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How To Get 2012 Tax Forms

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How To Get 2012 Tax Forms

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The How To Get 2012 Tax Forms

How to get 2012 tax forms 3. How to get 2012 tax forms   Rent Expense Table of Contents Introduction Topics - This chapter discusses: RentConditional sales contract. How to get 2012 tax forms Leveraged leases. How to get 2012 tax forms Leveraged leases of limited-use property. How to get 2012 tax forms Taxes on Leased Property Cost of Getting a Lease Improvements by Lessee Capitalizing Rent Expenses Introduction This chapter discusses the tax treatment of rent or lease payments you make for property you use in your business but do not own. How to get 2012 tax forms It also discusses how to treat other kinds of payments you make that are related to your use of this property. How to get 2012 tax forms These include payments you make for taxes on the property. How to get 2012 tax forms Topics - This chapter discusses: The definition of rent Taxes on leased property The cost of getting a lease Improvements by the lessee Capitalizing rent expenses Rent Rent is any amount you pay for the use of property you do not own. How to get 2012 tax forms In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. How to get 2012 tax forms If you have or will receive equity in or title to the property, the rent is not deductible. How to get 2012 tax forms Unreasonable rent. How to get 2012 tax forms   You cannot take a rental deduction for unreasonable rent. How to get 2012 tax forms Ordinarily, the issue of reasonableness arises only if you and the lessor are related. How to get 2012 tax forms Rent paid to a related person is reasonable if it is the same amount you would pay to a stranger for use of the same property. How to get 2012 tax forms Rent is not unreasonable just because it is figured as a percentage of gross sales. How to get 2012 tax forms For examples of related persons, see Related persons in chapter 2, Publication 544. How to get 2012 tax forms Rent on your home. How to get 2012 tax forms   If you rent your home and use part of it as your place of business, you may be able to deduct the rent you pay for that part. How to get 2012 tax forms You must meet the requirements for business use of your home. How to get 2012 tax forms For more information, see Business use of your home in chapter 1. How to get 2012 tax forms Rent paid in advance. How to get 2012 tax forms   Generally, rent paid in your trade or business is deductible in the year paid or accrued. How to get 2012 tax forms If you pay rent in advance, you can deduct only the amount that applies to your use of the rented property during the tax year. How to get 2012 tax forms You can deduct the rest of your payment only over the period to which it applies. How to get 2012 tax forms Example 1. How to get 2012 tax forms You are a calendar year taxpayer and you leased a building for 5 years beginning July 1. How to get 2012 tax forms Your rent is $12,000 per year. How to get 2012 tax forms You paid the first year's rent ($12,000) on June 30. How to get 2012 tax forms You can deduct only $6,000 (6/12 × $12,000) for the rent that applies to the first year. How to get 2012 tax forms Example 2. How to get 2012 tax forms You are a calendar year taxpayer. How to get 2012 tax forms Last January you leased property for 3 years for $6,000 a year. How to get 2012 tax forms You paid the full $18,000 (3 × $6,000) during the first year of the lease. How to get 2012 tax forms Each year you can deduct only $6,000, the part of the lease that applies to that year. How to get 2012 tax forms Canceling a lease. How to get 2012 tax forms   You generally can deduct as rent an amount you pay to cancel a business lease. How to get 2012 tax forms Lease or purchase. How to get 2012 tax forms   There may be instances in which you must determine whether your payments are for rent or for the purchase of the property. How to get 2012 tax forms You must first determine whether your agreement is a lease or a conditional sales contract. How to get 2012 tax forms Payments made under a conditional sales contract are not deductible as rent expense. How to get 2012 tax forms Conditional sales contract. How to get 2012 tax forms   Whether an agreement is a conditional sales contract depends on the intent of the parties. How to get 2012 tax forms Determine intent based on the provisions of the agreement and the facts and circumstances that exist when you make the agreement. How to get 2012 tax forms No single test, or special combination of tests, always applies. How to get 2012 tax forms However, in general, an agreement may be considered a conditional sales contract rather than a lease if any of the following is true. How to get 2012 tax forms The agreement applies part of each payment toward an equity interest you will receive. How to get 2012 tax forms You get title to the property after you make a stated amount of required payments. How to get 2012 tax forms The amount you must pay to use the property for a short time is a large part of the amount you would pay to get title to the property. How to get 2012 tax forms You pay much more than the current fair rental value of the property. How to get 2012 tax forms You have an option to buy the property at a nominal price compared to the value of the property when you may exercise the option. How to get 2012 tax forms Determine this value when you make the agreement. How to get 2012 tax forms You have an option to buy the property at a nominal price compared to the total amount you have to pay under the agreement. How to get 2012 tax forms The agreement designates part of the payments as interest, or that part is easy to recognize as interest. How to get 2012 tax forms Leveraged leases. How to get 2012 tax forms   Leveraged lease transactions may not be considered leases. How to get 2012 tax forms Leveraged leases generally involve three parties: a lessor, a lessee, and a lender to the lessor. How to get 2012 tax forms Usually the lease term covers a large part of the useful life of the leased property, and the lessee's payments to the lessor are enough to cover the lessor's payments to the lender. How to get 2012 tax forms   If you plan to take part in what appears to be a leveraged lease, you may want to get an advance ruling. How to get 2012 tax forms Revenue Procedure 2001-28 on page 1156 of Internal Revenue Bulletin 2001-19 contains the guidelines the IRS will use to determine if a leveraged lease is a lease for federal income tax purposes. How to get 2012 tax forms Revenue Procedure 2001-29 on page 1160 of the same Internal Revenue Bulletin provides the information required to be furnished in a request for an advance ruling on a leveraged lease transaction. How to get 2012 tax forms Internal Revenue Bulletin 2001-19 is available at www. How to get 2012 tax forms irs. How to get 2012 tax forms gov/pub/irs-irbs/irb01-19. How to get 2012 tax forms pdf. How to get 2012 tax forms   In general, Revenue Procedure 2001-28 provides that, for advance ruling purposes only, the IRS will consider the lessor in a leveraged lease transaction to be the owner of the property and the transaction to be a valid lease if all the factors in the revenue procedure are met, including the following. How to get 2012 tax forms The lessor must maintain a minimum unconditional “at risk” equity investment in the property (at least 20% of the cost of the property) during the entire lease term. How to get 2012 tax forms The lessee may not have a contractual right to buy the property from the lessor at less than fair market value when the right is exercised. How to get 2012 tax forms The lessee may not invest in the property, except as provided by Revenue Procedure 2001-28. How to get 2012 tax forms The lessee may not lend any money to the lessor to buy the property or guarantee the loan used by the lessor to buy the property. How to get 2012 tax forms The lessor must show that it expects to receive a profit apart from the tax deductions, allowances, credits, and other tax attributes. How to get 2012 tax forms   The IRS may charge you a user fee for issuing a tax ruling. How to get 2012 tax forms For more information, see Revenue Procedure 2014-1 available at  www. How to get 2012 tax forms irs. How to get 2012 tax forms gov/irb/2014-1_IRB/ar05. How to get 2012 tax forms html. How to get 2012 tax forms Leveraged leases of limited-use property. How to get 2012 tax forms   The IRS will not issue advance rulings on leveraged leases of so-called limited-use property. How to get 2012 tax forms Limited-use property is property not expected to be either useful to or usable by a lessor at the end of the lease term except for continued leasing or transfer to a lessee. How to get 2012 tax forms See Revenue Procedure 2001-28 for examples of limited-use property and property that is not limited-use property. How to get 2012 tax forms Leases over $250,000. How to get 2012 tax forms   Special rules are provided for certain leases of tangible property. How to get 2012 tax forms The rules apply if the lease calls for total payments of more than $250,000 and any of the following apply. How to get 2012 tax forms Rents increase during the lease. How to get 2012 tax forms Rents decrease during the lease. How to get 2012 tax forms Rents are deferred (rent is payable after the end of the calendar year following the calendar year in which the use occurs and the rent is allocated). How to get 2012 tax forms Rents are prepaid (rent is payable before the end of the calendar year preceding the calendar year in which the use occurs and the rent is allocated). How to get 2012 tax forms These rules do not apply if your lease specifies equal amounts of rent for each month in the lease term and all rent payments are due in the calendar year to which the rent relates (or in the preceding or following calendar year). How to get 2012 tax forms   Generally, if the special rules apply, you must use an accrual method of accounting (and time value of money principles) for your rental expenses, regardless of your overall method of accounting. How to get 2012 tax forms In addition, in certain cases in which the IRS has determined that a lease was designed to achieve tax avoidance, you must take rent and stated or imputed interest into account under a constant rental accrual method in which the rent is treated as accruing ratably over the entire lease term. How to get 2012 tax forms For details, see section 467 of the Internal Revenue Code. How to get 2012 tax forms Taxes on Leased Property If you lease business property, you can deduct as additional rent any taxes you have to pay to or for the lessor. How to get 2012 tax forms When you can deduct these taxes as additional rent depends on your accounting method. How to get 2012 tax forms Cash method. How to get 2012 tax forms   If you use the cash method of accounting, you can deduct the taxes as additional rent only for the tax year in which you pay them. How to get 2012 tax forms Accrual method. How to get 2012 tax forms   If you use an accrual method of accounting, you can deduct taxes as additional rent for the tax year in which you can determine all the following. How to get 2012 tax forms That you have a liability for taxes on the leased property. How to get 2012 tax forms How much the liability is. How to get 2012 tax forms That economic performance occurred. How to get 2012 tax forms   The liability and amount of taxes are determined by state or local law and the lease agreement. How to get 2012 tax forms Economic performance occurs as you use the property. How to get 2012 tax forms Example 1. How to get 2012 tax forms Oak Corporation is a calendar year taxpayer that uses an accrual method of accounting. How to get 2012 tax forms Oak leases land for use in its business. How to get 2012 tax forms Under state law, owners of real property become liable (incur a lien on the property) for real estate taxes for the year on January 1 of that year. How to get 2012 tax forms However, they do not have to pay these taxes until July 1 of the next year (18 months later) when tax bills are issued. How to get 2012 tax forms Under the terms of the lease, Oak becomes liable for the real estate taxes in the later year when the tax bills are issued. How to get 2012 tax forms If the lease ends before the tax bill for a year is issued, Oak is not liable for the taxes for that year. How to get 2012 tax forms Oak cannot deduct the real estate taxes as rent until the tax bill is issued. How to get 2012 tax forms This is when Oak's liability under the lease becomes fixed. How to get 2012 tax forms Example 2. How to get 2012 tax forms The facts are the same as in Example 1 except that, according to the terms of the lease, Oak becomes liable for the real estate taxes when the owner of the property becomes liable for them. How to get 2012 tax forms As a result, Oak will deduct the real estate taxes as rent on its tax return for the earlier year. How to get 2012 tax forms This is the year in which Oak's liability under the lease becomes fixed. How to get 2012 tax forms Cost of Getting a Lease You may either enter into a new lease with the lessor of the property or get an existing lease from another lessee. How to get 2012 tax forms Very often when you get an existing lease from another lessee, you must pay the previous lessee money to get the lease, besides having to pay the rent on the lease. How to get 2012 tax forms If you get an existing lease on property or equipment for your business, you generally must amortize any amount you pay to get that lease over the remaining term of the lease. How to get 2012 tax forms For example, if you pay $10,000 to get a lease and there are 10 years remaining on the lease with no option to renew, you can deduct $1,000 each year. How to get 2012 tax forms The cost of getting an existing lease of tangible property is not subject to the amortization rules for section 197 intangibles discussed in chapter 8. How to get 2012 tax forms Option to renew. How to get 2012 tax forms   The term of the lease for amortization includes all renewal options plus any other period for which you and the lessor reasonably expect the lease to be renewed. How to get 2012 tax forms However, this applies only if less than 75% of the cost of getting the lease is for the term remaining on the purchase date (not including any period for which you may choose to renew, extend, or continue the lease). How to get 2012 tax forms Allocate the lease cost to the original term and any option term based on the facts and circumstances. How to get 2012 tax forms In some cases, it may be appropriate to make the allocation using a present value computation. How to get 2012 tax forms For more information, see Regulations section 1. How to get 2012 tax forms 178-1(b)(5). How to get 2012 tax forms Example 1. How to get 2012 tax forms You paid $10,000 to get a lease with 20 years remaining on it and two options to renew for 5 years each. How to get 2012 tax forms Of this cost, you paid $7,000 for the original lease and $3,000 for the renewal options. How to get 2012 tax forms Because $7,000 is less than 75% of the total $10,000 cost of the lease (or $7,500), you must amortize the $10,000 over 30 years. How to get 2012 tax forms That is the remaining life of your present lease plus the periods for renewal. How to get 2012 tax forms Example 2. How to get 2012 tax forms The facts are the same as in Example 1, except that you paid $8,000 for the original lease and $2,000 for the renewal options. How to get 2012 tax forms You can amortize the entire $10,000 over the 20-year remaining life of the original lease. How to get 2012 tax forms The $8,000 cost of getting the original lease was not less than 75% of the total cost of the lease (or $7,500). How to get 2012 tax forms Cost of a modification agreement. How to get 2012 tax forms   You may have to pay an additional “rent” amount over part of the lease period to change certain provisions in your lease. How to get 2012 tax forms You must capitalize these payments and amortize them over the remaining period of the lease. How to get 2012 tax forms You cannot deduct the payments as additional rent, even if they are described as rent in the agreement. How to get 2012 tax forms Example. How to get 2012 tax forms You are a calendar year taxpayer and sign a 20-year lease to rent part of a building starting on January 1. How to get 2012 tax forms However, before you occupy it, you decide that you really need less space. How to get 2012 tax forms The lessor agrees to reduce your rent from $7,000 to $6,000 per year and to release the excess space from the original lease. How to get 2012 tax forms In exchange, you agree to pay an additional rent amount of $3,000, payable in 60 monthly installments of $50 each. How to get 2012 tax forms   You must capitalize the $3,000 and amortize it over the 20-year term of the lease. How to get 2012 tax forms Your amortization deduction each year will be $150 ($3,000 ÷ 20). How to get 2012 tax forms You cannot deduct the $600 (12 × $50) that you will pay during each of the first 5 years as rent. How to get 2012 tax forms Commissions, bonuses, and fees. How to get 2012 tax forms   Commissions, bonuses, fees, and other amounts you pay to get a lease on property you use in your business are capital costs. How to get 2012 tax forms You must amortize these costs over the term of the lease. How to get 2012 tax forms Loss on merchandise and fixtures. How to get 2012 tax forms   If you sell at a loss merchandise and fixtures that you bought solely to get a lease, the loss is a cost of getting the lease. How to get 2012 tax forms You must capitalize the loss and amortize it over the remaining term of the lease. How to get 2012 tax forms Improvements by Lessee If you add buildings or make other permanent improvements to leased property, depreciate the cost of the improvements using the modified accelerated cost recovery system (MACRS). How to get 2012 tax forms Depreciate the property over its appropriate recovery period. How to get 2012 tax forms You cannot amortize the cost over the remaining term of the lease. How to get 2012 tax forms If you do not keep the improvements when you end the lease, figure your gain or loss based on your adjusted basis in the improvements at that time. How to get 2012 tax forms For more information, see the discussion of MACRS in Publication 946, How To Depreciate Property. How to get 2012 tax forms Assignment of a lease. How to get 2012 tax forms   If a long-term lessee who makes permanent improvements to land later assigns all lease rights to you for money and you pay the rent required by the lease, the amount you pay for the assignment is a capital investment. How to get 2012 tax forms If the rental value of the leased land increased since the lease began, part of your capital investment is for that increase in the rental value. How to get 2012 tax forms The rest is for your investment in the permanent improvements. How to get 2012 tax forms   The part that is for the increased rental value of the land is a cost of getting a lease, and you amortize it over the remaining term of the lease. How to get 2012 tax forms You can depreciate the part that is for your investment in the improvements over the recovery period of the property as discussed earlier, without regard to the lease term. How to get 2012 tax forms Capitalizing Rent Expenses Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. How to get 2012 tax forms Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. How to get 2012 tax forms You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. How to get 2012 tax forms Indirect costs include amounts incurred for renting or leasing equipment, facilities, or land. How to get 2012 tax forms Uniform capitalization rules. How to get 2012 tax forms   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. How to get 2012 tax forms Produce real property or tangible personal property. How to get 2012 tax forms For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. How to get 2012 tax forms Acquire property for resale. How to get 2012 tax forms However, these rules do not apply to the following property. How to get 2012 tax forms Personal property you acquire for resale if your average annual gross receipts are $10 million or less for the 3 prior tax years. How to get 2012 tax forms Property you produce if you meet either of the following conditions. How to get 2012 tax forms Your indirect costs of producing the property are $200,000 or less. How to get 2012 tax forms You use the cash method of accounting and do not account for inventories. How to get 2012 tax forms Example 1. How to get 2012 tax forms You rent construction equipment to build a storage facility. How to get 2012 tax forms If you are subject to the uniform capitalization rules, you must capitalize as part of the cost of the building the rent you paid for the equipment. How to get 2012 tax forms You recover your cost by claiming a deduction for depreciation on the building. How to get 2012 tax forms Example 2. How to get 2012 tax forms You rent space in a facility to conduct your business of manufacturing tools. How to get 2012 tax forms If you are subject to the uniform capitalization rules, you must include the rent you paid to occupy the facility in the cost of the tools you produce. How to get 2012 tax forms More information. How to get 2012 tax forms   For more information on these rules, see Uniform Capitalization Rules in Publication 538 and the regulations under Internal Revenue Code section 263A. How to get 2012 tax forms Prev  Up  Next   Home   More Online Publications