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How To File A 2011 Tax Return Late

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How To File A 2011 Tax Return Late

How to file a 2011 tax return late Publication 4492-A - Main Contents Table of Contents DefinitionsKansas Disaster Area Storms and Tornadoes Casualty and Theft Losses Replacement Period for Nonrecognition of Gain Net Operating Losses IRAs and Other Retirement PlansDefinitions Taxation of Qualified Recovery Assistance Distributions Repayment of Qualified Recovery Assistance Distributions How To Report Qualified Recovery Assistance Distributions Repayment of Qualified Distributions for the Purchase or Construction of a Main Home Loans From Qualified Plans Additional Tax Relief for BusinessesSpecial Depreciation Allowance Increased Section 179 Deduction Employee Retention Credit Demolition and Clean-up Costs Request for Copy or Transcript of Tax Return How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). How to file a 2011 tax return late Definitions The following definitions are used throughout this publication. How to file a 2011 tax return late Kansas Disaster Area The Kansas disaster area covers the Kansas counties of Barton, Clay, Cloud, Comanche, Dickinson, Edwards, Ellsworth, Kiowa, Leavenworth, Lyon, McPherson, Osage, Osborne, Ottawa, Phillips, Pottawatomie, Pratt, Reno, Rice, Riley, Saline, Shawnee, Smith, and Stafford. How to file a 2011 tax return late Storms and Tornadoes The term “storms and tornadoes” as used in this publication, refers to the storms and tornadoes that began on May 4, 2007, and affected the Kansas disaster area (defined above). How to file a 2011 tax return late Casualty and Theft Losses The following paragraphs explain changes to casualty and theft losses that occurred in the Kansas disaster area. How to file a 2011 tax return late Limits on personal casualty or theft losses in the Kansas disaster area. How to file a 2011 tax return late   Losses of personal use property that arose in the Kansas disaster area after May 3, 2007, are not subject to the $100 or 10% of adjusted gross income limits. How to file a 2011 tax return late Qualifying losses include losses from casualties and thefts that arose in the disaster area and that were attributable to the storms and tornadoes. How to file a 2011 tax return late When to deduct the loss. How to file a 2011 tax return late   Casualty and theft losses are generally deductible only in the year the casualty occurred or the theft was discovered. How to file a 2011 tax return late However, the Kansas disaster area is a Presidentially declared disaster. How to file a 2011 tax return late Therefore, you could have elected to deduct losses from these storms and tornadoes on your tax return for the previous year. How to file a 2011 tax return late The deadline for making this election has expired. How to file a 2011 tax return late   The following special instructions explain how to complete your forms if you deduct the loss in 2007 or elected to deduct the loss in 2006. How to file a 2011 tax return late Special instructions for individuals who file Form 4684 to claim a Kansas disaster area casualty or theft loss for 2007 or are amending their 2006 return. How to file a 2011 tax return late   Individuals filing or amending their 2007 tax return or amending their 2006 tax return for casualty or theft losses that were attributable to the storms and tornadoes should enter “Kansas Disaster Area” at the top of Form 1040 or 1040X. How to file a 2011 tax return late They must also complete and attach the 2006 version of Form 4684 for either year and enter “Kansas Disaster Area” on the top and on the dotted line next to line 11 and enter -0- on line 11. How to file a 2011 tax return late Individuals filing or amending their 2007 tax return should cross out “2006” and enter “2007” at the top of Form 4684. How to file a 2011 tax return late They must also enter the amount from line 21 of that form on line 20 of Schedule A (Form 1040). How to file a 2011 tax return late Replacement Period for Nonrecognition of Gain Generally, an involuntary conversion occurs when property is damaged, destroyed, stolen, seized, requisitioned, or condemned, and you receive other property or money in payment, such as insurance or a condemnation award. How to file a 2011 tax return late Generally, you do not have to report a gain (if any) if you replace the property within 2 years (4 years for a main home in a Presidentially declared disaster area). How to file a 2011 tax return late However, for property that was involuntarily converted after May 3, 2007, as a result of the storms and tornadoes, a 5-year replacement period applies if substantially all of the use of the replacement property is in the Kansas disaster area. How to file a 2011 tax return late For more information, see the Instructions for Form 4684. How to file a 2011 tax return late Net Operating Losses Qualified recovery assistance loss. How to file a 2011 tax return late   Generally, you can carry a net operating loss (NOL) back to the 2 tax years before the NOL year. How to file a 2011 tax return late However, the portion of an NOL that is a qualified recovery assistance loss can be carried back to the 5 tax years before the NOL year. How to file a 2011 tax return late In addition, the 90% limit on the alternative tax NOL deduction (ATNOLD) does not apply to such portion of the ATNOLD. How to file a 2011 tax return late   A qualified recovery assistance loss is the smaller of: The excess of the NOL for the year over the specified liability loss for the year to which a 10-year carryback applies, or The total of the following deductions (to the extent they are taken into account in computing the NOL for the tax year): Qualified recovery assistance casualty loss (as defined below), Moving expenses paid or incurred after May 3, 2007, and before January 1, 2010, for the employment of an individual whose main home was in the Kansas disaster area before May 4, 2007, who was unable to remain in that home because of the storms and tornadoes, and whose main job location (after the move) is in the Kansas disaster area, Temporary housing expenses paid or incurred after May 3, 2007, and before January 1, 2010, to house employees of the taxpayer whose main job location is in the Kansas disaster area, Depreciation or amortization allowable for any qualified recovery assistance property (even if you elected not to claim the special recovery assistance depreciation allowance for such property) for the year placed in service, and Repair expenses (including expenses for the removal of debris) paid or incurred after May 3, 2007, and before January 1, 2010, for any damage from the storms and tornadoes to property located in the Kansas disaster area. How to file a 2011 tax return late Qualified recovery assistance casualty loss. How to file a 2011 tax return late   A qualified recovery assistance casualty loss is any deductible section 1231 loss of property located in the Kansas disaster area if the loss was caused by the storms and tornadoes. How to file a 2011 tax return late For this purpose, the amount of the loss is reduced by any recognized gain from an involuntary conversion caused by the storms and tornadoes of property located in the Kansas disaster area. How to file a 2011 tax return late Any such loss taken into account in figuring your qualified recovery assistance loss is not eligible for the election to be treated as having occurred in the previous tax year. How to file a 2011 tax return late Amended return. How to file a 2011 tax return late   If you have already filed your 2007 tax return and then carried your NOL back 2 years, you may file an amended return to carry back for 5 years your NOL attributable to a qualified recovery assistance loss. How to file a 2011 tax return late More information. How to file a 2011 tax return late    For more information on NOLs, see Publication 536. How to file a 2011 tax return late IRAs and Other Retirement Plans New rules provide for tax-favored withdrawals, repayments, and loans from certain retirement plans for individuals who suffered economic losses as a result of the storms and tornadoes. How to file a 2011 tax return late Definitions Qualified recovery assistance distribution. How to file a 2011 tax return late   Except as provided below, a qualified recovery assistance distribution is any distribution you received and designated as such from an eligible retirement plan if all of the following apply. How to file a 2011 tax return late The distribution was made after May 3, 2007, and before January 1, 2009. How to file a 2011 tax return late Your main home was located in the Kansas disaster area on May 4, 2007. How to file a 2011 tax return late You sustained an economic loss because of the storms and tornadoes. How to file a 2011 tax return late Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. How to file a 2011 tax return late   If (1) through (3) above apply, you can generally designate any distribution (including periodic payments and required minimum distributions) from an eligible retirement plan as a qualified recovery assistance distribution, regardless of whether the distribution was made on account of the storms and tornadoes. How to file a 2011 tax return late Qualified recovery assistance distributions are permitted without regard to your need or the actual amount of your economic loss. How to file a 2011 tax return late   The total of your qualified recovery assistance distributions from all plans is limited to $100,000. How to file a 2011 tax return late If you have distributions in excess of $100,000 from more than one type of plan, such as a 401(k) plan and an IRA, you may allocate the $100,000 limit among the plans any way you choose. How to file a 2011 tax return late   A reduction or offset after May 3, 2007, of your account balance in an eligible retirement plan in order to repay a loan can also be designated as a qualified recovery assistance distribution. How to file a 2011 tax return late Eligible retirement plan. How to file a 2011 tax return late   An eligible retirement plan can be any of the following. How to file a 2011 tax return late A qualified pension, profit-sharing, or stock bonus plan (including a 401(k) plan). How to file a 2011 tax return late A qualified annuity plan. How to file a 2011 tax return late A tax-sheltered annuity contract. How to file a 2011 tax return late A governmental section 457 deferred compensation plan. How to file a 2011 tax return late A traditional, SEP, SIMPLE, or Roth IRA. How to file a 2011 tax return late Main home. How to file a 2011 tax return late   Generally, your main home is the home where you live most of the time. How to file a 2011 tax return late A temporary absence due to special circumstances, such as illness, education, business, military service, evacuation, or vacation, will not change your main home. How to file a 2011 tax return late Taxation of Qualified Recovery Assistance Distributions Qualified recovery assistance distributions are included in income in equal amounts over three years. How to file a 2011 tax return late However, if you elect, you can include the entire distribution in your income in the year it was received. How to file a 2011 tax return late Qualified recovery assistance distributions are not subject to the additional 10% tax (or the additional 25% tax for certain distributions from SIMPLE IRAs) on early distributions from qualified retirement plans (including IRAs). How to file a 2011 tax return late However, any distributions you receive in excess of the $100,000 qualified recovery assistance distribution limit may be subject to the additional tax on early distributions. How to file a 2011 tax return late For more information, see How To Report Qualified Recovery Assistance Distributions on page 4. How to file a 2011 tax return late Repayment of Qualified Recovery Assistance Distributions If you choose, you generally can repay any portion of a qualified recovery assistance distribution that is eligible for tax-free rollover treatment to an eligible retirement plan. How to file a 2011 tax return late Also, you can repay a qualified recovery assistance distribution made on account of a hardship from a retirement plan. How to file a 2011 tax return late However, see Exceptions below for qualified recovery assistance distributions you cannot repay. How to file a 2011 tax return late You have three years from the day after the date you received the distribution to make a repayment. How to file a 2011 tax return late Amounts that are repaid are treated as a qualified rollover and are not included in income. How to file a 2011 tax return late Also, for purposes of the one-rollover-per-year limitation for IRAs, a repayment to an IRA is not considered a qualified rollover. How to file a 2011 tax return late See Form 8915 for more information on how to report repayments. How to file a 2011 tax return late Exceptions. How to file a 2011 tax return late   You cannot repay the following types of distributions. How to file a 2011 tax return late Qualified recovery assistance distributions received as a beneficiary (other than a surviving spouse). How to file a 2011 tax return late Required minimum distributions. How to file a 2011 tax return late Periodic payments (other than from an IRA) that are for: A period of 10 years or more, Your life or life expectancy, or The joint lives or joint life expectancies of you and your beneficiary. How to file a 2011 tax return late How To Report Qualified Recovery Assistance Distributions You will need the following information to correctly report any 2007 or 2008 qualified recovery assistance distributions. How to file a 2011 tax return late 2007 Qualified Recovery Assistance Distributions If you received a distribution after May 3, 2007, from an eligible retirement plan, you may be able to designate it as a qualified recovery assistance distribution. How to file a 2011 tax return late See Qualified recovery assistance distribution on page 3. How to file a 2011 tax return late If you have not filed your 2007 income tax return, see Form 8915 and Form 8606 on this page to see how to complete these forms for any qualified recovery assistance distributions. How to file a 2011 tax return late Be sure to attach Form 8915 and Form 8606 (if required) to your 2007 income tax return. How to file a 2011 tax return late If you have filed your 2007 income tax return, you will need to amend your return to designate any distributions as qualified recovery assistance distributions. How to file a 2011 tax return late You can amend your 2007 income tax return by using Form 1040X. How to file a 2011 tax return late You will need to complete and attach Form 8915 and Form 8606 (if required) to your amended income tax return for any qualified recovery assistance distributions. How to file a 2011 tax return late See Form 8915 and Form 8606 on this page. How to file a 2011 tax return late Form 8915. How to file a 2011 tax return late   For a 2007 qualified recovery assistance distribution, complete the 2005 Form 8915, Qualified Hurricane Retirement Plan Distributions and Repayments. How to file a 2011 tax return late Before you complete the form, modify the form as follows. How to file a 2011 tax return late Cross out “Hurricane” in the title at the top of the form and enter “Recovery Assistance. How to file a 2011 tax return late ” To the right of the title, cross out “2005” and enter “2007. How to file a 2011 tax return late ” In Part I, at the top of column (a), cross out “2005” and enter “2007. How to file a 2011 tax return late ” In Part II, cross out “Hurricane” in the title and enter “Recovery Assistance. How to file a 2011 tax return late ” On lines 10 and 11, cross out “2005” and enter “2007. How to file a 2011 tax return late ” In Part III, cross out “Hurricane” in the title and enter “Recovery Assistance. How to file a 2011 tax return late ” On line 12, cross out “hurricane” and enter “recovery assistance. How to file a 2011 tax return late ” On lines 13 and 14, cross out “line 15b” and “line 25b. How to file a 2011 tax return late ” On lines 18 and 19, cross out “2005” and enter “2007. How to file a 2011 tax return late ”   You can now complete Form 8915. How to file a 2011 tax return late For the instructions, use the applicable dates and terms in this publication instead of those used in the 2005 Form 8915 instructions. How to file a 2011 tax return late See Example 1 on page 5 to see how to complete Form 8915. How to file a 2011 tax return late Form 8606. How to file a 2011 tax return late   For a 2007 qualified recovery assistance distribution, complete or amend the 2007 Form 8606, Nondeductible IRAs. How to file a 2011 tax return late Before you complete or amend the form, use the following additional instructions. How to file a 2011 tax return late Form 8606, Part I. How to file a 2011 tax return late    On line 6, subtract any repayments of qualified recovery assistance distributions from the amount you would otherwise enter on line 6. How to file a 2011 tax return late Do not enter an amount less than -0-. How to file a 2011 tax return late Include on line 7 the amount of any qualified recovery assistance distributions that you received even if they were later repaid. How to file a 2011 tax return late Complete line 15 as follows. How to file a 2011 tax return late If all of your distributions are qualified recovery assistance distributions, enter the amount from line 15 on Form 8915, line 13. How to file a 2011 tax return late Do not enter this amount on Form 1040, line 15b; Form 1040A, line 11b; or Form 1040NR, line 16b. How to file a 2011 tax return late If you have qualified recovery assistance distributions as well as other distributions, you will need to multiply the amount on line 15 by a fraction. How to file a 2011 tax return late The numerator of the fraction is your total qualified recovery assistance distributions and the denominator is the amount from Form 8606, line 7. How to file a 2011 tax return late Enter the result in the white space in the bottom margin of the form under line 15. How to file a 2011 tax return late To the left of this amount, enter “Qualified recovery assistance distributions” and also enter this amount on Form 8915, line 13. How to file a 2011 tax return late Then, subtract this amount from the amount on line 15 and include the result on Form 1040, line 15b; Form 1040A, line 11b; or Form 1040NR, line 16b. How to file a 2011 tax return late Also, enter this amount on Form 8606 under your qualified recovery assistance distributions. How to file a 2011 tax return late To the left of this amount, enter “Other distributions. How to file a 2011 tax return late ” Form 8606, Part III. How to file a 2011 tax return late    Include on line 19 the amount of any qualified recovery assistance distributions that you received even if they were later repaid. How to file a 2011 tax return late Complete line 25 as follows. How to file a 2011 tax return late If all of your distributions are qualified recovery assistance distributions, enter the amount from line 25 on Form 8915, line 14. How to file a 2011 tax return late Do not enter this amount on Form 1040, line 15b; Form 1040A, line 11b; or Form 1040NR, line 16b. How to file a 2011 tax return late If you have qualified recovery assistance distributions as well as other distributions, you will need to multiply the amount on line 25 by a fraction. How to file a 2011 tax return late The numerator of the fraction is your total qualified recovery assistance distributions and the denominator is the amount from Form 8606, line 21. How to file a 2011 tax return late Enter the result in the white space in the bottom margin of the form under line 25. How to file a 2011 tax return late To the left of this amount, enter “Qualified recovery assistance distributions” and also enter this amount on Form 8915, line 14. How to file a 2011 tax return late Then, subtract this amount from the amount on line 25 and include the result on Form 1040, line 15b; Form 1040A, line 11b; or Form 1040NR, line 16b. How to file a 2011 tax return late Also, enter this amount on Form 8606 under your qualified recovery assistance distributions. How to file a 2011 tax return late To the left of this amount, enter “Other distributions. How to file a 2011 tax return late ” Example 1. How to file a 2011 tax return late   On May 4, 2007, Margaret Maple lost her home due to the tornadoes on that day. How to file a 2011 tax return late Her home was located in the Kansas disaster area. How to file a 2011 tax return late On July 31, 2007, Margaret took out $30,000 from her 401(k) plan and an additional $15,000 from her traditional IRA in order to rebuild her home. How to file a 2011 tax return late Margaret has not filed her 2007 return yet but would like to designate the $45,000 in distributions from her retirement plans as qualified recovery assistance distributions. How to file a 2011 tax return late Since the distributions occurred in 2007, Margaret would modify and complete the 2005 Form 8915 as discussed on page 4. How to file a 2011 tax return late Margaret would also need to complete Form 8606 since her distribution from her traditional IRA has nondeductible contributions from previous years. How to file a 2011 tax return late   In addition to the $15,000 qualified recovery assistance distribution on July 31, 2007, Margaret received an additional distribution of $15,000 from her traditional IRA on October 31, 2007, that she did not designate as a qualified recovery assistance distribution. How to file a 2011 tax return late Because Margaret has a qualified recovery assistance distribution as well as a distribution not so designated, Margaret must allocate the amount on Form 8606, line 15 to both distributions, as discussed earlier. How to file a 2011 tax return late Margaret's qualified recovery assistance distributions are $13,125 ($26,250 × $15,000 ÷ $30,000). How to file a 2011 tax return late Margaret enters in the white space in the bottom margin of Form 8606, the following, “Qualified recovery assistance distributions $13,125. How to file a 2011 tax return late ” This amount is then reported on Form 8915, line 13. How to file a 2011 tax return late Below this entry, Margaret enters “Other distributions $13,125,” and includes this amount on Form 1040, line 15b. How to file a 2011 tax return late See Margaret's modified 2005 Form 8915 and 2007 Form 8606 shown on pages 6 through 8. How to file a 2011 tax return late This image is too large to be displayed in the current screen. How to file a 2011 tax return late Please click the link to view the image. How to file a 2011 tax return late 2005 Form 8915, page 1, Illustrated Example 1. How to file a 2011 tax return late This image is too large to be displayed in the current screen. How to file a 2011 tax return late Please click the link to view the image. How to file a 2011 tax return late 2005 Form 8915, page 2, Illustrated Example 1 This image is too large to be displayed in the current screen. How to file a 2011 tax return late Please click the link to view the image. How to file a 2011 tax return late Form 8606, page 1, Illustrated Example 1 2008 Qualified Recovery Assistance Distributions If you received a distribution in 2008 from an eligible retirement plan, you may be able to designate it as a qualified recovery assistance distribution. How to file a 2011 tax return late See Qualified recovery assistance distribution on page 3. How to file a 2011 tax return late You will need to complete and attach Form 8915 and Form 8606 (if required) to your 2008 income tax return for any qualified recovery assistance distributions. How to file a 2011 tax return late See Form 8915 and Form 8606 below. How to file a 2011 tax return late Form 8915. How to file a 2011 tax return late   For a 2008 qualified recovery assistance distribution, you will need to complete the 2006 Form 8915. How to file a 2011 tax return late Before you complete the form, modify the form as follows. How to file a 2011 tax return late Cross out “Hurricane” in the title at the top of the form and enter “Recovery Assistance. How to file a 2011 tax return late ” To the right of the title, cross out “2006” and enter “2008. How to file a 2011 tax return late ” In the first sentence of Part I and on line 1, cross out “hurricane” and enter “recovery assistance,” cross out “2006” and enter “2008,” and cross out “2005” and enter “2007. How to file a 2011 tax return late ” At the top of column (a) cross out “2006” and enter “2008. How to file a 2011 tax return late ” In Part II, cross out “Hurricane” in the title and enter “Recovery Assistance. How to file a 2011 tax return late ” On lines 12, 14, and 15, cross out “2005” and enter “2007. How to file a 2011 tax return late ” On lines 17 and 19, cross out “2006” and enter “2008. How to file a 2011 tax return late ” In Part III, cross out “Hurricane” in the title and enter “Recovery Assistance. How to file a 2011 tax return late ” On line 21, cross out “hurricane” and enter “recovery assistance. How to file a 2011 tax return late ” On lines 22 and 23, cross out “line 15b” and “line 25b. How to file a 2011 tax return late ” On lines 27, 29, and 30, cross out “2005” and enter “2007. How to file a 2011 tax return late ” On lines 32 and 34, cross out “2006” and enter “2008. How to file a 2011 tax return late ”   You can now complete Form 8915. How to file a 2011 tax return late For the instructions, use the applicable dates and terms in this publication instead of those used in the 2006 Form 8915 instructions. How to file a 2011 tax return late Example 2. How to file a 2011 tax return late   On June 15, 2008, Margaret Maple, from the previous example, took out $15,000 from her 401(k) plan that she is designating as a qualified recovery assistance distribution. How to file a 2011 tax return late Since the distribution occurred in 2008, Margaret would modify and complete the 2006 Form 8915 as discussed above. How to file a 2011 tax return late Also, since Margaret is including her 2007 recovery assistance distributions in income over 3 years, she reports the applicable amount of those distributions on the modified 2006 Form 8915. How to file a 2011 tax return late See Margaret's modified 2006 Form 8915 shown on pages 9 and 10. How to file a 2011 tax return late This image is too large to be displayed in the current screen. How to file a 2011 tax return late Please click the link to view the image. How to file a 2011 tax return late 2006 Form 8915, page 1, Illustrated Example 2 This image is too large to be displayed in the current screen. How to file a 2011 tax return late Please click the link to view the image. How to file a 2011 tax return late 2006 Form 8915, page 2, Illustrated Example 2 Form 8606. How to file a 2011 tax return late   For a 2008 qualified recovery assistance distribution, you may need to complete the 2008 Form 8606. How to file a 2011 tax return late Before you complete Form 8606, use the additional instructions outlined in Form 8606, Part I, on page 4 and Form 8606, Part III, on this page. How to file a 2011 tax return late Repayment of Qualified Distributions for the Purchase or Construction of a Main Home If you received a qualified distribution to purchase or construct a main home in the Kansas disaster area, you can repay part or all of that distribution after May 3, 2007, but no later than October 22, 2008, to an eligible retirement plan. How to file a 2011 tax return late For this purpose, an eligible retirement plan is any plan, annuity, or IRA to which a qualified rollover can be made. How to file a 2011 tax return late To be a qualified distribution, the distribution must meet all of the following requirements. How to file a 2011 tax return late The distribution is a hardship distribution from a 401(k) plan, a hardship distribution from a tax-sheltered annuity contract, or a qualified first-time homebuyer distribution from an IRA. How to file a 2011 tax return late The distribution was received after November 4, 2006, and before May 5, 2007. How to file a 2011 tax return late The distribution was to be used to purchase or construct a main home in the Kansas disaster area that was not purchased or constructed because of the storms and tornadoes. How to file a 2011 tax return late Amounts that are repaid before October 23, 2008, are treated as a qualified rollover and are not included in income. How to file a 2011 tax return late Also, for purposes of the one-rollover-per-year limitation for IRAs, a repayment to an IRA is not considered a qualified rollover. How to file a 2011 tax return late A qualified distribution not repaid before October 23, 2008, may be taxable for 2006 or 2007 and subject to the additional 10% tax (or the additional 25% tax for certain SIMPLE IRAs) on early distributions. How to file a 2011 tax return late You must file Form 8915 if you received a qualified distribution that you repaid, in whole or in part, before October 23, 2008. How to file a 2011 tax return late See How to report, next, for information on completing Form 8915. How to file a 2011 tax return late How to report. How to file a 2011 tax return late   To report the repayment of a qualified distribution for the purchase or construction of a main home that was not purchased or constructed due to the storms and tornadoes, use the 2005 Form 8915, Part IV. How to file a 2011 tax return late Before you complete the form, modify the form as follows. How to file a 2011 tax return late Cross out “Hurricane” in the title at the top of the form and enter “Recovery Assistance. How to file a 2011 tax return late ” To the right of the title, cross out “2005” and enter “2006” or “2007. How to file a 2011 tax return late ” Enter only the year the distribution was received. How to file a 2011 tax return late Cross out “Hurricane” in the title of Part IV and enter “Kansas. How to file a 2011 tax return late ” In the sentence below the title of Part IV, cross out “March 1, 2006” and enter “October 23, 2008. How to file a 2011 tax return late ” On line 24, cross out “March 1, 2006” and enter “October 23, 2008. How to file a 2011 tax return late ” You can now complete Part IV of Form 8915. How to file a 2011 tax return late Use the applicable dates and terms in this publication instead of those used in the 2005 Form 8915 instructions to complete the form. How to file a 2011 tax return late Attach Form 8915 to your original or amended return for the year of the distribution. How to file a 2011 tax return late Amended return. How to file a 2011 tax return late   If you repay part or all of a qualified distribution by October 22, 2008, you will need to file an amended return for that part of a distribution that was previously included in income. How to file a 2011 tax return late Loans From Qualified Plans The following benefits are available to qualified individuals. How to file a 2011 tax return late Increases to the limits for distributions treated as loans from employer plans. How to file a 2011 tax return late A 1-year suspension for payments due on plan loans. How to file a 2011 tax return late Qualified individual. How to file a 2011 tax return late   You are a qualified individual if your main home on May 4, 2007, was located in the Kansas disaster area and you had an economic loss because of the storms and tornadoes. How to file a 2011 tax return late Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. How to file a 2011 tax return late Limits on plan loans. How to file a 2011 tax return late   The $50,000 limit for distributions treated as plan loans is increased to $100,000. How to file a 2011 tax return late In addition, the limit based on 50% of your vested accrued benefit is increased to 100% of that benefit. How to file a 2011 tax return late If your home was located in the Kansas disaster area, the higher limits apply only to loans received during the period beginning on May 22, 2008, and ending on December 31, 2008. How to file a 2011 tax return late One-year suspension of loan payments. How to file a 2011 tax return late   Payments on plan loans outstanding after May 3, 2007, may be suspended for 1 year by the plan administrator. How to file a 2011 tax return late To qualify for the suspension, the due date for any loan payment must occur during the period beginning on May 4, 2007, and ending on December 31, 2008. How to file a 2011 tax return late Additional Tax Relief for Businesses Special Depreciation Allowance You can take a special depreciation allowance for qualified recovery assistance property (as defined below) you acquire after May 4, 2007. How to file a 2011 tax return late The special allowance is an additional deduction of 50% of the property's depreciable basis (after any section 179 deduction and before figuring your regular depreciation deduction). How to file a 2011 tax return late The special allowance applies only for the first year the property is placed in service. How to file a 2011 tax return late The special allowance is deductible for both the regular tax and the alternative minimum tax (AMT). How to file a 2011 tax return late There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. How to file a 2011 tax return late You can elect not to deduct the special allowance for qualified recovery assistance property. How to file a 2011 tax return late If you make this election for any property, it applies to all property in the same class placed in service during the year. How to file a 2011 tax return late Qualified recovery assistance property. How to file a 2011 tax return late   Property that qualifies for the special allowance for qualified recovery assistance property includes the following. How to file a 2011 tax return late Tangible property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less. How to file a 2011 tax return late Water utility property. How to file a 2011 tax return late Computer software that is readily available for purchase by the general public, is subject to a nonexclusive license, and has not been substantially modified. How to file a 2011 tax return late (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. How to file a 2011 tax return late ) Qualified leasehold improvement property. How to file a 2011 tax return late Nonresidential real property and residential rental property. How to file a 2011 tax return late   For more information on this property, see Publication 946. How to file a 2011 tax return late Other tests to be met. How to file a 2011 tax return late   To be qualified recovery assistance property, the property must also meet all of the following tests. How to file a 2011 tax return late You must have acquired the property, by purchase, after May 4, 2007, but only if no binding written contract for the acquisition was in effect before May 5, 2007. How to file a 2011 tax return late The property must be placed in service before 2009 (2010 in the case of nonresidential real property and residential rental property). How to file a 2011 tax return late Substantially all of the use of the property must be in the Kansas disaster area and in the active conduct of your trade or business in the Kansas disaster area. How to file a 2011 tax return late The original use of the property in the Kansas disaster area must begin with you after May 4, 2007. How to file a 2011 tax return late Used property can be qualified recovery assistance property if it has not previously been used within the Kansas disaster area. How to file a 2011 tax return late Also, additional capital expenditures you incurred after May 4, 2007, to recondition or rebuild your property meet the original use test if the original use of the property in the Kansas disaster area began with you. How to file a 2011 tax return late Excepted property. How to file a 2011 tax return late   Qualified recovery assistance property does not include any of the following. How to file a 2011 tax return late Property required to be depreciated using the Alternative Depreciation System (ADS). How to file a 2011 tax return late Property any portion of which is financed with the proceeds of a tax-exempt obligation under section 103. How to file a 2011 tax return late Property for which you are claiming a commercial revitalization deduction. How to file a 2011 tax return late Property in the same class as that for which you elected not to claim the special allowance for qualified recovery assistance property. How to file a 2011 tax return late Property placed in service and disposed of in the same tax year. How to file a 2011 tax return late Property converted from business use to personal use in the same tax year it is placed in service. How to file a 2011 tax return late Property converted from personal use to business use in the same or later tax year may be qualified recovery assistance property. How to file a 2011 tax return late Recapture of special allowance. How to file a 2011 tax return late   If, in any year after the year you claim the special allowance, the property ceases to be qualified recovery assistance property, you may have to recapture as ordinary income any excess benefit you received from claiming the special allowance. How to file a 2011 tax return late Amended return. How to file a 2011 tax return late   If you have already filed your tax return, you may have to amend that return to claim any special allowance. How to file a 2011 tax return late Additional guidance will be published on how you may claim, or elect not to claim, the special allowance if you have already filed your tax return. How to file a 2011 tax return late Increased Section 179 Deduction An increased section 179 deduction is allowable for qualified section 179 recovery assistance property (as defined later) placed in service in the Kansas disaster area. How to file a 2011 tax return late Increased dollar limit. How to file a 2011 tax return late   The limit on the section 179 deduction ($125,000 for 2007, $250,000 for 2008) is increased by the smaller of: $100,000, or The cost of qualified section 179 recovery assistance property placed in service during the year (including such property placed in service by your spouse, even if you are filing a separate return). How to file a 2011 tax return late   The amount for which you can make the election is reduced if the cost of all section 179 property you placed in service during the year exceeds $500,000 for 2007 and $800,000 for 2008 increased by the smaller of: $600,000, or The cost of qualified section 179 recovery assistance property placed in service during the year. How to file a 2011 tax return late Qualified section 179 recovery assistance property. How to file a 2011 tax return late   Qualified section 179 recovery assistance property is section 179 property that is qualified recovery assistance property (explained earlier under Special Depreciation Allowance). How to file a 2011 tax return late Section 179 property does not include nonresidential real property or residential rental property. How to file a 2011 tax return late For more information, including the requirements that must be met for property to qualify for the section 179 deduction, see chapter 2 of Publication 946. How to file a 2011 tax return late Amended return. How to file a 2011 tax return late   If you have already filed your tax return, you may have to amend that return for any increased section 179 deduction. How to file a 2011 tax return late Employee Retention Credit An eligible employer who conducted an active trade or business in the Kansas disaster area can claim the employee retention credit. How to file a 2011 tax return late The credit is 40% of qualified wages for each eligible employee (up to a maximum of $6,000 in qualified wages per employee). How to file a 2011 tax return late Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). How to file a 2011 tax return late Use Form 5884-A to claim the credit. How to file a 2011 tax return late See Form 5884-A later. How to file a 2011 tax return late The following rules and definitions apply. How to file a 2011 tax return late Employers affected by the storms and tornadoes. How to file a 2011 tax return late   The following definitions apply to employers affected by the storms and tornadoes. How to file a 2011 tax return late Eligible employer. How to file a 2011 tax return late   For this purpose, an eligible employer is any employer who meets all of the following. How to file a 2011 tax return late Employed an average of not more than 200 employees on business days during the tax year before May 4, 2007. How to file a 2011 tax return late Conducted an active trade or business on May 4, 2007, in the Kansas disaster area. How to file a 2011 tax return late Whose trade or business was inoperable on any day after May 4, 2007, and before January 1, 2008, because of damage caused by the storms and tornadoes. How to file a 2011 tax return late Eligible employee. How to file a 2011 tax return late   For this purpose, an eligible employee is an employee whose principal place of employment on May 4, 2007, with the eligible employer was in the Kansas disaster area. How to file a 2011 tax return late An employee is not an eligible employee for purposes of the storms and tornadoes if the employee is treated as an eligible employee for the work opportunity credit. How to file a 2011 tax return late Qualified wages. How to file a 2011 tax return late   Qualified wages are wages you paid or incurred before January 1, 2008, (up to $6,000 per employee) for an eligible employee beginning on the date your trade or business first became inoperable at the employee's principal place of employment immediately before May 4, 2007, and ending on the date your trade or business resumed significant operations at that place. How to file a 2011 tax return late In addition, the wages must have been paid or incurred after May 4, 2007. How to file a 2011 tax return late    This includes wages paid even if the employee performed no services, performed services at a place of employment other than the principal place of employment, or performed services at the principal place of employment before significant operations resumed. How to file a 2011 tax return late    Wages qualifying for the credit generally have the same meaning as wages subject to the Federal Unemployment Tax Act (FUTA). How to file a 2011 tax return late Qualified wages also include amounts you paid for medical or hospitalization expenses in connection with sickness or accident disability. How to file a 2011 tax return late Qualified wages for any employee must be reduced by the amount of any work supplementation payment you received under the Social Security Act. How to file a 2011 tax return late   For agricultural employees, if the work performed by any employee during more than half of any pay period qualified under FUTA as agricultural labor, that employee's wages subject to social security and Medicare taxes are qualified wages. How to file a 2011 tax return late For a special rule that applies to railroad employees, see section 51(h)(1)(B). How to file a 2011 tax return late   Qualified wages do not include the following. How to file a 2011 tax return late Wages paid to your dependent or a related individual. How to file a 2011 tax return late See section 51(i)(1). How to file a 2011 tax return late Wages paid to any employee during the period for which you received payment for the employee from a federally funded on-the-job training program. How to file a 2011 tax return late Wages for services of replacement workers during a strike or lockout. How to file a 2011 tax return late Form 5884-A. How to file a 2011 tax return late   Use Section A of Form 5884-A (Rev. How to file a 2011 tax return late October 2006) to claim the employer retention credit. How to file a 2011 tax return late Section B does not apply to the Kansas disaster area. How to file a 2011 tax return late Before you complete the form, modify the form as follows. How to file a 2011 tax return late Cross out “Hurricane Katrina, Rita, or Wilma” in the title at the top of the form and enter “Kansas Storms and Tornadoes. How to file a 2011 tax return late ” On line 1a cross out “Hurricane Katrina” and enter “Kansas Storms and Tornadoes,” cross out “August 28, 2005,” and enter “May 4, 2007,” and cross out “January 1, 2006,” and enter “January 1, 2008. How to file a 2011 tax return late ”   Complete the form as instructed. How to file a 2011 tax return late Lines 1b and 1c do not apply. How to file a 2011 tax return late Include the amount from Form 5884-A, line 4 in the amount entered on Form 3800, line 1x. How to file a 2011 tax return late On the dotted line to the left of line 1x, enter “5884-A. How to file a 2011 tax return late ” Use the applicable dates and terms in this publication instead of those used in the Form 5884-A instructions. How to file a 2011 tax return late Amended return. How to file a 2011 tax return late   You may have to amend a previously filed return to claim the employee retention credit. How to file a 2011 tax return late Demolition and Clean-up Costs You can elect to deduct 50% of any qualified recovery assistance clean-up costs for the tax year in which the costs are paid or incurred, instead of capitalizing them. How to file a 2011 tax return late Qualified recovery assistance clean-up costs are any amounts paid or incurred after May 3, 2007, and before January 1, 2010, for the removal of debris from, or the demolition of structures on, real property located in the Kansas disaster area that is: Held by you for use in a trade or business or for the production of income, or Inventory or other property held primarily for sale to customers in the ordinary course of your trade or business. How to file a 2011 tax return late Amended return. How to file a 2011 tax return late   If you have already filed your tax return, you may have to amend that return to claim the 50% of any qualified recovery assistance clean-up costs. How to file a 2011 tax return late Request for Copy or Transcript of Tax Return Request for copy of tax return. How to file a 2011 tax return late   You can use Form 4506 to order a copy of your tax return. How to file a 2011 tax return late Generally, there is a $39. How to file a 2011 tax return late 00 fee (subject to change) for requesting each copy of a tax return. How to file a 2011 tax return late If your main home, principal place of business, or tax records are located in a Presidentially declared disaster area, the fee will be waived if the assigned disaster designation (for example, “Kansas Storms”) is written in red across the top of the form when filed. How to file a 2011 tax return late Request for transcript of tax return. How to file a 2011 tax return late   You can use Form 4506-T to order a free transcript of your tax return. How to file a 2011 tax return late A transcript provides most of the line entries from a tax return and usually contains the information that a third party requires. How to file a 2011 tax return late You can also call 1-800-829-1040 to order a transcript. How to file a 2011 tax return late How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. How to file a 2011 tax return late By selecting the method that is best for you, you will have quick and easy access to tax help. How to file a 2011 tax return late Contacting your Taxpayer Advocate. How to file a 2011 tax return late   The Taxpayer Advocate Service (TAS) is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should. How to file a 2011 tax return late   You can contact the TAS by calling the TAS toll-free case intake line at 1-877-777-4778 or TTY/TDD 1-800-829-4059 to see if you are eligible for assistance. How to file a 2011 tax return late You can also call or write to your local taxpayer advocate, whose phone number and address are listed in your local telephone directory and in Publication 1546, Taxpayer Advocate Service — Your Voice at the IRS. How to file a 2011 tax return late You can file Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order), or ask an IRS employee to complete it on your behalf. How to file a 2011 tax return late For more information, go to www. How to file a 2011 tax return late irs. How to file a 2011 tax return late gov/advocate. How to file a 2011 tax return late Low Income Taxpayer Clinics (LITCs). How to file a 2011 tax return late   LITCs are independent organizations that provide low income taxpayers with representation in federal tax controversies with the IRS for free or for a nominal charge. How to file a 2011 tax return late The clinics also provide tax education and outreach for taxpayers who speak English as a second language. How to file a 2011 tax return late Publication 4134, Low Income Taxpayer Clinic List, provides information on clinics in your area. How to file a 2011 tax return late It is available at www. How to file a 2011 tax return late irs. How to file a 2011 tax return late gov or your local IRS office. How to file a 2011 tax return late Free tax services. How to file a 2011 tax return late   To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. How to file a 2011 tax return late It contains lists of free tax information sources, including publications, services, and free tax education and assistance programs. How to file a 2011 tax return late It also has an index of over 100 TeleTax topics, (recorded tax information) you can listen to on your telephone. How to file a 2011 tax return late   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with disabilities. How to file a 2011 tax return late Free help with your return. How to file a 2011 tax return late   Free help in preparing your return is available nationwide from IRS-trained volunteers. How to file a 2011 tax return late The Volunteer Income Tax Assistance (VITA) program is designed to help low-income taxpayers and Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. How to file a 2011 tax return late Many VITA sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. How to file a 2011 tax return late To find a site near you, call 1-800-829-1040. How to file a 2011 tax return late Or to find the nearest AARP TaxAide site, visit AARP's website at www. How to file a 2011 tax return late aarp. How to file a 2011 tax return late org/taxaide or call 1-888-227-7669. How to file a 2011 tax return late For more information on these programs, go to www. How to file a 2011 tax return late irs. How to file a 2011 tax return late gov and enter keyword “VITA” in the upper right-hand corner. How to file a 2011 tax return late Internet. How to file a 2011 tax return late You can access the IRS website at www. How to file a 2011 tax return late irs. How to file a 2011 tax return late gov 24 hours a day, 7 days a week to: E-file your return. How to file a 2011 tax return late Find out about commercial tax preparation and e-file services available free to eligible taxpayers. How to file a 2011 tax return late Check the status of your refund. How to file a 2011 tax return late Click on Where's My Refund. How to file a 2011 tax return late Wait at least 6 weeks from the date you filed your return (3 weeks if you filed electronically). How to file a 2011 tax return late Have your tax return available because you will need to know your social security number, your filing status, and the exact whole dollar amount of your refund. How to file a 2011 tax return late Download forms, instructions, and publications. How to file a 2011 tax return late Order IRS products online. How to file a 2011 tax return late Research your tax questions online. How to file a 2011 tax return late Search publications online by topic or keyword. How to file a 2011 tax return late View Internal Revenue Bulletins (IRBs) published in the last few years. How to file a 2011 tax return late Figure your withholding allowances using the withholding calculator online at www. How to file a 2011 tax return late irs. How to file a 2011 tax return late gov/individuals. How to file a 2011 tax return late Determine if Form 6251 must be filed using our Alternative Minimum Tax (AMT) Assistant. How to file a 2011 tax return late Sign up to receive local and national tax news by email. How to file a 2011 tax return late Get information on starting and operating a small business. How to file a 2011 tax return late Phone. How to file a 2011 tax return late Many services are available by phone. How to file a 2011 tax return late Ordering forms, instructions, and publications. How to file a 2011 tax return late Call 1-800-829-3676 to order current-year forms, instructions, and publications, and prior-year forms and instructions. How to file a 2011 tax return late You should receive your order within 10 days. How to file a 2011 tax return late Asking tax questions. How to file a 2011 tax return late Call the IRS with your tax questions at 1-800-829-1040. How to file a 2011 tax return late Solving problems. How to file a 2011 tax return late You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. How to file a 2011 tax return late An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. How to file a 2011 tax return late Call your local Taxpayer Assistance Center for an appointment. How to file a 2011 tax return late To find the number, go to www. How to file a 2011 tax return late irs. How to file a 2011 tax return late gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. How to file a 2011 tax return late TTY/TDD equipment. How to file a 2011 tax return late If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications. How to file a 2011 tax return late TeleTax topics. How to file a 2011 tax return late Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics. How to file a 2011 tax return late Refund information. How to file a 2011 tax return late To check the status of your refund, call 1-800-829-4477 and press 1 for automated refund information or call 1-800-829-1954. How to file a 2011 tax return late Be sure to wait at least 6 weeks from the date you filed your return (3 weeks if you filed electronically). How to file a 2011 tax return late Have your tax return available because you will need to know your social security number, your filing status, and the exact whole dollar amount of your refund. How to file a 2011 tax return late Evaluating the quality of our telephone services. How to file a 2011 tax return late To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. How to file a 2011 tax return late One method is for a second IRS representative to listen in on or record random telephone calls. How to file a 2011 tax return late Another is to ask some callers to complete a short survey at the end of the call. How to file a 2011 tax return late Walk-in. How to file a 2011 tax return late Many products and services are available on a walk-in basis. How to file a 2011 tax return late Products. How to file a 2011 tax return late You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. How to file a 2011 tax return late Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD or photocopy from reproducible proofs. How to file a 2011 tax return late Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes. How to file a 2011 tax return late Services. How to file a 2011 tax return late You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. How to file a 2011 tax return late An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. How to file a 2011 tax return late If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you're more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. How to file a 2011 tax return late No appointment is necessary — just walk in. How to file a 2011 tax return late If you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. How to file a 2011 tax return late A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. How to file a 2011 tax return late If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment may be requested. How to file a 2011 tax return late All other issues will be handled without an appointment. How to file a 2011 tax return late To find the number of your local office, go to www. How to file a 2011 tax return late irs. How to file a 2011 tax return late gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. How to file a 2011 tax return late Mail. How to file a 2011 tax return late You can send your order for forms, instructions, and publications to the address below. How to file a 2011 tax return late You should receive a response within 10 days after your request is received. How to file a 2011 tax return late Internal Revenue Service 1201 N. How to file a 2011 tax return late Mitsubishi Motorway Bloomington, IL 61705-6613 CD/DVD for tax products. How to file a 2011 tax return late You can order Publication 1796, IRS Tax Products CD/DVD, and obtain: Current-year forms, instructions, and publications. How to file a 2011 tax return late Prior-year forms, instructions, and publications. How to file a 2011 tax return late Bonus: Historical Tax Products DVD - Ships with the final release. How to file a 2011 tax return late IRS Tax Map: an electronic research tool and finding aid. How to file a 2011 tax return late Tax law frequently asked questions (FAQ). How to file a 2011 tax return late Tax Topics from the IRS telephone response system. How to file a 2011 tax return late Fill-in, print, and save features for most tax forms. How to file a 2011 tax return late Internal Revenue Bulletins. How to file a 2011 tax return late Toll-free and email technical support. How to file a 2011 tax return late The CD/DVD is released twice during the year in January and March. How to file a 2011 tax return late Purchase the CD/DVD from National Technical Information Service (NTIS) at www. How to file a 2011 tax return late irs. How to file a 2011 tax return late gov/cdorders for $35 (no handling fee) or call 1-877-CDFORMS (1-877-233-6767) toll free to buy the CD/DVD for $35 (plus a $5 handling fee). How to file a 2011 tax return late Price is subject to change. How to file a 2011 tax return late CD for small businesses. How to file a 2011 tax return late Publication 3207, The Small Business Resource Guide CD, is a must for every small business owner or any taxpayer about to start a business. How to file a 2011 tax return late This year's CD includes: Helpful information, such as how to prepare a business plan, find financing for your business, and much more. How to file a 2011 tax return late All the business tax forms, instructions, and publications needed to successfully manage a business. How to file a 2011 tax return late Tax law changes. How to file a 2011 tax return late Tax Map: an electronic research tool and finding aid. How to file a 2011 tax return late Web links to various government agencies, business associations, and IRS organizations. How to file a 2011 tax return late “Rate the Product” survey—your opportunity to suggest changes for future editions. How to file a 2011 tax return late A site map of the CD to help you navigate the pages of the CD with ease. How to file a 2011 tax return late An interactive “Teens in Biz” module that gives practical tips for teens about starting their own business, creating a business plan, and filing taxes. How to file a 2011 tax return late An updated version of this CD is available each year in early April. How to file a 2011 tax return late You can get a free copy by calling 1-800-829-3676 or by visiting www. How to file a 2011 tax return late irs. How to file a 2011 tax return late gov/smallbiz. How to file a 2011 tax return late Prev  Up  Next   Home   More Online Publications
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The How To File A 2011 Tax Return Late

How to file a 2011 tax return late Publication 925 - Main Content Table of Contents Passive Activity LimitsWho Must Use These Rules? Passive Activity Loss Passive Activity Credit Publicly Traded Partnership Excess Farm Loss Passive Activities Activities That Are Not Passive Activities Passive Activity Income and Deductions Grouping Your Activities Recharacterization of Passive Income Dispositions How To Report Your Passive Activity Loss Comprehensive ExampleGeneral Information At-Risk LimitsWho Is Affected? Activities Covered by the At-Risk Rules At-Risk Amounts Amounts Not At Risk Reductions of Amounts At Risk Recapture Rule How To Get Tax HelpLow Income Taxpayer Clinics Passive Activity Limits Who Must Use These Rules? The passive activity rules apply to: Individuals, Estates, Trusts (other than grantor trusts), Personal service corporations, and Closely held corporations. How to file a 2011 tax return late Even though the rules do not apply to grantor trusts, partnerships, and S corporations directly, they do apply to the owners of these entities. How to file a 2011 tax return late For information about personal service corporations and closely held corporations, including definitions and how the passive activity rules apply to these corporations, see Form 8810 and its instructions. How to file a 2011 tax return late Before applying the passive activity limits, you must first determine the amount of the deductions disallowed under the basis, excess farm loss, or at-risk rules. How to file a 2011 tax return late See Passive Activity Deductions, later. How to file a 2011 tax return late Passive Activity Loss Generally, the passive activity loss for the tax year is not allowed. How to file a 2011 tax return late However, there is a special allowance under which some or all of your passive activity loss may be allowed. How to file a 2011 tax return late See Special $25,000 allowance , later. How to file a 2011 tax return late Definition of passive activity loss. How to file a 2011 tax return late    Generally, your passive activity loss for the tax year is the excess of your passive activity deductions over your passive activity gross income. How to file a 2011 tax return late See Passive Activity Income and Deductions , later. How to file a 2011 tax return late   For a closely held corporation, the passive activity loss is the excess of passive activity deductions over the sum of passive activity gross income and net active income. How to file a 2011 tax return late For details on net active income, see the Instructions for Form 8810. How to file a 2011 tax return late For the definition of passive activity gross income, see Passive Activity Income , later. How to file a 2011 tax return late For the definition of passive activity deductions, see Passive Activity Deductions , later. How to file a 2011 tax return late Identification of Disallowed Passive Activity Deductions If all or a part of your passive activity loss is disallowed for the tax year, you may need to allocate the disallowed passive activity loss among different passive activities and among different deductions within a passive activity. How to file a 2011 tax return late Allocation of disallowed passive activity loss among activities. How to file a 2011 tax return late   If all or any part of your passive activity loss is disallowed for the tax year, a ratable portion of the loss (if any) from each of your passive activities is disallowed. How to file a 2011 tax return late The ratable portion of a loss from an activity is computed by multiplying the passive activity loss that is disallowed for the tax year by the fraction obtained by dividing: The loss from the activity for the tax year; by The sum of the losses for the tax year from all activities having losses for the tax year. How to file a 2011 tax return late Use Worksheet 5 of Form 8582 to figure the ratable portion of the loss from each activity that is disallowed. How to file a 2011 tax return late Loss from an activity. How to file a 2011 tax return late   The term “loss from an activity” means: The amount by which the passive activity deductions (defined later) from the activity for the tax year exceed the passive activity gross income (defined later) from the activity for the tax year; reduced by Any part of such amount that is allowed under the Special $25,000 Allowance , later. How to file a 2011 tax return late   If your passive activity gross income from significant participation passive activities (defined later) for the tax year is more than your passive activity deductions from those activities for the tax year, those activities shall be treated, solely for purposes of figuring your loss from the activity, as a single activity that does not have a loss for such taxable year. How to file a 2011 tax return late See Significant Participation Passive Activities , later. How to file a 2011 tax return late Example. How to file a 2011 tax return late John Pine holds interests in three passive activities, A, B, and C. How to file a 2011 tax return late The gross income and deductions from these activities for the taxable year are as follows:   A B C Total Gross income $7,000 $4,000 $12,000 $23,000 Deductions (16,000) (20,000) (8,000) (44,000)           Net income (loss) ($9,000) ($16,000) $4,000 ($21,000)   John Pine’s $21,000 passive activity loss for the taxable year is disallowed. How to file a 2011 tax return late Therefore, a ratable portion of the losses from activities A and B is disallowed. How to file a 2011 tax return late He figures the disallowed portion of each loss as follows: A: $21,000 x $9,000/$25,000 $7,560 B: $21,000 x $16,000/$25,000 13,440     Total $21,000 Allocation within loss activities. How to file a 2011 tax return late   If all or any part of your loss from an activity is disallowed under Allocation of disallowed passive activity loss among activities for the tax year, a ratable portion of each of your passive activity deductions (defined later), other than an excluded deduction (defined below) from such activity is disallowed. How to file a 2011 tax return late The ratable portion of a passive activity deduction is the amount of the disallowed portion of the loss from the activity for the tax year multiplied by the fraction obtained by dividing: The amount of such deduction; by The sum of all of your passive activity deductions (other than excluded deductions) from that activity from the tax year. How to file a 2011 tax return late Excluded deductions. How to file a 2011 tax return late    “Excluded deduction” means any passive activity deduction that is taken into account in computing your net income from an item of property for a taxable year in which an amount of the taxpayer's gross income from such item of property is treated as not from a passive activity. How to file a 2011 tax return late See Recharacterization of Passive Income , later. How to file a 2011 tax return late Separately identified deductions. How to file a 2011 tax return late   In identifying the deductions from an activity that are disallowed, you do not need to account separately for a deduction unless such deduction may, if separately taken into account, result in an income tax liability for any tax year different from that which would result were such deduction not taken into account separately. How to file a 2011 tax return late   Use Form 8582, Worksheet 7, for any activity if you have passive activity deductions for that activity that must be separately identified. How to file a 2011 tax return late   Deductions that must be accounted for separately include (but are not limited to) the following deductions. How to file a 2011 tax return late Deductions that arise in a rental real estate activity in tax years in which you actively participate in such activity. How to file a 2011 tax return late See Active participation , later. How to file a 2011 tax return late Deductions that arise in a rental real estate activity in tax years in which you do not actively participate in such activity. How to file a 2011 tax return late See Active participation , later. How to file a 2011 tax return late Losses from sales or exchanges of capital assets. How to file a 2011 tax return late Section 1231 losses. How to file a 2011 tax return late See Section 1231 Gains and Losses in Publication 544, Sales and Other Disposition of Assets, for more information. How to file a 2011 tax return late Carryover of Disallowed Deductions In the case of an activity with respect to which any deductions or credits are disallowed for a taxable year (the loss activity), the disallowed deductions are allocated among your activities for the next tax year in a manner that reasonably reflects the extent to which each activity continues the loss activity. How to file a 2011 tax return late The disallowed deductions or credits allocated to an activity under the preceding sentence are treated as deductions or credits from the activity for the next tax year. How to file a 2011 tax return late For more information, see Regulations section 1. How to file a 2011 tax return late 469-1(f)(4). How to file a 2011 tax return late Passive Activity Credit Generally, the passive activity credit for the tax year is disallowed. How to file a 2011 tax return late The passive activity credit is the amount by which the sum of all your credits subject to the passive activity rules exceed your regular tax liability allocable to all passive activities for the tax year. How to file a 2011 tax return late Credits that are included in figuring the general business credit are subject to the passive activity rules. How to file a 2011 tax return late See the Instructions for Form 8582-CR for more information. How to file a 2011 tax return late Publicly Traded Partnership You must apply the rules in this part separately to your income or loss from a passive activity held through a publicly traded partnership (PTP). How to file a 2011 tax return late You also must apply the limit on passive activity credits separately to your credits from a passive activity held through a PTP. How to file a 2011 tax return late You can offset deductions from passive activities of a PTP only against income or gain from passive activities of the same PTP. How to file a 2011 tax return late Likewise, you can offset credits from passive activities of a PTP only against the tax on the net passive income from the same PTP. How to file a 2011 tax return late This separate treatment rule also applies to a regulated investment company holding an interest in a PTP for the items attributable to that interest. How to file a 2011 tax return late For more information on how to apply the passive activity loss rules to PTPs, and on how to apply the limit on passive activity credits to PTPs, see Publicly Traded Partnerships (PTPs) in the Instructions for Forms 8582 and 8582-CR, respectively. How to file a 2011 tax return late Excess Farm Loss If you receive an applicable subsidy for any tax year and you have an excess farm loss for the tax year, special rules apply. How to file a 2011 tax return late These rules do not apply to C corporations. How to file a 2011 tax return late For information, see the Instructions for Schedule F (Form 1040), Profit or Loss From Farming. How to file a 2011 tax return late Passive Activities There are two kinds of passive activities. How to file a 2011 tax return late Trade or business activities in which you do not materially participate during the year. How to file a 2011 tax return late Rental activities, even if you do materially participate in them, unless you are a real estate professional. How to file a 2011 tax return late Material participation in a trade or business is discussed later, under Activities That Are Not Passive Activities . How to file a 2011 tax return late Treatment of former passive activities. How to file a 2011 tax return late   A former passive activity is an activity that was a passive activity in any earlier tax year, but is not a passive activity in the current tax year. How to file a 2011 tax return late You can deduct a prior year's unallowed loss from the activity up to the amount of your current year net income from the activity. How to file a 2011 tax return late Treat any remaining prior year unallowed loss like you treat any other passive loss. How to file a 2011 tax return late   In addition, any prior year unallowed passive activity credits from a former passive activity offset the allocable part of your current year tax liability. How to file a 2011 tax return late The allocable part of your current year tax liability is that part of this year's tax liability that is allocable to the current year net income from the former passive activity. How to file a 2011 tax return late You figure this after you reduce your net income from the activity by any prior year unallowed loss from that activity (but not below zero). How to file a 2011 tax return late Trade or Business Activities A trade or business activity is an activity that: Involves the conduct of a trade or business (that is, deductions would be allowable under section 162 of the Internal Revenue Code if other limitations, such as the passive activity rules, did not apply), Is conducted in anticipation of starting a trade or business, or Involves research or experimental expenditures that are deductible under Internal Revenue Code section 174 (or that would be deductible if you chose to deduct rather than capitalize them). How to file a 2011 tax return late A trade or business activity does not include a rental activity or the rental of property that is incidental to an activity of holding the property for investment. How to file a 2011 tax return late You generally report trade or business activities on Schedule C, C-EZ, F, or in Part II or III of Schedule E. How to file a 2011 tax return late Rental Activities A rental activity is a passive activity even if you materially participated in that activity, unless you materially participated as a real estate professional. How to file a 2011 tax return late See Real Estate Professional under Activities That Are Not Passive Activities, later. How to file a 2011 tax return late An activity is a rental activity if tangible property (real or personal) is used by customers or held for use by customers, and the gross income (or expected gross income) from the activity represents amounts paid (or to be paid) mainly for the use of the property. How to file a 2011 tax return late It does not matter whether the use is under a lease, a service contract, or some other arrangement. How to file a 2011 tax return late Exceptions. How to file a 2011 tax return late   Your activity is not a rental activity if any of the following apply. How to file a 2011 tax return late The average period of customer use of the property is 7 days or less. How to file a 2011 tax return late You figure the average period of customer use by dividing the total number of days in all rental periods by the number of rentals during the tax year. How to file a 2011 tax return late If the activity involves renting more than one class of property, multiply the average period of customer use of each class by a fraction. How to file a 2011 tax return late The numerator of the fraction is the gross rental income from that class of property and the denominator is the activity's total gross rental income. How to file a 2011 tax return late The activity's average period of customer use will equal the sum of the amounts for each class. How to file a 2011 tax return late The average period of customer use of the property, as figured in (1) above, is 30 days or less and you provide significant personal services with the rentals. How to file a 2011 tax return late Significant personal services include only services performed by individuals. How to file a 2011 tax return late To determine if personal services are significant, all relevant facts and circumstances are taken into consideration, including the frequency of the services, the type and amount of labor required to perform the services, and the value of the services relative to the amount charged for use of the property. How to file a 2011 tax return late Significant personal services do not include the following. How to file a 2011 tax return late Services needed to permit the lawful use of the property, Services to repair or improve property that would extend its useful life for a period substantially longer than the average rental, and Services that are similar to those commonly provided with long-term rentals of real estate, such as cleaning and maintenance of common areas or routine repairs. How to file a 2011 tax return late You provide extraordinary personal services in making the rental property available for customer use. How to file a 2011 tax return late Services are extraordinary personal services if they are performed by individuals and the customers' use of the property is incidental to their receipt of the services. How to file a 2011 tax return late The rental is incidental to a nonrental activity. How to file a 2011 tax return late The rental of property is incidental to an activity of holding property for investment if the main purpose of holding the property is to realize a gain from its appreciation and the gross rental income from the property is less than 2% of the smaller of the property's unadjusted basis or fair market value. How to file a 2011 tax return late The unadjusted basis of property is its cost not reduced by depreciation or any other basis adjustment. How to file a 2011 tax return late The rental of property is incidental to a trade or business activity if all of the following apply. How to file a 2011 tax return late You own an interest in the trade or business activity during the year. How to file a 2011 tax return late The rental property was used mainly in that trade or business activity during the current year, or during at least 2 of the 5 preceding tax years. How to file a 2011 tax return late Your gross rental income from the property is less than 2% of the smaller of its unadjusted basis or fair market value. How to file a 2011 tax return late Lodging provided to an employee or the employee's spouse or dependents is incidental to the activity or activities in which the employee performs services if the lodging is furnished for the employer's convenience. How to file a 2011 tax return late You customarily make the rental property available during defined business hours for nonexclusive use by various customers. How to file a 2011 tax return late You provide the property for use in a nonrental activity in your capacity as an owner of an interest in the partnership, S corporation, or joint venture conducting that activity. How to file a 2011 tax return late    If you meet any of the exceptions listed above, see the instructions for Form 8582 for information about how to report any income or loss from the activity. How to file a 2011 tax return late Special $25,000 allowance. How to file a 2011 tax return late   If you or your spouse actively participated in a passive rental real estate activity, the amount of the passive activity loss that is disallowed is decreased and you therefore can deduct up to $25,000 of loss from the activity from your nonpassive income. How to file a 2011 tax return late This special allowance is an exception to the general rule disallowing the passive activity loss. How to file a 2011 tax return late Similarly, you can offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. How to file a 2011 tax return late   If you are married, filing a separate return, and lived apart from your spouse for the entire tax year, your special allowance cannot be more than $12,500. How to file a 2011 tax return late If you lived with your spouse at any time during the year and are filing a separate return, you cannot use the special allowance to reduce your nonpassive income or tax on nonpassive income. How to file a 2011 tax return late   The maximum special allowance is reduced if your modified adjusted gross income exceeds certain amounts. How to file a 2011 tax return late See Phaseout rule , later. How to file a 2011 tax return late Example. How to file a 2011 tax return late Kate, a single taxpayer, has $70,000 in wages, $15,000 income from a limited partnership, a $26,000 loss from rental real estate activities in which she actively participated, and is not subject to the modified adjusted gross income phaseout rule. How to file a 2011 tax return late She can use $15,000 of her $26,000 loss to offset her $15,000 passive income from the partnership. How to file a 2011 tax return late She actively participated in her rental real estate activities, so she can use the remaining $11,000 rental real estate loss to offset $11,000 of her nonpassive income (wages). How to file a 2011 tax return late Commercial revitalization deduction (CRD). How to file a 2011 tax return late   The special allowance must first be applied to losses from rental real estate activities figured without the CRD. How to file a 2011 tax return late Any remaining part of the special allowance is available for the CRD from the rental real estate activities and is not subject to the active participation rules or the phaseout based on modified adjusted gross income. How to file a 2011 tax return late You cannot claim a CRD for a building placed in service after December 31, 2009. How to file a 2011 tax return late Active participation. How to file a 2011 tax return late   Active participation is not the same as material participation (defined later). How to file a 2011 tax return late Active participation is a less stringent standard than material participation. How to file a 2011 tax return late For example, you may be treated as actively participating if you make management decisions in a significant and bona fide sense. How to file a 2011 tax return late Management decisions that count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and similar decisions. How to file a 2011 tax return late   Only individuals can actively participate in rental real estate activities. How to file a 2011 tax return late However, a decedent's estate is treated as actively participating for its tax years ending less than 2 years after the decedent's death, if the decedent would have satisfied the active participation requirement for the activity for the tax year the decedent died. How to file a 2011 tax return late   A decedent's qualified revocable trust can also be treated as actively participating if both the trustee and the executor (if any) of the estate choose to treat the trust as part of the estate. How to file a 2011 tax return late The choice applies to tax years ending after the decedent's death and before: 2 years after the decedent's death if no estate tax return is required, or 6 months after the estate tax liability is finally determined if an estate tax return is required. How to file a 2011 tax return late   The choice is irrevocable and cannot be made later than the due date for the estate's first income tax return (including any extensions). How to file a 2011 tax return late   Limited partners are not treated as actively participating in a partnership's rental real estate activities. How to file a 2011 tax return late   You are not treated as actively participating in a rental real estate activity unless your interest in the activity (including your spouse's interest) was at least 10% (by value) of all interests in the activity throughout the year. How to file a 2011 tax return late   Active participation is not required to take the low-income housing credit, the rehabilitation investment credit, or CRD from rental real estate activities. How to file a 2011 tax return late Example. How to file a 2011 tax return late Mike, a single taxpayer, had the following income and loss during the tax year: Salary $42,300 Dividends 300 Interest 1,400 Rental loss (4,000) The rental loss came from a house Mike owned. How to file a 2011 tax return late He advertised and rented the house to the current tenant himself. How to file a 2011 tax return late He also collected the rents and did the repairs or hired someone to do them. How to file a 2011 tax return late Even though the rental loss is a loss from a passive activity, Mike can use the entire $4,000 loss to offset his other income because he actively participated. How to file a 2011 tax return late Phaseout rule. How to file a 2011 tax return late   The maximum special allowance of $25,000 ($12,500 for married individuals filing separate returns and living apart at all times during the year) is reduced by 50% of the amount of your modified adjusted gross income that is more than $100,000 ($50,000 if you are married filing separately). How to file a 2011 tax return late If your modified adjusted gross income is $150,000 or more ($75,000 or more if you are married filing separately), you generally cannot use the special allowance. How to file a 2011 tax return late    Modified adjusted gross income for this purpose is your adjusted gross income figured without the following. How to file a 2011 tax return late Taxable social security and tier 1 railroad retirement benefits. How to file a 2011 tax return late Deductible contributions to individual retirement accounts (IRAs) and section 501(c)(18) pension plans. How to file a 2011 tax return late The exclusion from income of interest from qualified U. How to file a 2011 tax return late S. How to file a 2011 tax return late savings bonds used to pay qualified higher education expenses. How to file a 2011 tax return late The exclusion from income of amounts received from an employer's adoption assistance program. How to file a 2011 tax return late Passive activity income or loss included on Form 8582. How to file a 2011 tax return late Any rental real estate loss allowed because you materially participated in the rental activity as a Real Estate Professional (as discussed later, under Activities That Are Not Passive Activities). How to file a 2011 tax return late Any overall loss from a publicly traded partnership (see Publicly Traded Partnerships (PTPs) in the instructions for Form 8582). How to file a 2011 tax return late The deduction for the employer-equivalent portion of self-employment tax. How to file a 2011 tax return late The deduction for domestic production activities. How to file a 2011 tax return late The deduction allowed for interest on student loans. How to file a 2011 tax return late The deduction for qualified tuition and related expenses. How to file a 2011 tax return late Example. How to file a 2011 tax return late During 2013, John was unmarried and was not a real estate professional. How to file a 2011 tax return late For 2013, he had $120,000 in salary and a $31,000 loss from his rental real estate activities in which he actively participated. How to file a 2011 tax return late His modified adjusted gross income is $120,000. How to file a 2011 tax return late When he files his 2013 return, he can deduct only $15,000 of his passive activity loss. How to file a 2011 tax return late He must carry over the remaining $16,000 passive activity loss to 2014. How to file a 2011 tax return late He figures his deduction and carryover as follows: Adjusted gross income, modified as required $120,000       Minus amount not subject to phaseout 100,000 Amount subject to phaseout rule $20,000 Multiply by 50% × 50% Required reduction to special allowance $10,000 Maximum special allowance $25,000 Minus required reduction (see above) 10,000 Adjusted special allowance $15,000 Passive loss from rental real estate $31,000 Deduction allowable/Adjusted  special allowance (see above) 15,000       Amount that must be carried forward $16,000 Exceptions to the phaseout rules. How to file a 2011 tax return late   A higher phaseout range applies to rehabilitation investment credits from rental real estate activities. How to file a 2011 tax return late For those credits, the phaseout of the $25,000 special allowance starts when your modified adjusted gross income exceeds $200,000 ($100,000 if you are a married individual filing a separate return and living apart at all times during the year). How to file a 2011 tax return late   There is no phaseout of the $25,000 special allowance for low-income housing credits or for the CRD. How to file a 2011 tax return late Ordering rules. How to file a 2011 tax return late   If you have more than one of the exceptions to the phaseout rules in the same tax year, you must apply the $25,000 phaseout against your passive activity losses and credits in the following order. How to file a 2011 tax return late The portion of passive activity losses not attributable to the CRD. How to file a 2011 tax return late The portion of passive activity losses attributable to the CRD. How to file a 2011 tax return late The portion of passive activity credits attributable to credits other than the rehabilitation and low-income housing credits. How to file a 2011 tax return late The portion of passive activity credits attributable to the rehabilitation credit. How to file a 2011 tax return late The portion of passive activity credits attributable to the low-income housing credit. How to file a 2011 tax return late Activities That Are Not Passive Activities The following are not passive activities. How to file a 2011 tax return late Trade or business activities in which you materially participated for the tax year. How to file a 2011 tax return late A working interest in an oil or gas well which you hold directly or through an entity that does not limit your liability (such as a general partner interest in a partnership). How to file a 2011 tax return late It does not matter whether you materially participated in the activity for the tax year. How to file a 2011 tax return late However, if your liability was limited for part of the year (for example, you converted your general partner interest to a limited partner interest during the year) and you had a net loss from the well for the year, some of your income and deductions from the working interest may be treated as passive activity gross income and passive activity deductions. How to file a 2011 tax return late  See Temporary Regulations section 1. How to file a 2011 tax return late 469-1T(e)(4)(ii). How to file a 2011 tax return late The rental of a dwelling unit that you also used for personal purposes during the year for more than the greater of 14 days or 10% of the number of days during the year that the home was rented at a fair rental. How to file a 2011 tax return late An activity of trading personal property for the account of those who own interests in the activity. How to file a 2011 tax return late See Temporary Regulations section 1. How to file a 2011 tax return late 469-1T(e)(6). How to file a 2011 tax return late Rental real estate activities in which you materially participated as a real estate professional. How to file a 2011 tax return late See Real Estate Professional , later. How to file a 2011 tax return late You should not enter income and losses from these activities on Form 8582. How to file a 2011 tax return late Instead, enter them on the forms or schedules you would normally use. How to file a 2011 tax return late Material Participation A trade or business activity is not a passive activity if you materially participated in the activity. How to file a 2011 tax return late Material participation tests. How to file a 2011 tax return late    You materially participated in a trade or business activity for a tax year if you satisfy any of the following tests. How to file a 2011 tax return late You participated in the activity for more than 500 hours. How to file a 2011 tax return late Your participation was substantially all the participation in the activity of all individuals for the tax year, including the participation of individuals who did not own any interest in the activity. How to file a 2011 tax return late You participated in the activity for more than 100 hours during the tax year, and you participated at least as much as any other individual (including individuals who did not own any interest in the activity) for the year. How to file a 2011 tax return late The activity is a significant participation activity, and you participated in all significant participation activities for more than 500 hours. How to file a 2011 tax return late A significant participation activity is any trade or business activity in which you participated for more than 100 hours during the year and in which you did not materially participate under any of the material participation tests, other than this test. How to file a 2011 tax return late See Significant Participation Passive Activities , under Recharacterization of Passive Income, later. How to file a 2011 tax return late You materially participated in the activity for any 5 (whether or not consecutive) of the 10 immediately preceding tax years. How to file a 2011 tax return late The activity is a personal service activity in which you materially participated for any 3 (whether or not consecutive) preceding tax years. How to file a 2011 tax return late An activity is a personal service activity if it involves the performance of personal services in the fields of health (including veterinary services), law, engineering, architecture, accounting, actuarial science, performing arts, consulting, or any other trade or business in which capital is not a material income-producing factor. How to file a 2011 tax return late Based on all the facts and circumstances, you participated in the activity on a regular, continuous, and substantial basis during the year. How to file a 2011 tax return late   You did not materially participate in the activity under test (7) if you participated in the activity for 100 hours or less during the year. How to file a 2011 tax return late Your participation in managing the activity does not count in determining whether you materially participated under this test if: Any person other than you received compensation for managing the activity, or Any individual spent more hours during the tax year managing the activity than you did (regardless of whether the individual was compensated for the management services). How to file a 2011 tax return late Participation. How to file a 2011 tax return late   In general, any work you do in connection with an activity in which you own an interest is treated as participation in the activity. How to file a 2011 tax return late Work not usually performed by owners. How to file a 2011 tax return late   You do not treat the work you do in connection with an activity as participation in the activity if both of the following are true. How to file a 2011 tax return late The work is not work that is customarily done by the owner of that type of activity. How to file a 2011 tax return late One of your main reasons for doing the work is to avoid the disallowance of any loss or credit from the activity under the passive activity rules. How to file a 2011 tax return late Participation as an investor. How to file a 2011 tax return late   You do not treat the work you do in your capacity as an investor in an activity as participation unless you are directly involved in the day-to-day management or operations of the activity. How to file a 2011 tax return late Work you do as an investor includes: Studying and reviewing financial statements or reports on operations of the activity, Preparing or compiling summaries or analyses of the finances or operations of the activity for your own use, and Monitoring the finances or operations of the activity in a nonmanagerial capacity. How to file a 2011 tax return late Spouse's participation. How to file a 2011 tax return late   Your participation in an activity includes your spouse's participation. How to file a 2011 tax return late This applies even if your spouse did not own any interest in the activity and you and your spouse do not file a joint return for the year. How to file a 2011 tax return late Proof of participation. How to file a 2011 tax return late You can use any reasonable method to prove your participation in an activity for the year. How to file a 2011 tax return late You do not have to keep contemporaneous daily time reports, logs, or similar documents if you can establish your participation in some other way. How to file a 2011 tax return late For example, you can show the services you performed and the approximate number of hours spent by using an appointment book, calendar, or narrative summary. How to file a 2011 tax return late Limited partners. How to file a 2011 tax return late   If you owned an activity as a limited partner, you generally are not treated as materially participating in the activity. How to file a 2011 tax return late However, you are treated as materially participating in the activity if you met test (1), (5), or (6) under Material participation tests , discussed earlier, for the tax year. How to file a 2011 tax return late   You are not treated as a limited partner, however, if you also were a general partner in the partnership at all times during the partnership's tax year ending with or within your tax year (or, if shorter, during that part of the partnership's tax year in which you directly or indirectly owned your limited partner interest). How to file a 2011 tax return late Retired or disabled farmer and surviving spouse of a farmer. How to file a 2011 tax return late   If you are a retired or disabled farmer, you are treated as materially participating in a farming activity if you materially participated for 5 or more of the 8 years before your retirement or disability. How to file a 2011 tax return late Similarly, if you are a surviving spouse of a farmer, you are treated as materially participating in a farming activity if the real property used in the activity meets the estate tax rules for special valuation of farm property passed from a qualifying decedent, and you actively manage the farm. How to file a 2011 tax return late Corporations. How to file a 2011 tax return late   A closely held corporation or a personal service corporation is treated as materially participating in an activity only if one or more shareholders holding more than 50% by value of the outstanding stock of the corporation materially participate in the activity. How to file a 2011 tax return late   A closely held corporation can also satisfy the material participation standard by meeting the first two requirements for the qualifying business exception from the at-risk limits. How to file a 2011 tax return late See Special exception for qualified corporations under Activities Covered by the At-Risk Rules, later. How to file a 2011 tax return late Real Estate Professional Generally, rental activities are passive activities even if you materially participated in them. How to file a 2011 tax return late However, if you qualified as a real estate professional, rental real estate activities in which you materially participated are not passive activities. How to file a 2011 tax return late For this purpose, each interest you have in a rental real estate activity is a separate activity, unless you choose to treat all interests in rental real estate activities as one activity. How to file a 2011 tax return late See the Instructions for Schedule E (Form 1040), Supplemental Income and Loss, for information about making this choice. How to file a 2011 tax return late If you qualified as a real estate professional for 2013, report income or losses from rental real estate activities in which you materially participated as nonpassive income or losses, and complete line 43 of Schedule E (Form 1040). How to file a 2011 tax return late If you also have an unallowed loss from these activities from an earlier year when you did not qualify, see Treatment of former passive activities under Passive Activities, earlier. How to file a 2011 tax return late Qualifications. How to file a 2011 tax return late   You qualified as a real estate professional for the year if you met both of the following requirements. How to file a 2011 tax return late More than half of the personal services you performed in all trades or businesses during the tax year were performed in real property trades or businesses in which you materially participated. How to file a 2011 tax return late You performed more than 750 hours of services during the tax year in real property trades or businesses in which you materially participated. How to file a 2011 tax return late   Do not count personal services you performed as an employee in real property trades or businesses unless you were a 5% owner of your employer. How to file a 2011 tax return late You were a 5% owner if you owned (or are considered to have owned) more than 5% of your employer's outstanding stock, outstanding voting stock, or capital or profits interest. How to file a 2011 tax return late   If you file a joint return, do not count your spouse's personal services to determine whether you met the preceding requirements. How to file a 2011 tax return late However, you can count your spouse's participation in an activity in determining if you materially participated. How to file a 2011 tax return late Real property trades or businesses. How to file a 2011 tax return late   A real property trade or business is a trade or business that does any of the following with real property. How to file a 2011 tax return late Develops or redevelops it. How to file a 2011 tax return late Constructs or reconstructs it. How to file a 2011 tax return late Acquires it. How to file a 2011 tax return late Converts it. How to file a 2011 tax return late Rents or leases it. How to file a 2011 tax return late Operates or manages it. How to file a 2011 tax return late Brokers it. How to file a 2011 tax return late Closely held corporations. How to file a 2011 tax return late   A closely held corporation can qualify as a real estate professional if more than 50% of the gross receipts for its tax year came from real property trades or businesses in which it materially participated. How to file a 2011 tax return late Passive Activity Income and Deductions In figuring your net income or loss from a passive activity, take into account only passive activity income and passive activity deductions. How to file a 2011 tax return late Self-charged interest. How to file a 2011 tax return late   Certain self-charged interest income or deductions may be treated as passive activity gross income or passive activity deductions if the loan proceeds are used in a passive activity. How to file a 2011 tax return late   Generally, self-charged interest income and deductions result from loans between you and a partnership or S corporation in which you had a direct or indirect ownership interest. How to file a 2011 tax return late This includes both loans you made to the partnership or S corporation and loans the partnership or S corporation made to you. How to file a 2011 tax return late   It also includes loans from one partnership or S corporation to another partnership or S corporation if each owner in the borrowing entity has the same proportional ownership interest in the lending entity. How to file a 2011 tax return late    Exception. How to file a 2011 tax return late The self-charged interest rules do not apply to your interest in a partnership or S corporation if the entity made an election under Regulations section 1. How to file a 2011 tax return late 469-7(g) to avoid the application of these rules. How to file a 2011 tax return late For more details on the self-charged interest rules, see Regulations section 1. How to file a 2011 tax return late 469-7. How to file a 2011 tax return late Passive Activity Income Passive activity income includes all income from passive activities and generally includes gain from disposition of an interest in a passive activity or property used in a passive activity. How to file a 2011 tax return late Passive activity income does not include the following items. How to file a 2011 tax return late Income from an activity that is not a passive activity. How to file a 2011 tax return late These activities are discussed under Activities That Are Not Passive Activities , earlier. How to file a 2011 tax return late Portfolio income. How to file a 2011 tax return late This includes interest, dividends, annuities, and royalties not derived in the ordinary course of a trade or business. How to file a 2011 tax return late It includes gain or loss from the disposition of property that produces these types of income or that is held for investment. How to file a 2011 tax return late The exclusion for portfolio income does not apply to self-charged interest treated as passive activity income. How to file a 2011 tax return late For more information on self-charged interest, see Self-charged interest , earlier. How to file a 2011 tax return late Personal service income. How to file a 2011 tax return late This includes salaries, wages, commissions, self-employment income from trade or business activities in which you materially participated, deferred compensation, taxable social security and other retirement benefits, and payments from partnerships to partners for personal services. How to file a 2011 tax return late Income from positive section 481 adjustments allocated to activities other than passive activities. How to file a 2011 tax return late (Section 481 adjustments are adjustments that must be made due to changes in your accounting method. How to file a 2011 tax return late ) Income or gain from investments of working capital. How to file a 2011 tax return late Income from an oil or gas property if you treated any loss from a working interest in the property for any tax year beginning after 1986 as a nonpassive loss, as discussed in item (2) under Activities That Are Not Passive Activities , earlier. How to file a 2011 tax return late This also applies to income from other oil and gas property the basis of which is determined wholly or partly by the basis of the property in the preceding sentence. How to file a 2011 tax return late Any income from intangible property, such as a patent, copyright, or literary, musical, or artistic composition, if your personal efforts significantly contributed to the creation of the property. How to file a 2011 tax return late Any other income that must be treated as nonpassive income. How to file a 2011 tax return late See Recharacterization of Passive Income , later. How to file a 2011 tax return late Overall gain from any interest in a publicly traded partnership. How to file a 2011 tax return late See Publicly Traded Partnerships (PTPs) in the instructions for Form 8582. How to file a 2011 tax return late State, local, and foreign income tax refunds. How to file a 2011 tax return late Income from a covenant not to compete. How to file a 2011 tax return late Reimbursement of a casualty or theft loss included in gross income to recover all or part of a prior year loss deduction, if the loss deduction was not a passive activity deduction. How to file a 2011 tax return late Alaska Permanent Fund dividends. How to file a 2011 tax return late Cancellation of debt income, if at the time the debt is discharged the debt is not allocated to passive activities under the interest expense allocation rules. How to file a 2011 tax return late See chapter 4 of Publication 535, Business Expenses, for information about the rules for allocating interest. How to file a 2011 tax return late Disposition of property interests. How to file a 2011 tax return late   Gain on the disposition of an interest in property generally is passive activity income if, at the time of the disposition, the property was used in an activity that was a passive activity in the year of disposition. How to file a 2011 tax return late The gain generally is not passive activity income if, at the time of disposition, the property was used in an activity that was not a passive activity in the year of disposition. How to file a 2011 tax return late An exception to this general rule may apply if you previously used the property in a different activity. How to file a 2011 tax return late Exception for more than one use in the preceding 12 months. How to file a 2011 tax return late   If you used the property in more than one activity during the 12-month period before its disposition, you must allocate the gain between the activities on a basis that reasonably reflects the property's use during that period. How to file a 2011 tax return late Any gain allocated to a passive activity is passive activity income. How to file a 2011 tax return late   For this purpose, an allocation of the gain solely to the activity in which the property was mainly used during that period reasonably reflects the property's use if the fair market value of your interest in the property is not more than the lesser of: $10,000, or 10% of the total of the fair market value of your interest in the property and the fair market value of all other property used in that activity immediately before the disposition. How to file a 2011 tax return late Exception for substantially appreciated property. How to file a 2011 tax return late   The gain is passive activity income if the fair market value of the property at disposition was more than 120% of its adjusted basis and either of the following conditions applies. How to file a 2011 tax return late You used the property in a passive activity for 20% of the time you held your interest in the property. How to file a 2011 tax return late You used the property in a passive activity for the entire 24-month period before its disposition. How to file a 2011 tax return late If neither condition applies, the gain is not passive activity income. How to file a 2011 tax return late However, it is treated as portfolio income only if you held the property for investment for more than half of the time you held it in nonpassive activities. How to file a 2011 tax return late   For this purpose, treat property you held through a corporation (other than an S corporation) or other entity whose owners receive only portfolio income as property held in a nonpassive activity and as property held for investment. How to file a 2011 tax return late Also, treat the date you agree to transfer your interest for a fixed or determinable amount as the disposition date. How to file a 2011 tax return late   If you used the property in more than one activity during the 12-month period before its disposition, this exception applies only to the part of the gain allocated to a passive activity under the rules described in the preceding discussion. How to file a 2011 tax return late Disposition of property converted to inventory. How to file a 2011 tax return late   If you disposed of property that you had converted to inventory from its use in another activity (for example, you sold condominium units you previously held for use in a rental activity), a special rule may apply. How to file a 2011 tax return late Under this rule, you disregard the property's use as inventory and treat it as if it were still used in that other activity at the time of disposition. How to file a 2011 tax return late This rule applies only if you meet all of the following conditions. How to file a 2011 tax return late At the time of disposition, you held your interest in the property in a dealing activity (an activity that involves holding the property or similar property mainly for sale to customers in the ordinary course of a trade or business). How to file a 2011 tax return late Your other activities included a nondealing activity (an activity that does not involve holding similar property for sale to customers in the ordinary course of a trade or business) in which you used the property for more than 80% of the period you held it. How to file a 2011 tax return late You did not acquire or hold your interest in the property for the main purpose of selling it to customers in the ordinary course of a trade or business. How to file a 2011 tax return late Passive Activity Deductions Generally, a deduction is a passive activity deduction for a taxable year if and only if such deduction either: Arises in connection with the conduct of an activity that is a passive activity for the tax year; or Is treated as a deduction from an activity for the tax year because it was disallowed by the passive activity rules in the preceding year and carried forward to the tax year. How to file a 2011 tax return late For purposes of item (1), above, an item of deduction arises in the taxable year in which the item would be allowable as a deduction under the taxpayer's method of accounting if taxable income for all taxable years were determined without regard to the passive activity rules and without regard to the basis, excess farm loss, and at-risk limits. How to file a 2011 tax return late See Coordination with other limitations on deductions that apply before the passive activity rules , later. How to file a 2011 tax return late Passive activity deductions generally include losses from dispositions of property used in a passive activity at the time of the disposition and losses from a disposition of less than your entire interest in a passive activity. How to file a 2011 tax return late Exceptions. How to file a 2011 tax return late   Passive activity deductions do not include the following items. How to file a 2011 tax return late Deductions for expenses (other than interest expense) that are clearly and directly allocable to portfolio income. How to file a 2011 tax return late Qualified home mortgage interest, capitalized interest expenses, and other interest expenses (other than self-charged interest) properly allocable to passive activities. How to file a 2011 tax return late For more information on self-charged interest, see Self-charged interest under Passive Activity Income and Deductions, earlier. How to file a 2011 tax return late Losses from dispositions of property that produce portfolio income or property held for investment. How to file a 2011 tax return late State, local, and foreign income taxes. How to file a 2011 tax return late Miscellaneous itemized deductions that may be disallowed because of the 2%-of-adjusted-gross-income limit. How to file a 2011 tax return late Charitable contribution deductions. How to file a 2011 tax return late Net operating loss deductions. How to file a 2011 tax return late Percentage depletion carryovers for oil and gas wells. How to file a 2011 tax return late Capital loss carrybacks and carryovers. How to file a 2011 tax return late Items of deduction from a passive activity that are disallowed under the limits on deductions that apply before the passive activity rules. How to file a 2011 tax return late See Coordination with other limitations on deductions that apply before the passive activity rules , later. How to file a 2011 tax return late Deductions and losses that would have been allowed for tax years beginning before 1987 but for basis or at-risk limits. How to file a 2011 tax return late Net negative section 481 adjustments allocated to activities other than passive activities. How to file a 2011 tax return late (Section 481 adjustments are adjustments required due to changes in accounting methods. How to file a 2011 tax return late ) Casualty and theft losses, unless losses similar in cause and severity recur regularly in the activity. How to file a 2011 tax return late The deduction for the employer-equivalent portion of self-employment tax. How to file a 2011 tax return late Coordination with other limitations on deductions that apply before the passive activity rules. How to file a 2011 tax return late   An item of deduction from a passive activity that is disallowed for a tax year under the basis or at-risk limitations is not a passive activity deduction for the tax year. How to file a 2011 tax return late The following sections provide rules for figuring the extent to which items of deduction from a passive activity are disallowed for a tax year under the basis or at-risk limitations. How to file a 2011 tax return late Proration of deductions disallowed under basis limitations. How to file a 2011 tax return late   If any amount of your distributive share of a partnership's loss for the tax year is disallowed under the basis limitation, a ratable portion of your distributive share of each item of deduction or loss of the partnership is disallowed for the tax year. How to file a 2011 tax return late For this purpose, the ratable portion of an item of deduction or loss is the amount of such item multiplied by the fraction obtained by dividing: The amount of your distributive share of partnership loss that is disallowed for the taxable year; by The sum of your distributive shares of all items of deduction and loss of the partnership for the tax year. How to file a 2011 tax return late   If any amount of your pro rata share of an S corporation's loss for the tax year is disallowed under the basis limitation, a ratable portion of your pro rata share of each item of deduction or loss of the S corporation is disallowed for the tax year. How to file a 2011 tax return late For this purpose, the ratable portion of an item of deduction or loss is the amount of such item multiplied by the fraction obtained by dividing: The amount of your share of S corporation loss that is disallowed for the tax year; by The sum of your pro rata shares of all items of deduction and loss of the corporation for the tax year. How to file a 2011 tax return late Proration of deductions disallowed under at-risk limitation. How to file a 2011 tax return late   If any amount of your loss from an activity (as defined in Activities Covered by the At-Risk Rules , later) is disallowed under the at-risk rules for the tax year, a ratable portion of each item of deduction or loss from the activity is disallowed for the tax year. How to file a 2011 tax return late For this purpose, the ratable portion of an item of deduction or loss is the amount of such item multiplied by the fraction obtained by dividing: The amount of the loss from the activity that is disallowed for the tax year; by The sum of all deductions from the activity for the taxable year. How to file a 2011 tax return late Coordination of basis and at-risk limitations. How to file a 2011 tax return late   The portion of any item of deduction or loss that is disallowed for the tax year under the basis limitations is not taken into account for the taxable year in determining the loss from an activity (as defined in Activities Covered by the At-Risk Rules , later) for purposes of applying the at-risk rules. How to file a 2011 tax return late Separately identified items of deduction and loss. How to file a 2011 tax return late   In identifying the items of deduction and loss from an activity that are not disallowed under the basis and at-risk limitations (and that therefore may be treated as passive activity deductions), you need not account separately for any item of deduction or loss unless such item may, if separately taken into account, result in an income tax liability different from that which would result were such item of deduction or loss taken into account separately. How to file a 2011 tax return late   Items of deduction or loss that must be accounted for separately include (but are not limited to) items of deduction or loss that: Are attributable to separate activities. How to file a 2011 tax return late See Grouping Your Activities , later. How to file a 2011 tax return late Arise in a rental real estate activity in tax years in which you actively participate in such activity; Arise in a rental real estate activity in taxable years in which you do not actively participate in such activity; Arose in a taxable year beginning before 1987 and were not allowed for such taxable year under the basis or at-risk limitations; Are taken into account under section 613A(d) (relating to limitations on certain depletion deductions); Are taken into account under section 1211 (relating to the limitation on capital losses); Are taken into account under section 1231 (relating to property used in a trade or business and involuntary conversions). How to file a 2011 tax return late See Section 1231 Gains and Losses in Publication 544 for more information. How to file a 2011 tax return late Are attributable to pre-enactment interests in activities. How to file a 2011 tax return late See Regulations section 1. How to file a 2011 tax return late 469-11T(c). How to file a 2011 tax return late Grouping Your Activities You can treat one or more trade or business activities, or rental activities, as a single activity if those activities form an appropriate economic unit for measuring gain or loss under the passive activity rules. How to file a 2011 tax return late Grouping is important for a number of reasons. How to file a 2011 tax return late If you group two activities into one larger activity, you need only show material participation in the activity as a whole. How to file a 2011 tax return late But if the two activities are separate, you must show material participation in each one. How to file a 2011 tax return late On the other hand, if you group two activities into one larger activity and you dispose of one of the two, then you have disposed of only part of your entire interest in the activity. How to file a 2011 tax return late But if the two activities are separate and you dispose of one of them, then you have disposed of your entire interest in that activity. How to file a 2011 tax return late Grouping can also be important in determining whether you meet the 10% ownership requirement for actively participating in a rental real estate activity. How to file a 2011 tax return late Appropriate Economic Units Generally, to determine if activities form an appropriate economic unit, you must consider all the relevant facts and circumstances. How to file a 2011 tax return late You can use any reasonable method of applying the relevant facts and circumstances in grouping activities. How to file a 2011 tax return late The following factors have the greatest weight in determining whether activities form an appropriate economic unit. How to file a 2011 tax return late All of the factors do not have to apply to treat more than one activity as a single activity. How to file a 2011 tax return late The factors that you should consider are: The similarities and differences in the types of trades or businesses, The extent of common control, The extent of common ownership, The geographical location, and The interdependencies between or among activities, which may include the extent to which the activities: Buy or sell goods between or among themselves, Involve products or services that are generally provided together, Have the same customers, Have the same employees, or Use a single set of books and records to account for the activities. How to file a 2011 tax return late Example 1. How to file a 2011 tax return late John Jackson owns a bakery and a movie theater at a shopping mall in Baltimore and a bakery and movie theater in Philadelphia. How to file a 2011 tax return late Based on all the relevant facts and circumstances, there may be more than one reasonable method for grouping John's activities. How to file a 2011 tax return late For example, John may be able to group the movie theaters and the bakeries into: One activity, A movie theater activity and a bakery activity, A Baltimore activity and a Philadelphia activity, or Four separate activities. How to file a 2011 tax return late Example 2. How to file a 2011 tax return late Betty is a partner in ABC partnership, which sells nonfood items to grocery stores. How to file a 2011 tax return late Betty is also a partner in DEF (a trucking business). How to file a 2011 tax return late ABC and DEF are under common control. How to file a 2011 tax return late The main part of DEF's business is transporting goods for ABC. How to file a 2011 tax return late DEF is the only trucking business in which Betty is involved. How to file a 2011 tax return late Based on the rules of this section, Betty treats ABC's wholesale activity and DEF's trucking activity as a single activity. How to file a 2011 tax return late Consistency and disclosure requirement. How to file a 2011 tax return late   Generally, when you group activities into appropriate economic units, you may not regroup those activities in a later tax year. How to file a 2011 tax return late You must meet any disclosure requirements of the IRS when you first group your activities and when you add or dispose of any activities in your groupings. How to file a 2011 tax return late   However, if the original grouping is clearly inappropriate or there is a material change in the facts and circumstances that makes the original grouping clearly inappropriate, you must regroup the activities and comply with any disclosure requirements of the IRS. How to file a 2011 tax return late   See Disclosure Requirement , later. How to file a 2011 tax return late Regrouping by the IRS. How to file a 2011 tax return late   If any of the activities resulting from your grouping is not an appropriate economic unit and one of the primary purposes of your grouping (or failure to regroup) is to avoid the passive activity rules, the IRS may regroup your activities. How to file a 2011 tax return late Rental activities. How to file a 2011 tax return late   In general, you cannot group a rental activity with a trade or business activity. How to file a 2011 tax return late However, you can group them together if the activities form an appropriate economic unit and: The rental activity is insubstantial in relation to the trade or business activity, The trade or business activity is insubstantial in relation to the rental activity, or Each owner of the trade or business activity has the same ownership interest in the rental activity, in which case the part of the rental activity that involves the rental of items of property for use in the trade or business activity may be grouped with the trade or business activity. How to file a 2011 tax return late Example. How to file a 2011 tax return late Herbert and Wilma are married and file a joint return. How to file a 2011 tax return late Healthy Food, an S corporation, is a grocery store business. How to file a 2011 tax return late Herbert is Healthy Food's only shareholder. How to file a 2011 tax return late Plum Tower, an S corporation, owns and rents out the building. How to file a 2011 tax return late Wilma is Plum Tower's only shareholder. How to file a 2011 tax return late Plum Tower rents part of its building to Healthy Food. How to file a 2011 tax return late Plum Tower's grocery store rental business and Healthy Food's grocery business are not insubstantial in relation to each other. How to file a 2011 tax return late Herbert and Wilma file a joint return, so they are treated as one taxpayer for purposes of the passive activity rules. How to file a 2011 tax return late The same owner (Herbert and Wilma) owns both Healthy Food and Plum Tower with the same ownership interest (100% in each). How to file a 2011 tax return late If the grouping forms an appropriate economic unit, as discussed earlier, Herbert and Wilma can group Plum Tower's grocery store rental and Healthy Food's grocery business into a single trade or business activity. How to file a 2011 tax return late Grouping of real and personal property rentals. How to file a 2011 tax return late   In general, you cannot treat an activity involving the rental of real property and an activity involving the rental of personal property as a single activity. How to file a 2011 tax return late However, you can treat them as a single activity if you provide the personal property in connection with the real property or the real property in connection with the personal property. How to file a 2011 tax return late Certain activities may not be grouped. How to file a 2011 tax return late   In general, if you own an interest as a limited partner or a limited entrepreneur in one of the following activities, you may not group that activity with any other activity in another type of business. How to file a 2011 tax return late Holding, producing, or distributing motion picture films or video tapes. How to file a 2011 tax return late Farming. How to file a 2011 tax return late Leasing any section 1245 property (as defined in section 1245(a)(3) of the Internal Revenue Code). How to file a 2011 tax return late For a list of section 1245 property, see Section 1245 property under Activities Covered by the At-Risk Rules , later. How to file a 2011 tax return late Exploring for, or exploiting, oil and gas resources. How to file a 2011 tax return late Exploring for, or exploiting, geothermal deposits. How to file a 2011 tax return late   If you own an interest as a limited partner or a limited entrepreneur in an activity described in the list above, you may group that activity with another activity in the same type of business if the grouping forms an appropriate economic unit as discussed earlier. How to file a 2011 tax return late Limited entrepreneur. How to file a 2011 tax return late   A limited entrepreneur is a person who: Has an interest in an enterprise other than as a limited partner, and Does not actively participate in the management of the enterprise. How to file a 2011 tax return late Activities conducted through another entity. How to file a 2011 tax return late   A personal service corporation, closely held corporation, partnership, or S corporation must group its activities using the rules discussed in this section. How to file a 2011 tax return late Once the entity groups its activities, you, as the partner or shareholder of the entity, may group those activities (following the rules of this section): With each other, With activities conducted directly by you, or With activities conducted through other entities. How to file a 2011 tax return late    You may not treat activities grouped together by the entity as separate activities. How to file a 2011 tax return late Personal service and closely held corporations. How to file a 2011 tax return late   You may group an activity conducted through a personal service or closely held corporation with your other activities only to determine whether you materially or significantly participated in those other activities. How to file a 2011 tax return late See Material Participation , earlier, and Significant Participation Passive Activities , later. How to file a 2011 tax return late Publicly traded partnership (PTP). How to file a 2011 tax return late   You may not group activities conducted through a PTP with any other activity, including an activity conducted through another PTP. How to file a 2011 tax return late Partial dispositions. How to file a 2011 tax return late   If you dispose of substantially all of an activity during your tax year, you may treat the part disposed of as a separate activity. How to file a 2011 tax return late However, you can do this only if you can show with reasonable certainty: The amount of deductions and credits disallowed in prior years under the passive activity rules that is allocable to the part of the activity disposed of, and The amount of gross income and any other deductions and credits for the current tax year that is allocable to the part of the activity disposed of. How to file a 2011 tax return late Disclosure Requirement For tax years beginning after January 24, 2010, the following disclosure requirements for groupings apply. How to file a 2011 tax return late You are required to report certain changes to your groupings that occur during the tax year to the IRS. How to file a 2011 tax return late If you fail to report these changes, each trade or business activity or rental activity will be treated as a separate activity. How to file a 2011 tax return late You will be considered to have made a timely disclosure if you filed all affected income tax returns consistent with the claimed grouping and make the required disclosure on the income tax return for the year in which you first discovered the failure to disclose. How to file a 2011 tax return late If the IRS discovered the failure to disclose, you must have reasonable cause for not making the required disclosure. How to file a 2011 tax return late New grouping. How to file a 2011 tax return late   You must file a written statement with your original income tax return for the first tax year in which two or more activities are originally grouped into a single activity. How to file a 2011 tax return late The statement must provide the names, addresses, and employer identification numbers (EINs), if applicable, for the activities being grouped as a single activity. How to file a 2011 tax return late In addition, the statement must contain a declaration that the grouped activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules. How to file a 2011 tax return late Addition to an existing grouping. How to file a 2011 tax return late   You must file a written statement with your original income tax return for the tax year in which you add a new activity to an existing group. How to file a 2011 tax return late The statement must provide the name, address, and EIN, if applicable, for the activity that is being added and for the activities in the existing group. How to file a 2011 tax return late In addition, the statement must contain a declaration that the activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules. How to file a 2011 tax return late Regrouping. How to file a 2011 tax return late   You must file a written statement with your original income tax return for the tax year in which you regroup the activities. How to file a 2011 tax return late The statement must provide the names, addresses, and EINs, if applicable, for the activities that are being regrouped. How to file a 2011 tax return late If two or more activities are being regrouped into a single activity, the statement must contain a declaration that the regrouped activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules. How to file a 2011 tax return late In addition, the statement must contain an explanation of the material change in the facts and circumstances that made the original grouping clearly inappropriate. How to file a 2011 tax return late Groupings by partnerships and S corporations. How to file a 2011 tax return late   Partnerships and S corporations are not subject to the rules for new grouping, addition to an existing grouping, or regrouping. How to file a 2011 tax return late Instead, they must comply with the disclosure instructions for grouping activities provided in their Form 1065, U. How to file a 2011 tax return late S. How to file a 2011 tax return late Return of Partnership Income, or Form 1120S, U. How to file a 2011 tax return late S. How to file a 2011 tax return late Income Tax Return for an S Corporation, whichever is applicable. How to file a 2011 tax return late   The partner or shareholder is not required to make a separate disclosure of the groupings disclosed by the entity unless the partner or shareholder: Groups together any of the activities that the entity does not group together, Groups the entity's activities with activities conducted directly by the partner or shareholder, or Groups an entity's activities with activities conducted through another entity. How to file a 2011 tax return late   A partner or shareholder may not treat activities grouped together by the entity as separate activities. How to file a 2011 tax return late Recharacterization of Passive Income Net income from the following passive activities may have to be recharacterized and excluded from passive activity income. How to file a 2011 tax return late Significant participation passive activities, Rental of property when less than 30% of the unadjusted basis of the property is subject to depreciation, Equity-financed lending activities, Rental of property incidental to development activities, Rental of property to nonpassive activities, and Licensing of intangible property by  pass-through entities. How to file a 2011 tax return late If you are engaged in or have an interest in one of these activities during the tax year (either directly or through a partnership or an S corporation), combine the income and losses from the activity to determine if you have a net loss or net income from that activity. How to file a 2011 tax return late If the result is a net loss, treat the income and losses the same as any other income or losses from that type of passive activity (trade or business activity or rental activity). How to file a 2011 tax return late If the result is net income, do not enter any of the income or losses from the activity or property on Form 8582 or its worksheets. How to file a 2011 tax return late Instead, enter income or losses on the form and schedules you normally use. How to file a 2011 tax return late However, see Significant Participation Passive Activities , later, if the activity is a significant participation passive activity and you also have a net loss from a different significant participation passive activity. How to file a 2011 tax return late Limit on recharacterized passive income. How to file a 2011 tax return late   The total amount that you treat as nonpassive income under the rules described later in this discussion for significant participation passive activities, rental of nondepreciable property, and equity-financed lending activities cannot exceed the greatest amount that you treat as nonpassive income under any one of these rules. How to file a 2011 tax return late Investment income and investment expense. How to file a 2011 tax return late   To figure your investment interest expense limitation on Form 4952, treat as investment income any net passive income recharacterized as nonpassive income from rental of nondepreciable property, equity-financed lending activity, or licensing of intangible property by a pass-through entity. How to file a 2011 tax return late Significant Participation Passive Activities A significant participation passive activity is any trade or business activity in which you participated for more than 100 hours during the tax year but did not materially participate. How to file a 2011 tax return late If your gross income from all significant participation passive activities is more than your deductions from those activities, a part of your net income from each significant participation passive activity is treated as nonpassive income. How to file a 2011 tax return late Corporations. How to file a 2011 tax return late   An activity of a personal service corporation or closely held corporation is a significant participation passive activity if both of the following statements are true. How to file a 2011 tax return late The corporation is not treated as materially participating in the activity for the year. How to file a 2011 tax return late One or more individuals, each of whom is treated as significantly participating in the activity, directly or indirectly hold (in total) more than 50% (by value) of the corporation's outstanding stock. How to file a 2011 tax return late Worksheet A. How to file a 2011 tax return late   Complete Worksheet A. How to file a 2011 tax return late Significant Participation Passive Activities , below, if you have income or losses from any significant participation activity. How to file a 2011 tax return late Begin by entering the name of each activity in the left column. How to file a 2011 tax return late Column (a). How to file a 2011 tax return late   Enter the number of hours you participated in each activity and total the column. How to file a 2011 tax return late   If the total is more than 500, do not complete Worksheet A or B. How to file a 2011 tax return late None of the activities are passive activities because you satisfy test 4 for material participation. How to file a 2011 tax return late (See Material participation tests , earlier. How to file a 2011 tax return late ) Report all the income and losses from these activities on the forms and schedules you normally use. How to file a 2011 tax return late Do not include the income and losses on Form 8582. How to file a 2011 tax return late Column (b). How to file a 2011 tax return late   Enter the net loss, if any, from the activity. How to file a 2011 tax return late Net loss from an activity means either: The activity's current year net loss (if any) plus prior year unallowed losses (if any), or The excess of prior year unallowed losses over the current year net income (if any). How to file a 2011 tax return late Enter -0- here if the prior year unallowed loss is the same as the current year net income. How to file a 2011 tax return late Column (c). How to file a 2011 tax return late   Enter net income (if any) from the activity. How to file a 2011 tax return late Net income means the excess of the current year's net income from the activity over any prior year unallowed losses from the activity. How to file a 2011 tax return late Column (d). How to file a 2011 tax return late   Combine amounts in the Totals row for columns (b) and (c) and enter the total net income or net loss in the Totals row of column (d). How to file a 2011 tax return late If column (d) is a net loss, skip Worksheet B, Significant Participation Activities With Net Income. How to file a 2011 tax return late Include the income and losses in Worksheet 3 of Form 8582 (or Worksheet 2 in the Form 88