Covenant not to compete. How do i file my 2012 tax return   A covenant not to compete (or similar arrangement) that is a section 197 intangible cannot be treated as disposed of or worthless before you have disposed of your entire interest in the trade or business for which the covenant was entered into. How do i file my 2012 tax return Members of the same controlled group of corporations and commonly controlled businesses are treated as a single entity in determining whether a member has disposed of its entire interest in a trade or business. How do i file my 2012 tax return Anti-churning rules. How do i file my 2012 tax return   Anti-churning rules prevent a taxpayer from converting section 197 intangibles that do not qualify for amortization into property that would qualify for amortization. How do i file my 2012 tax return However, these rules do not apply to part of the basis of property acquired by certain related persons if the transferor elects to do both the following. How do i file my 2012 tax return Recognize gain on the transfer of the property. How do i file my 2012 tax return Pay income tax on the gain at the highest tax rate. How do i file my 2012 tax return   If the transferor is a partnership or S corporation, the partnership or S corporation (not the partners or shareholders) can make the election. How do i file my 2012 tax return But each partner or shareholder must pay the tax on his or her share of gain. How do i file my 2012 tax return   To make the election, you, as the transferor, must attach a statement containing certain information to your income tax return for the year of the transfer. How do i file my 2012 tax return You must file the tax return by the due date (including extensions). How do i file my 2012 tax return You must also notify the transferee of the election in writing by the due date of the return. How do i file my 2012 tax return   If you timely filed your return without making the election, you can make the election by filing an amended return within 6 months after the due date of the return (excluding extensions). How do i file my 2012 tax return Attach the statement to the amended return and write “Filed pursuant to section 301. How do i file my 2012 tax return 9100-2” at the top of the statement. How do i file my 2012 tax return File the amended return at the same address the original return was filed. How do i file my 2012 tax return For more information about making the election, see Regulations section 1. How do i file my 2012 tax return 197-2(h)(9). How do i file my 2012 tax return For information about reporting the tax on your income tax return, see the Instructions for Form 4797. How do i file my 2012 tax return Patents The transfer of a patent by an individual is treated as a sale or exchange of a capital asset held longer than 1 year. How do i file my 2012 tax return This applies even if the payments for the patent are made periodically during the transferee's use or are contingent on the productivity, use, or disposition of the patent. How do i file my 2012 tax return For information on the treatment of gain or loss on the transfer of capital assets, see chapter 4. How do i file my 2012 tax return This treatment applies to your transfer of a patent if you meet all the following conditions. How do i file my 2012 tax return You are the holder of the patent. How do i file my 2012 tax return You transfer the patent other than by gift, inheritance, or devise. How do i file my 2012 tax return You transfer all substantial rights to the patent or an undivided interest in all such rights. How do i file my 2012 tax return You do not transfer the patent to a related person. How do i file my 2012 tax return Holder. How do i file my 2012 tax return   You are the holder of a patent if you are either of the following. How do i file my 2012 tax return The individual whose effort created the patent property and who qualifies as the original and first inventor. How do i file my 2012 tax return The individual who bought an interest in the patent from the inventor before the invention was tested and operated successfully under operating conditions and who is neither related to, nor the employer of, the inventor. How do i file my 2012 tax return All substantial rights. How do i file my 2012 tax return   All substantial rights to patent property are all rights that have value when they are transferred. How do i file my 2012 tax return A security interest (such as a lien), or a reservation calling for forfeiture for nonperformance, is not treated as a substantial right for these rules and may be kept by you as the holder of the patent. How do i file my 2012 tax return   All substantial rights to a patent are not transferred if any of the following apply to the transfer. How do i file my 2012 tax return The rights are limited geographically within a country. How do i file my 2012 tax return The rights are limited to a period less than the remaining life of the patent. How do i file my 2012 tax return The rights are limited to fields of use within trades or industries and are less than all the rights that exist and have value at the time of the transfer. How do i file my 2012 tax return The rights are less than all the claims or inventions covered by the patent that exist and have value at the time of the transfer. How do i file my 2012 tax return Related persons. How do i file my 2012 tax return   This tax treatment does not apply if the transfer is directly or indirectly between you and a related person as defined earlier in the list under Nondeductible Loss, with the following changes. How do i file my 2012 tax return Members of your family include your spouse, ancestors, and lineal descendants, but not your brothers, sisters, half-brothers, or half-sisters. How do i file my 2012 tax return Substitute “25% or more” ownership for “more than 50%. How do i file my 2012 tax return ”   If you fit within the definition of a related person independent of family status, the brother-sister exception in (1), earlier, does not apply. How do i file my 2012 tax return For example, a transfer between a brother and a sister as beneficiary and fiduciary of the same trust is a transfer between related persons. How do i file my 2012 tax return The brother-sister exception does not apply because the trust relationship is independent of family status. How do i file my 2012 tax return Franchise, Trademark, or Trade Name If you transfer or renew a franchise, trademark, or trade name for a price contingent on its productivity, use, or disposition, the amount you receive generally is treated as an amount realized from the sale of a noncapital asset. How do i file my 2012 tax return A franchise includes an agreement that gives one of the parties the right to distribute, sell, or provide goods, services, or facilities within a specified area. How do i file my 2012 tax return Significant power, right, or continuing interest. How do i file my 2012 tax return   If you keep any significant power, right, or continuing interest in the subject matter of a franchise, trademark, or trade name that you transfer or renew, the amount you receive is ordinary royalty income rather than an amount realized from a sale or exchange. How do i file my 2012 tax return   A significant power, right, or continuing interest in a franchise, trademark, or trade name includes, but is not limited to, the following rights in the transferred interest. How do i file my 2012 tax return A right to disapprove any assignment of the interest, or any part of it. How do i file my 2012 tax return A right to end the agreement at will. How do i file my 2012 tax return A right to set standards of quality for products used or sold, or for services provided, and for the equipment and facilities used to promote such products or services. How do i file my 2012 tax return A right to make the recipient sell or advertise only your products or services. How do i file my 2012 tax return A right to make the recipient buy most supplies and equipment from you. How do i file my 2012 tax return A right to receive payments based on the productivity, use, or disposition of the transferred item of interest if those payments are a substantial part of the transfer agreement. How do i file my 2012 tax return Subdivision of Land If you own a tract of land and, to sell or exchange it, you subdivide it into individual lots or parcels, the gain normally is ordinary income. How do i file my 2012 tax return However, you may receive capital gain treatment on at least part of the proceeds provided you meet certain requirements. How do i file my 2012 tax return See section 1237 of the Internal Revenue Code. How do i file my 2012 tax return Timber Standing timber held as investment property is a capital asset. How do i file my 2012 tax return Gain or loss from its sale is reported as a capital gain or loss on Form 8949, and Schedule D (Form 1040), as applicable. How do i file my 2012 tax return If you held the timber primarily for sale to customers, it is not a capital asset. How do i file my 2012 tax return Gain or loss on its sale is ordinary business income or loss. How do i file my 2012 tax return It is reported in the gross receipts or sales and cost of goods sold items of your return. How do i file my 2012 tax return Farmers who cut timber on their land and sell it as logs, firewood, or pulpwood usually have no cost or other basis for that timber. How do i file my 2012 tax return These sales constitute a very minor part of their farm businesses. How do i file my 2012 tax return In these cases, amounts realized from such sales, and the expenses of cutting, hauling, etc. How do i file my 2012 tax return , are ordinary farm income and expenses reported on Schedule F (Form 1040), Profit or Loss From Farming. How do i file my 2012 tax return Different rules apply if you owned the timber longer than 1 year and elect to either: Treat timber cutting as a sale or exchange, or Enter into a cutting contract. How do i file my 2012 tax return Timber is considered cut on the date when, in the ordinary course of business, the quantity of felled timber is first definitely determined. How do i file my 2012 tax return This is true whether the timber is cut under contract or whether you cut it yourself. How do i file my 2012 tax return Under the rules discussed below, disposition of the timber is treated as a section 1231 transaction. How do i file my 2012 tax return See chapter 3. How do i file my 2012 tax return Gain or loss is reported on Form 4797. How do i file my 2012 tax return Christmas trees. How do i file my 2012 tax return   Evergreen trees, such as Christmas trees, that are more than 6 years old when severed from their roots and sold for ornamental purposes are included in the term timber. How do i file my 2012 tax return They qualify for both rules discussed below. How do i file my 2012 tax return Election to treat cutting as a sale or exchange. How do i file my 2012 tax return   Under the general rule, the cutting of timber results in no gain or loss. How do i file my 2012 tax return It is not until a sale or exchange occurs that gain or loss is realized. How do i file my 2012 tax return But if you owned or had a contractual right to cut timber, you can elect to treat the cutting of timber as a section 1231 transaction in the year the timber is cut. How do i file my 2012 tax return Even though the cut timber is not actually sold or exchanged, you report your gain or loss on the cutting for the year the timber is cut. How do i file my 2012 tax return Any later sale results in ordinary business income or loss. How do i file my 2012 tax return See Example, later. How do i file my 2012 tax return   To elect this treatment, you must: Own or hold a contractual right to cut the timber for a period of more than 1 year before it is cut, and Cut the timber for sale or for use in your trade or business. How do i file my 2012 tax return Making the election. How do i file my 2012 tax return   You make the election on your return for the year the cutting takes place by including in income the gain or loss on the cutting and including a computation of the gain or loss. How do i file my 2012 tax return You do not have to make the election in the first year you cut timber. How do i file my 2012 tax return You can make it in any year to which the election would apply. How do i file my 2012 tax return If the timber is partnership property, the election is made on the partnership return. How do i file my 2012 tax return This election cannot be made on an amended return. How do i file my 2012 tax return   Once you have made the election, it remains in effect for all later years unless you cancel it. How do i file my 2012 tax return   If you previously elected to treat the cutting of timber as a sale or exchange, you may revoke this election without the consent of the IRS. How do i file my 2012 tax return The prior election (and revocation) is disregarded for purposes of making a subsequent election. How do i file my 2012 tax return See Form T (Timber), Forest Activities Schedule, for more information. How do i file my 2012 tax return Gain or loss. How do i file my 2012 tax return   Your gain or loss on the cutting of standing timber is the difference between its adjusted basis for depletion and its fair market value on the first day of your tax year in which it is cut. How do i file my 2012 tax return   Your adjusted basis for depletion of cut timber is based on the number of units (feet board measure, log scale, or other units) of timber cut during the tax year and considered to be sold or exchanged. How do i file my 2012 tax return Your adjusted basis for depletion is also based on the depletion unit of timber in the account used for the cut timber, and should be figured in the same manner as shown in section 611 of the Internal Revenue Code and the related regulations. How do i file my 2012 tax return   Timber depletion is discussed in chapter 9 of Publication 535. How do i file my 2012 tax return Example. How do i file my 2012 tax return In April 2013, you had owned 4,000 MBF (1,000 board feet) of standing timber longer than 1 year. How do i file my 2012 tax return It had an adjusted basis for depletion of $40 per MBF. How do i file my 2012 tax return You are a calendar year taxpayer. How do i file my 2012 tax return On January 1, 2013, the timber had a fair market value (FMV) of $350 per MBF. How do i file my 2012 tax return It was cut in April for sale. How do i file my 2012 tax return On your 2013 tax return, you elect to treat the cutting of the timber as a sale or exchange. How do i file my 2012 tax return You report the difference between the fair market value and your adjusted basis for depletion as a gain. How do i file my 2012 tax return This amount is reported on Form 4797 along with your other section 1231 gains and losses to figure whether it is treated as capital gain or as ordinary gain. How do i file my 2012 tax return You figure your gain as follows. How do i file my 2012 tax return FMV of timber January 1, 2013 $1,400,000 Minus: Adjusted basis for depletion 160,000 Section 1231 gain $1,240,000 The fair market value becomes your basis in the cut timber and a later sale of the cut timber including any by-product or tree tops will result in ordinary business income or loss. How do i file my 2012 tax return Outright sales of timber. How do i file my 2012 tax return   Outright sales of timber by landowners qualify for capital gains treatment using rules similar to the rules for certain disposal of timber under a contract with retained economic interest (defined below). How do i file my 2012 tax return However, for outright sales, the date of disposal is not deemed to be the date the timber is cut because the landowner can elect to treat the payment date as the date of disposal (see below). How do i file my 2012 tax return Cutting contract. How do i file my 2012 tax return   You must treat the disposal of standing timber under a cutting contract as a section 1231 transaction if all the following apply to you. How do i file my 2012 tax return You are the owner of the timber. How do i file my 2012 tax return You held the timber longer than 1 year before its disposal. How do i file my 2012 tax return You kept an economic interest in the timber. How do i file my 2012 tax return   You have kept an economic interest in standing timber if, under the cutting contract, the expected return on your investment is conditioned on the cutting of the timber. How do i file my 2012 tax return   The difference between the amount realized from the disposal of the timber and its adjusted basis for depletion is treated as gain or loss on its sale. How do i file my 2012 tax return Include this amount on Form 4797 along with your other section 1231 gains or losses to figure whether it is treated as capital or ordinary gain or loss. How do i file my 2012 tax return Date of disposal. How do i file my 2012 tax return   The date of disposal is the date the timber is cut. How do i file my 2012 tax return However, for outright sales by landowners or if you receive payment under the contract before the timber is cut, you can elect to treat the date of payment as the date of disposal. How do i file my 2012 tax return   This election applies only to figure the holding period of the timber. How do i file my 2012 tax return It has no effect on the time for reporting gain or loss (generally when the timber is sold or exchanged). How do i file my 2012 tax return   To make this election, attach a statement to the tax return filed by the due date (including extensions) for the year payment is received. How do i file my 2012 tax return The statement must identify the advance payments subject to the election and the contract under which they were made. How do i file my 2012 tax return   If you timely filed your return for the year you received payment without making the election, you still can make the election by filing an amended return within 6 months after the due date for that year's return (excluding extensions). How do i file my 2012 tax return Attach the statement to the amended return and write “Filed pursuant to section 301. How do i file my 2012 tax return 9100-2” at the top of the statement. How do i file my 2012 tax return File the amended return at the same address the original return was filed. How do i file my 2012 tax return Owner. How do i file my 2012 tax return   The owner of timber is any person who owns an interest in it, including a sublessor and the holder of a contract to cut the timber. How do i file my 2012 tax return You own an interest in timber if you have the right to cut it for sale on your own account or for use in your business. How do i file my 2012 tax return Tree stumps. How do i file my 2012 tax return   Tree stumps are a capital asset if they are on land held by an investor who is not in the timber or stump business as a buyer, seller, or processor. How do i file my 2012 tax return Gain from the sale of stumps sold in one lot by such a holder is taxed as a capital gain. How do i file my 2012 tax return However, tree stumps held by timber operators after the saleable standing timber was cut and removed from the land are considered by-products. How do i file my 2012 tax return Gain from the sale of stumps in lots or tonnage by such operators is taxed as ordinary income. How do i file my 2012 tax return   See Form T (Timber) and its separate instructions for more information about dispositions of timber. How do i file my 2012 tax return Precious Metals and Stones, Stamps, and Coins Gold, silver, gems, stamps, coins, etc. How do i file my 2012 tax return , are capital assets except when they are held for sale by a dealer. How do i file my 2012 tax return Any gain or loss from their sale or exchange generally is a capital gain or loss. How do i file my 2012 tax return If you are a dealer, the amount received from the sale is ordinary business income. How do i file my 2012 tax return Coal and Iron Ore You must treat the disposal of coal (including lignite) or iron ore mined in the United States as a section 1231 transaction if both the following apply to you. How do i file my 2012 tax return You owned the coal or iron ore longer than 1 year before its disposal. How do i file my 2012 tax return You kept an economic interest in the coal or iron ore. How do i file my 2012 tax return For this rule, the date the coal or iron ore is mined is considered the date of its disposal. How do i file my 2012 tax return Your gain or loss is the difference between the amount realized from disposal of the coal or iron ore and the adjusted basis you use to figure cost depletion (increased by certain expenses not allowed as deductions for the tax year). How do i file my 2012 tax return This amount is included on Form 4797 along with your other section 1231 gains and losses. How do i file my 2012 tax return You are considered an owner if you own or sublet an economic interest in the coal or iron ore in place. How do i file my 2012 tax return If you own only an option to buy the coal in place, you do not qualify as an owner. How do i file my 2012 tax return In addition, this gain or loss treatment does not apply to income realized by an owner who is a co-adventurer, partner, or principal in the mining of coal or iron ore. How do i file my 2012 tax return The expenses of making and administering the contract under which the coal or iron ore was disposed of and the expenses of preserving the economic interest kept under the contract are not allowed as deductions in figuring taxable income. How do i file my 2012 tax return Rather, their total, along with the adjusted depletion basis, is deducted from the amount received to determine gain. How do i file my 2012 tax return If the total of these expenses plus the adjusted depletion basis is more than the amount received, the result is a loss. How do i file my 2012 tax return Special rule. How do i file my 2012 tax return   The above treatment does not apply if you directly or indirectly dispose of the iron ore or coal to any of the following persons. How do i file my 2012 tax return A related person whose relationship to you would result in the disallowance of a loss (see Nondeductible Loss under Sales and Exchanges Between Related Persons, earlier). How do i file my 2012 tax return An individual, trust, estate, partnership, association, company, or corporation owned or controlled directly or indirectly by the same interests that own or control your business. How do i file my 2012 tax return Conversion Transactions Recognized gain on the disposition or termination of any position held as part of certain conversion transactions is treated as ordinary income. How do i file my 2012 tax return This applies if substantially all your expected return is attributable to the time value of your net investment (like interest on a loan) and the transaction is any of the following. How do i file my 2012 tax return An applicable straddle (generally, any set of offsetting positions with respect to personal property, including stock). How do i file my 2012 tax return A transaction in which you acquire property and, at or about the same time, you contract to sell the same or substantially identical property at a specified price. How do i file my 2012 tax return Any other transaction that is marketed and sold as producing capital gain from a transaction in which substantially all of your expected return is due to the time value of your net investment. How do i file my 2012 tax return For more information, see chapter 4 of Publication 550. How do i file my 2012 tax return Prev  Up  Next   Home   More Online Publications