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

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

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

3. E-File for FREE

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

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

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

How To File Taxes

Turbotax 2011Form 1040 XTurbotax MilitaryHow Can I File My 2011 Taxes Online For FreeEfile 7004 Tax ExtensionE File 2009 Tax ReturnH&r Block Online TaxesIrs Free Tax PreparationWww H&rblockfree Tax ReturnsWhere To File 2012 Taxes OnlineAmend My 2010 Tax ReturnFiling State Returns2012 1040aFiling A Tax Amendment OnlineHrblock Free FileHow Long Does An Amended Tax Return TakeFile Federal And State Taxes Free OnlineWww Turbotax ComFile An AmendmentPreparing Form 1040xMilitary Free Turbo TaxIrs 2011 Taxes Online2011 Federal Tax FormsPrintable Tax Forms 2011Turbo Tax Military2014 1040 Ez FormH&r Block TaxesEz Tax Form 20121040ez Tax Form And Booklet2011 Irs Forms And PublicationsFile 2012 Taxes Late FreeState Taxes File Free OnlineFederal Income Tax Ez Form 2011File State Taxes Only OnlineWhere Can I Get A State Tax FormHow Do I Efile My State TaxesFiling 2011 Taxes1040ez BookH&r Block Free State File CouponH And R Block Free Efile

How To File Taxes

How to file taxes Publication 54 - Introductory Material Table of Contents Future Developments What's New Reminders IntroductionOrdering forms and publications. How to file taxes Tax questions. How to file taxes Future Developments For the latest information about developments related to Publication 54, such as legislation enacted after it was published, go to www. How to file taxes irs. How to file taxes gov/pub54. How to file taxes What's New Exclusion amount. How to file taxes  The maximum foreign earned income exclusion is adjusted annually for inflation. How to file taxes For 2013, the maximum exclusion has increased to $97,600. How to file taxes See Limit on Excludable Amount under Foreign Earned Income Exclusion in chapter 4. How to file taxes Housing expenses — base amount. How to file taxes  The computation of the base housing amount (line 32 of Form 2555) is tied to the maximum foreign earned income exclusion. How to file taxes The amount is 16 percent of the exclusion amount (computed on a daily basis), multiplied by the number of days in your qualifying period that fall within your 2013 tax year. How to file taxes For 2013, this amount is $42. How to file taxes 78 per day ($15,616 per year). How to file taxes See Housing Amount under Foreign Housing Exclusion and Deduction in chapter 4. How to file taxes Housing expenses — maximum amount. How to file taxes  The amount of qualified housing expenses eligible for the housing exclusion and housing deduction has changed for some locations. How to file taxes See Limit on housing expenses under Foreign Housing Exclusion and Deduction in chapter 4. How to file taxes Filing requirements. How to file taxes  Generally, the amount of income you can receive before you must file an income tax return has increased. How to file taxes These amounts are shown in chapter 1 under Filing Requirements . How to file taxes Self-employment tax rate. How to file taxes  For 2013, the self-employment tax rate of 13. How to file taxes 3% has increased to 15. How to file taxes 3%. How to file taxes The maximum amount of net earnings from self-employment that is subject to the social security part of the self-employment tax has increased to $113,700. How to file taxes All net earnings are subject to the Medicare part of the tax. How to file taxes For more information, see chapter 3. How to file taxes IRA limitations for 2013. How to file taxes . How to file taxes  The 2013 contribution limit to an IRA has increased to $5,500 ($6,500 if age 50 or older). How to file taxes You may be able to take an IRA deduction if you were covered by a retirement plan and your 2013 modified adjusted gross income (AGI) is less than $69,000 ($115,000 if married filing jointly or a qualifying widow(er)). How to file taxes If your spouse was covered by a retirement plan, but you were not, you may be able to take an IRA deduction if your 2013 modified AGI is less than $188,000. How to file taxes See the Instructions for Form 1040 or the Instructions for Form 1040A for details and exceptions. How to file taxes Reminders Figuring tax on income not excluded. How to file taxes  If you claim the foreign earned income exclusion, the housing exclusion, or both, you must figure the tax on your nonexcluded income using the tax rates that would have applied had you not claimed the exclusions. How to file taxes See the Instructions for Form 1040 and complete the Foreign Earned Income Tax Worksheet to figure the amount of tax to enter on Form 1040, line 44. How to file taxes If you must attach Form 6251 to your return, use the Foreign Earned Income Tax Worksheet provided in the Instructions for Form 6251. How to file taxes Form 8938. How to file taxes  If you had foreign financial assets in 2013, you may have to file Form 8938 with your return. How to file taxes See Form 8938 in chapter 1. How to file taxes Change of address. How to file taxes  If you change your home mailing address, notify the Internal Revenue Service using Form 8822, Change of Address. How to file taxes If you are changing your business address, use Form 8822-B, Change of Address or Responsible Party—Business. How to file taxes Photographs of missing children. How to file taxes  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. How to file taxes Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. How to file taxes You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. How to file taxes Introduction This publication discusses special tax rules for U. How to file taxes S. How to file taxes citizens and resident aliens who work abroad or who have income earned in foreign countries. How to file taxes If you are a U. How to file taxes S. How to file taxes citizen or resident alien, your worldwide income generally is subject to U. How to file taxes S. How to file taxes income tax, regardless of where you are living. How to file taxes Also, you are subject to the same income tax filing requirements that apply to U. How to file taxes S. How to file taxes citizens or resident aliens living in the United States. How to file taxes Expatriation tax provisions apply to U. How to file taxes S. How to file taxes citizens who have renounced their citizenship and long-term residents who have ended their residency. How to file taxes These provisions are discussed in chapter 4 of Publication 519, U. How to file taxes S. How to file taxes Tax Guide for Aliens. How to file taxes Resident alien. How to file taxes   A resident alien is an individual who is not a citizen or national of the United States and who meets either the green card test or the substantial presence test for the calendar year. How to file taxes Green card test. How to file taxes You are a U. How to file taxes S. How to file taxes resident if you were a lawful permanent resident of the United States at any time during the calendar year. How to file taxes This is known as the green card test because resident aliens hold immigrant visas (also known as green cards). How to file taxes Substantial presence test. How to file taxes You are considered a U. How to file taxes S. How to file taxes resident if you meet the substantial presence test for the calendar year. How to file taxes To meet this test, you must be physically present in the United States on at least: 31 days during the current calendar year, and A total of 183 days during the current year and the 2 preceding years, counting all the days of physical presence in the current year, but only 1/3 the number of days of presence in the first preceding year, and only 1/6 the number of days in the second preceding year. How to file taxes Example. How to file taxes You were physically present in the United States on 120 days in each of the years 2011, 2012, and 2013. How to file taxes To determine if you meet the substantial presence test for 2013, count the full 120 days of presence in 2013, 40 days in 2012 (1/3 of 120), and 20 days in 2011 (1/6 of 120). How to file taxes Because the total for the 3-year period is 180 days, you are not considered a resident under the substantial presence test for 2013. How to file taxes   For more information on resident and nonresident status, the tests for residence, and the exceptions to them, see Publication 519. How to file taxes Filing information. How to file taxes    Chapter 1 contains general filing information, such as: Whether you must file a U. How to file taxes S. How to file taxes tax return, When and where to file your return, How to report your income if it is paid in foreign currency, How to treat a nonresident alien spouse as a U. How to file taxes S. How to file taxes resident, and Whether you must pay estimated tax. How to file taxes Withholding tax. How to file taxes    Chapter 2 discusses the withholding of income, social security, and Medicare taxes from the pay of U. How to file taxes S. How to file taxes citizens and resident aliens. How to file taxes Self-employment tax. How to file taxes    Chapter 3 discusses who must pay self-employment tax. How to file taxes Foreign earned income exclusion and housing exclusion and deduction. How to file taxes    Chapter 4 discusses income tax benefits that apply if you meet certain requirements while living abroad. How to file taxes You may qualify to treat up to $97,600 of your income as not taxable by the United States. How to file taxes You also may be able to either deduct part of your housing expenses from your income or treat a limited amount of income used for housing expenses as not taxable by the United States. How to file taxes These benefits are called the foreign earned income exclusion and the foreign housing deduction and exclusion. How to file taxes   To qualify for either of the exclusions or the deduction, you must have a tax home in a foreign country and earn income from personal services performed in a foreign country. How to file taxes These rules are explained in chapter 4. How to file taxes   If you are going to exclude or deduct your income as discussed above, you must file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. How to file taxes Exemptions, deductions, and credits. How to file taxes    Chapter 5 discusses exemptions, deductions, and credits you may be able to claim on your return. How to file taxes These are generally the same as if you were living in the United States. How to file taxes However, if you choose to exclude foreign earned income or housing amounts, you cannot deduct or exclude any item or take a credit for any item that is related to the amounts you exclude. How to file taxes Among the topics discussed in chapter 5 are: Exemptions, Contributions to foreign organizations, Foreign moving expenses, Contributions to individual retirement arrangements (IRAs), and Foreign taxes. How to file taxes Tax treaty benefits. How to file taxes    Chapter 6 discusses some benefits that are common to most tax treaties and explains how to get help if you think you are not receiving a treaty benefit to which you are entitled. How to file taxes It also explains how to get copies of tax treaties. How to file taxes How to get tax help. How to file taxes    Chapter 7 is an explanation of how to get information and assistance from the IRS. How to file taxes Questions and answers. How to file taxes   Frequently asked questions and answers to those questions are presented in the back of the publication. How to file taxes Comments and suggestions. How to file taxes   We welcome your comments about this publication and your suggestions for future editions. How to file taxes   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. How to file taxes NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. How to file taxes Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. How to file taxes   You can send us comments from www. How to file taxes irs. How to file taxes gov/formspubs/. How to file taxes Click on “More Information” and then on “Comment on Tax Forms and Publications. How to file taxes ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. How to file taxes Ordering forms and publications. How to file taxes   Visit www. How to file taxes irs. How to file taxes gov/formspubs/ to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received. How to file taxes Internal Revenue Service 1201 N. How to file taxes Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. How to file taxes   If you have a tax question, check the information available on IRS. How to file taxes gov or call 1-800-TAX–FORM (1-800-829-1040). How to file taxes We cannot answer tax questions sent to either of the above addresses. How to file taxes Prev  Up  Next   Home   More Online Publications
Español

Incorporate Your Business – State Licenses

Find out the steps in your state to get your business incorporated.

The How To File Taxes

How to file taxes 9. How to file taxes   Dispositions of Property Used in Farming Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Section 1231 Gains and LossesNonrecaptured section 1231 losses. How to file taxes Depreciation RecaptureSection 1245 Property Section 1250 Property Installment Sale Other Dispositions Other GainsExceptions. How to file taxes Amount to report as ordinary income. How to file taxes Applicable percentage. How to file taxes Amount to report as ordinary income. How to file taxes Applicable percentage. How to file taxes Introduction When you dispose of property used in your farm business, your taxable gain or loss is usually treated as ordinary income (which is taxed at the same rates as wages and interest income) or capital gain (which is generally taxed at lower rates) under the rules for section 1231 transactions. How to file taxes When you dispose of depreciable property (section 1245 property or section 1250 property) at a gain, you may have to recognize all or part of the gain as ordinary income under the depreciation recapture rules. How to file taxes Any gain remaining after applying the depreciation recapture rules is a section 1231 gain, which may be taxed as a capital gain. How to file taxes Gains and losses from property used in farming are reported on Form 4797, Sales of Business Property. How to file taxes Table 9-1 contains examples of items reported on Form 4797 and refers to the part of that form on which they first should be reported. How to file taxes Topics - This chapter discusses: Section 1231 gains and losses Depreciation recapture Other gains Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. How to file taxes Section 1231 Gains and Losses Section 1231 gains and losses are the taxable gains and losses from section 1231 transactions (explained below). How to file taxes Their treatment as ordinary or capital gains depends on whether you have a net gain or a net loss from all of your section 1231 transactions in the tax year. How to file taxes Table 9-1. How to file taxes Where to First Report Certain Items on Form 4797 Type of property Held 1 year  or less Held more than  1 year 1 Depreciable trade or business property:       a Sold or exchanged at a gain Part II Part III (1245, 1250)   b Sold or exchanged at a loss Part II Part I 2 Farmland held less than 10 years for which soil, water, or land clearing expenses were deducted:       a Sold at a gain Part II Part III (1252)   b Sold at a loss Part II Part I 3 All other farmland Part II Part I 4 Disposition of cost-sharing payment property described in section 126 Part II Part III (1255) 5 Cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 24 mos. How to file taxes Held 24 mos. How to file taxes  or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised cattle and horses sold at a gain Part II Part I 6 Livestock other than cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 12 mos. How to file taxes Held 12 mos. How to file taxes   or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised livestock sold at a gain Part II Part I If you have a gain from a section 1231 transaction, first determine whether any of the gain is ordinary income under the depreciation recapture rules (explained later). How to file taxes Do not take that gain into account as section 1231 gain. How to file taxes Section 1231 transactions. How to file taxes   Gain or loss on the following transactions is subject to section 1231 treatment. How to file taxes Sale or exchange of cattle and horses. How to file taxes The cattle and horses must be held for draft, breeding, dairy, or sporting purposes and held for 24 months or longer. How to file taxes Sale or exchange of other livestock. How to file taxes This livestock must be held for draft, breeding, dairy, or sporting purposes and held for 12 months or longer. How to file taxes Other livestock includes hogs, mules, sheep, goats, donkeys, and other fur-bearing animals. How to file taxes Other livestock does not include poultry. How to file taxes Sale or exchange of depreciable personal property. How to file taxes This property must be used in your business and held longer than 1 year. How to file taxes Generally, property held for the production of rents or royalties is considered to be used in a trade or business. How to file taxes Examples of depreciable personal property include farm machinery and trucks. How to file taxes It also includes amortizable section 197 intangibles. How to file taxes Sale or exchange of real estate. How to file taxes This property must be used in your business and held longer than 1 year. How to file taxes Examples are your farm or ranch (including barns and sheds). How to file taxes Sale or exchange of unharvested crops. How to file taxes The crop and land must be sold, exchanged, or involuntarily converted at the same time and to the same person, and the land must have been held longer than 1 year. How to file taxes You cannot keep any right or option to reacquire the land directly or indirectly (other than a right customarily incident to a mortgage or other security transaction). How to file taxes Growing crops sold with a leasehold on the land, even if sold to the same person in a single transaction, are not included. How to file taxes Distributive share of partnership gains and losses. How to file taxes Your distributive share must be from the sale or exchange of property listed above and held longer than 1 year (or for the required period for certain livestock). How to file taxes Cutting or disposal of timber. How to file taxes Special rules apply if you owned the timber longer than 1 year and elect to treat timber cutting as a sale or exchange, or you enter into a cutting contract, as described in chapter 8 under Timber . How to file taxes Condemnation. How to file taxes The condemned property (defined in chapter 11) must have been held longer than 1 year. How to file taxes It must be business property or a capital asset held in connection with a trade or business or a transaction entered into for profit, such as investment property. How to file taxes It cannot be property held for personal use. How to file taxes Casualty or theft. How to file taxes The casualty or theft must have affected business property, property held for the production of rents or royalties, or investment property (such as notes and bonds). How to file taxes You must have held the property longer than 1 year. How to file taxes However, if your casualty or theft losses are more than your casualty or theft gains, neither the gains nor the losses are taken into account in the section 1231 computation. How to file taxes Section 1231 does not apply to personal casualty gains and losses. How to file taxes See chapter 11 for information on how to treat those gains and losses. How to file taxes If the property is not held for the required holding period, the transaction is not subject to section 1231 treatment, and any gain or loss is ordinary income reported in Part II of Form 4797. How to file taxes See Table 9-1. How to file taxes Property for sale to customers. How to file taxes   A sale, exchange, or involuntary conversion of property held mainly for sale to customers is not a section 1231 transaction. How to file taxes If you will get back all, or nearly all, of your investment in the property by selling it rather than by using it up in your business, it is property held mainly for sale to customers. How to file taxes Treatment as ordinary or capital. How to file taxes   To determine the treatment of section 1231 gains and losses, combine all of your section 1231 gains and losses for the year. How to file taxes If you have a net section 1231 loss, it is an ordinary loss. How to file taxes If you have a net section 1231 gain, it is ordinary income up to your nonrecaptured section 1231 losses from previous years, explained next. How to file taxes The rest, if any, is long-term capital gain. How to file taxes Nonrecaptured section 1231 losses. How to file taxes   Your nonrecaptured section 1231 losses are your net section 1231 losses for the previous 5 years that have not been applied against a net section 1231 gain by treating the gain as ordinary income. How to file taxes These losses are applied against your net section 1231 gain beginning with the earliest loss in the 5-year period. How to file taxes Example. How to file taxes In 2013, Ben has a $2,000 net section 1231 gain. How to file taxes To figure how much he has to report as ordinary income and long-term capital gain, he must first determine his section 1231 gains and losses from the previous 5-year period. How to file taxes From 2008 through 2012 he had the following section 1231 gains and losses. How to file taxes Year Amount 2008 -0- 2009 -0- 2010 ($2,500) 2011 -0- 2012 $1,800   Ben uses this information to figure how to report his net section 1231 gain for 2013 as shown below. How to file taxes 1) Net section 1231 gain (2013) $2,000 2) Net section 1231 loss (2010) ($2,500)   3) Net section 1231 gain (2012) 1,800   4) Remaining net section 1231 loss from prior 5 years ($700)   5) Gain treated as  ordinary income $700 6) Gain treated as long-term  capital gain $1,300 His remaining net section 1231 loss from 2010 is completely recaptured in 2013. How to file taxes Depreciation Recapture If you dispose of depreciable or amortizable property at a gain, you may have to treat all or part of the gain (even if it is otherwise nontaxable) as ordinary income. How to file taxes To figure any gain that must be reported as ordinary income, you must keep permanent records of the facts necessary to figure the depreciation or amortization allowed or allowable on your property. How to file taxes For more information, see chapter 3 of Publication 544. How to file taxes Section 1245 Property A gain on the disposition of section 1245 property is treated as ordinary income to the extent of depreciation allowed or allowable. How to file taxes Any recognized gain that is more than the part that is ordinary income is a section 1231 gain. How to file taxes See Treatment as ordinary or capital under Section 1231 Gains and Losses , earlier. How to file taxes Section 1245 property includes any property that is or has been subject to an allowance for depreciation or amortization and that is any of the following types of property. How to file taxes Personal property (either tangible or intangible). How to file taxes Other tangible property (except buildings and their structural components) used as any of the following. How to file taxes See Buildings and structural components below. How to file taxes An integral part of manufacturing, production, or extraction, or of furnishing certain services. How to file taxes A research facility in any of the activities in (a). How to file taxes A facility in any of the activities in (a) above, for the bulk storage of fungible commodities (discussed later). How to file taxes That part of real property (not included in (2)) with an adjusted basis reduced by (but not limited to) the following. How to file taxes Amortization of certified pollution control facilities. How to file taxes The section 179 expense deduction. How to file taxes Deduction for clean-fuel vehicles and certain refueling property. How to file taxes Expenditures to remove architectural and transportation barriers to the handicapped and elderly. How to file taxes Certain reforestation expenditures (as described under Reforestation Costs in chapter 7. How to file taxes Single purpose agricultural (livestock) or horticultural structures. How to file taxes Storage facilities (except buildings and their structural components) used in distributing petroleum or any primary product of petroleum. How to file taxes Buildings and structural components. How to file taxes   Section 1245 property does not include buildings and structural components. How to file taxes The term building includes a house, barn, warehouse, or garage. How to file taxes The term structural component includes walls, floors, windows, doors, central air conditioning systems, light fixtures, etc. How to file taxes   Do not treat a structure that is essentially machinery or equipment as a building or structural component. How to file taxes Also, do not treat a structure that houses property used as an integral part of an activity as a building or structural component if the structure's use is so closely related to the property's use that the structure can be expected to be replaced when the property it initially houses is replaced. How to file taxes   The fact that the structure is specially designed to withstand the stress and other demands of the property and cannot be used economically for other purposes indicates it is closely related to the use of the property it houses. How to file taxes Structures such as oil and gas storage tanks, grain storage bins, and silos are not treated as buildings, but as section 1245 property. How to file taxes Facility for bulk storage of fungible commodities. How to file taxes   This is a facility used mainly for the bulk storage of fungible commodities. How to file taxes Bulk storage means storage of a commodity in a large mass before it is used. How to file taxes For example, if a facility is used to store oranges that have been sorted and boxed, it is not used for bulk storage. How to file taxes To be fungible, a commodity must be such that one part may be used in place of another. How to file taxes Gain Treated as Ordinary Income The gain treated as ordinary income on the sale, exchange, or involuntary conversion of section 1245 property, including a sale and leaseback transaction, is the lesser of the following amounts. How to file taxes The depreciation (which includes any section 179 deduction claimed) and amortization allowed or allowable on the property. How to file taxes The gain realized on the disposition (the amount realized from the disposition minus the adjusted basis of the property). How to file taxes For any other disposition of section 1245 property, ordinary income is the lesser of (1) above or the amount by which its fair market value (FMV) is more than its adjusted basis. How to file taxes For details, see chapter 3 of Publication 544. How to file taxes Use Part III of Form 4797 to figure the ordinary income part of the gain. How to file taxes Depreciation claimed on other property or claimed by other taxpayers. How to file taxes   Depreciation and amortization include the amounts you claimed on the section 1245 property as well as the following depreciation and amortization amounts. How to file taxes Amounts you claimed on property you exchanged for, or converted to, your section 1245 property in a like-kind exchange or involuntary conversion. How to file taxes For details on exchanges of property that are not taxable, see Like-Kind Exchanges in chapter 8. How to file taxes Amounts a previous owner of the section 1245 property claimed if your basis is determined with reference to that person's adjusted basis (for example, the donor's depreciation deductions on property you received as a gift and part of the transfer is a sale or exchange). How to file taxes Example. How to file taxes Jeff Free paid $120,000 for a tractor in 2012. How to file taxes On February 23, 2013, he traded it for a chopper and paid an additional $30,000. How to file taxes To figure his depreciation deduction on the chopper for the current year, Jeff continues to use the basis of the tractor as he would have before the trade. How to file taxes Jeff can also depreciate the additional $30,000 for the chopper. How to file taxes Depreciation and amortization. How to file taxes   Depreciation and amortization deductions that must be recaptured as ordinary income include (but are not limited to) the following items. How to file taxes See Depreciation Recapture in chapter 3 of Publication 544 for more details. How to file taxes Ordinary depreciation deductions. How to file taxes Section 179 deduction (see chapter 7). How to file taxes Any special depreciation allowance. How to file taxes Amortization deductions for all the following costs. How to file taxes Acquiring a lease. How to file taxes Lessee improvements. How to file taxes Pollution control facilities. How to file taxes Reforestation expenses. How to file taxes Section 197 intangibles. How to file taxes Qualified disaster expenses. How to file taxes Franchises, trademarks, and trade names acquired before August 11, 1993. How to file taxes Example. How to file taxes You file your returns on a calendar year basis. How to file taxes In February 2011, you bought and placed in service for 100% use in your farming business a light-duty truck (5-year property) that cost $10,000. How to file taxes You used the half-year convention and your MACRS deductions for the truck were $1,500 in 2011 and $2,550 in 2012. How to file taxes You did not claim the section 179 expense deduction for the truck. How to file taxes You sold it in May 2013 for $7,000. How to file taxes The MACRS deduction in 2013, the year of sale, is $893 (½ of $1,785). How to file taxes Figure the gain treated as ordinary income as follows. How to file taxes 1) Amount realized $7,000 2) Cost (February 2011) $10,000   3) Depreciation allowed or allowable (MACRS deductions: $1,500 + $2,550 + $893) 4,943   4) Adjusted basis (subtract line 3 from line 2) $5,057 5) Gain realized (subtract line 4 from line 1) 1,943 6) Gain treated as ordinary income (lesser of line 3 or line 5) $1,943 Depreciation allowed or allowable. How to file taxes   You generally use the greater of the depreciation allowed or allowable when figuring the part of gain to report as ordinary income. How to file taxes If, in prior years, you have consistently taken proper deductions under one method, the amount allowed for your prior years will not be increased even though a greater amount would have been allowed under another proper method. How to file taxes If you did not take any deduction at all for depreciation, your adjustments to basis for depreciation allowable are figured by using the straight line method. How to file taxes This treatment applies only when figuring what part of the gain is treated as ordinary income under the rules for section 1245 depreciation recapture. How to file taxes Disposition of plants and animals. How to file taxes   If you elect not to use the uniform capitalization rules (see chapter 6), you must treat any plant you produce as section 1245 property. How to file taxes If you have a gain on the property's disposition, you must recapture the pre-productive expenses you would have capitalized if you had not made the election by treating the gain, up to the amount of these expenses, as ordinary income. How to file taxes For section 1231 transactions, show these expenses as depreciation on Form 4797, Part III, line 22. How to file taxes For plant sales that are reported on Schedule F (1040), Profit or Loss From Farming, this recapture rule does not change the reporting of income because the gain is already ordinary income. How to file taxes You can use the farm-price method or the unit-livestock-price method discussed in  chapter 2 to figure these expenses. How to file taxes Example. How to file taxes Janet Maple sold her apple orchard in 2013 for $80,000. How to file taxes Her adjusted basis at the time of sale was $60,000. How to file taxes She bought the orchard in 2006, but the trees did not produce a crop until 2009. How to file taxes Her pre-productive expenses were $6,000. How to file taxes She elected not to use the uniform capitalization rules. How to file taxes Janet must treat $6,000 of the gain as ordinary income. How to file taxes Section 1250 Property Section 1250 property includes all real property subject to an allowance for depreciation that is not and never has been section 1245 property. How to file taxes It includes buildings and structural components that are not section 1245 property (discussed earlier). How to file taxes It includes a leasehold of land or section 1250 property subject to an allowance for depreciation. How to file taxes A fee simple interest in land is not section 1250 property because, like land, it is not depreciable. How to file taxes Gain on the disposition of section 1250 property is treated as ordinary income to the extent of additional depreciation allowed or allowable. How to file taxes To determine the additional depreciation on section 1250 property, see Depreciation Recapture in chapter 3 of Publication 544. How to file taxes You will not have additional depreciation if any of the following apply to the property disposed of. How to file taxes You figured depreciation for the property using the straight line method or any other method that does not result in depreciation that is more than the amount figured by the straight line method and you have held the property longer than 1 year. How to file taxes You chose the alternate ACRS (straight line) method for the property, which was a type of 15-, 18-, or 19-year real property covered by the section 1250 rules. How to file taxes The property was nonresidential real property placed in service after 1986 (or after July 31, 1986, if the choice to use MACRS was made) and you held it longer than 1 year. How to file taxes These properties are depreciated using the straight line method. How to file taxes Installment Sale If you report the sale of property under the installment method, any depreciation recapture under section 1245 or 1250 is taxable as ordinary income in the year of sale. How to file taxes This applies even if no payments are received in that year. How to file taxes If the gain is more than the depreciation recapture income, report the rest of the gain using the rules of the installment method. How to file taxes For this purpose, include the recapture income in your installment sale basis to determine your gross profit on the installment sale. How to file taxes If you dispose of more than one asset in a single transaction, you must separately figure the gain on each asset so that it may be properly reported. How to file taxes To do this, allocate the selling price and the payments you receive in the year of sale to each asset. How to file taxes Report any depreciation recapture income in the year of sale before using the installment method for any remaining gain. How to file taxes For more information on installment sales, see chapter 10. How to file taxes Other Dispositions Chapter 3 of Publication 544 discusses the tax treatment of the following transfers of depreciable property. How to file taxes By gift. How to file taxes At death. How to file taxes In like-kind exchanges. How to file taxes In involuntary conversions. How to file taxes Publication 544 also explains how to handle a single transaction involving multiple properties. How to file taxes Other Gains This section discusses gain on the disposition of farmland for which you were allowed either of the following. How to file taxes Deductions for soil and water conservation expenditures (section 1252 property). How to file taxes Exclusions from income for certain cost sharing payments (section 1255 property). How to file taxes Section 1252 property. How to file taxes   If you disposed of farmland you held more than 1 year and less than 10 years at a gain and you were allowed deductions for soil and water conservation expenses for the land, as discussed in chapter 5, you must treat part of the gain as ordinary income and treat the balance as section 1231 gain. How to file taxes Exceptions. How to file taxes   Do not treat gain on the following transactions as gain on section 1252 property. How to file taxes Disposition of farmland by gift. How to file taxes Transfer of farm property at death (except for income in respect of a decedent). How to file taxes For more information, see Regulations section 1. How to file taxes 1252-2. How to file taxes Amount to report as ordinary income. How to file taxes   You report as ordinary income the lesser of the following amounts. How to file taxes Your gain (determined by subtracting the adjusted basis from the amount realized from a sale, exchange, or involuntary conversion, or the FMV for all other dispositions). How to file taxes The total deductions allowed for soil and water conservation expenses multiplied by the applicable percentage, discussed next. How to file taxes Applicable percentage. How to file taxes   The applicable percentage is based on the length of time you held the land. How to file taxes If you dispose of your farmland within 5 years after the date you acquired it, the percentage is 100%. How to file taxes If you dispose of the land within the 6th through 9th year after you acquired it, the applicable percentage is reduced by 20% a year for each year or part of a year you hold the land after the 5th year. How to file taxes If you dispose of the land 10 or more years after you acquired it, the percentage is 0%, and the entire gain is a section 1231 gain. How to file taxes Example. How to file taxes You acquired farmland on January 19, 2005. How to file taxes On October 3, 2013, you sold the land at a $30,000 gain. How to file taxes Between January 1 and October 3, 2013, you incur soil and water conservation expenditures of $15,000 for the land that are fully deductible in 2013. How to file taxes The applicable percentage is 40% since you sold the land within the 8th year after you acquired it. How to file taxes You treat $6,000 (40% of $15,000) of the $30,000 gain as ordinary income and the $24,000 balance as a section 1231 gain. How to file taxes Section 1255 property. How to file taxes   If you receive certain cost-sharing payments on property and you exclude those payments from income (as discussed in chapter 3), you may have to treat part of any gain as ordinary income and treat the balance as a section 1231 gain. How to file taxes If you chose not to exclude these payments, you will not have to recognize ordinary income under this provision. How to file taxes Amount to report as ordinary income. How to file taxes   You report as ordinary income the lesser of the following amounts. How to file taxes The applicable percentage of the total excluded cost-sharing payments. How to file taxes The gain on the disposition of the property. How to file taxes You do not report ordinary income under this rule to the extent the gain is recognized as ordinary income under sections 1231 through 1254, 1256, and 1257. How to file taxes However, if applicable, gain reported under this rule must be reported regardless of any contrary provisions (including nonrecognition provisions) under any other section. How to file taxes Applicable percentage. How to file taxes   The applicable percentage of the excluded cost-sharing payments to be reported as ordinary income is based on the length of time you hold the property after receiving the payments. How to file taxes If the property is held less than 10 years after you receive the payments, the percentage is 100%. How to file taxes After 10 years, the percentage is reduced by 10% a year, or part of a year, until the rate is 0%. How to file taxes Form 4797, Part III. How to file taxes   Use Form 4797, Part III, to figure the ordinary income part of a gain from the sale, exchange, or involuntary conversion of section 1252 property and section 1255 property. How to file taxes Prev  Up  Next   Home   More Online Publications