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I Want To File My 2012 Taxes Online

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I Want To File My 2012 Taxes Online

I want to file my 2012 taxes online Publication 551 - Main Content Table of Contents Cost BasisStocks and Bonds Real Property Business Assets Allocating the Basis Adjusted BasisIncreases to Basis Decreases to Basis Adjustments to Basis Example Basis Other Than CostProperty Received for Services Taxable Exchanges Nontaxable Exchanges Property Transferred From a Spouse Property Received as a Gift Inherited Property Property Changed to Business or Rental Use How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). I want to file my 2012 taxes online Cost Basis The basis of property you buy is usually its cost. I want to file my 2012 taxes online The cost is the amount you pay in cash, debt obligations, other property, or services. I want to file my 2012 taxes online Your cost also includes amounts you pay for the following items. I want to file my 2012 taxes online Sales tax, Freight, Installation and testing, Excise taxes, Legal and accounting fees (when they must be capitalized), Revenue stamps, Recording fees, and Real estate taxes (if assumed for the seller). I want to file my 2012 taxes online  You may also have to capitalize (add to basis) certain other costs related to buying or producing property. I want to file my 2012 taxes online Loans with low or no interest. I want to file my 2012 taxes online   If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price, minus the amount considered to be unstated interest. I want to file my 2012 taxes online You generally have unstated interest if your interest rate is less than the applicable federal rate. I want to file my 2012 taxes online For more information, see Unstated Interest and Original Issue Discount in Publication 537. I want to file my 2012 taxes online Purchase of a business. I want to file my 2012 taxes online   When you purchase a trade or business, you generally purchase all assets used in the business operations, such as land, buildings, and machinery. I want to file my 2012 taxes online Allocate the price among the various assets, including any section 197 intangibles. I want to file my 2012 taxes online See Allocating the Basis, later. I want to file my 2012 taxes online Stocks and Bonds The basis of stocks or bonds you buy is generally the purchase price plus any costs of purchase, such as commissions and recording or transfer fees. I want to file my 2012 taxes online If you get stocks or bonds other than by purchase, your basis is usually determined by the fair market value (FMV) or the previous owner's adjusted basis of the stock. I want to file my 2012 taxes online You must adjust the basis of stocks for certain events that occur after purchase. I want to file my 2012 taxes online See Stocks and Bonds in chapter 4 of Publication 550 for more information on the basis of stock. I want to file my 2012 taxes online Identifying stock or bonds sold. I want to file my 2012 taxes online   If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stock or bonds. I want to file my 2012 taxes online If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. I want to file my 2012 taxes online For more information about identifying securities you sell, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. I want to file my 2012 taxes online Mutual fund shares. I want to file my 2012 taxes online   If you sell mutual fund shares acquired at different times and prices, you can choose to use an average basis. I want to file my 2012 taxes online For more information, see Publication 550. I want to file my 2012 taxes online Real Property Real property, also called real estate, is land and generally anything built on or attached to it. I want to file my 2012 taxes online If you buy real property, certain fees and other expenses become part of your cost basis in the property. I want to file my 2012 taxes online Real estate taxes. I want to file my 2012 taxes online   If you pay real estate taxes the seller owed on real property you bought, and the seller did not reimburse you, treat those taxes as part of your basis. I want to file my 2012 taxes online You cannot deduct them as taxes. I want to file my 2012 taxes online   If you reimburse the seller for taxes the seller paid for you, you can usually deduct that amount as an expense in the year of purchase. I want to file my 2012 taxes online Do not include that amount in the basis of the property. I want to file my 2012 taxes online If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. I want to file my 2012 taxes online Settlement costs. I want to file my 2012 taxes online   Your basis includes the settlement fees and closing costs for buying property. I want to file my 2012 taxes online You cannot include in your basis the fees and costs for getting a loan on property. I want to file my 2012 taxes online A fee for buying property is a cost that must be paid even if you bought the property for cash. I want to file my 2012 taxes online   The following items are some of the settlement fees or closing costs you can include in the basis of your property. I want to file my 2012 taxes online Abstract fees (abstract of title fees); Charges for installing utility services; Legal fees (including title search and preparation of the sales contract and deed); Recording fees; Surveys; Transfer taxes; Owner's title insurance; and Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. I want to file my 2012 taxes online   Settlement costs do not include amounts placed in escrow for the future payment of items such as taxes and insurance. I want to file my 2012 taxes online   The following items are some settlement fees and closing costs you cannot include in the basis of the property. I want to file my 2012 taxes online Casualty insurance premiums. I want to file my 2012 taxes online Rent for occupancy of the property before closing. I want to file my 2012 taxes online Charges for utilities or other services related to occupancy of the property before closing. I want to file my 2012 taxes online Charges connected with getting a loan. I want to file my 2012 taxes online The following are examples of these charges. I want to file my 2012 taxes online Points (discount points, loan origination fees). I want to file my 2012 taxes online Mortgage insurance premiums. I want to file my 2012 taxes online Loan assumption fees. I want to file my 2012 taxes online Cost of a credit report. I want to file my 2012 taxes online Fees for an appraisal required by a lender. I want to file my 2012 taxes online Fees for refinancing a mortgage. I want to file my 2012 taxes online If these costs relate to business property, items (1) through (3) are deductible as business expenses. I want to file my 2012 taxes online Items (4) and (5) must be capitalized as costs of getting a loan and can be deducted over the period of the loan. I want to file my 2012 taxes online Points. I want to file my 2012 taxes online   If you pay points to obtain a loan (including a mortgage, second mortgage, line of credit, or a home equity loan), do not add the points to the basis of the related property. I want to file my 2012 taxes online Generally, you deduct the points over the term of the loan. I want to file my 2012 taxes online For more information on how to deduct points, see Points in chapter 4 of Publication 535. I want to file my 2012 taxes online Points on home mortgage. I want to file my 2012 taxes online   Special rules may apply to points you and the seller pay when you obtain a mortgage to purchase your main home. I want to file my 2012 taxes online If certain requirements are met, you can deduct the points in full for the year in which they are paid. I want to file my 2012 taxes online Reduce the basis of your home by any seller-paid points. I want to file my 2012 taxes online For more information, see Points in Publication 936, Home Mortgage Interest Deduction. I want to file my 2012 taxes online Assumption of mortgage. I want to file my 2012 taxes online   If you buy property and assume (or buy subject to) an existing mortgage on the property, your basis includes the amount you pay for the property plus the amount to be paid on the mortgage. I want to file my 2012 taxes online Example. I want to file my 2012 taxes online If you buy a building for $20,000 cash and assume a mortgage of $80,000 on it, your basis is $100,000. I want to file my 2012 taxes online Constructing assets. I want to file my 2012 taxes online   If you build property or have assets built for you, your expenses for this construction are part of your basis. I want to file my 2012 taxes online Some of these expenses include the following costs. I want to file my 2012 taxes online Land, Labor and materials, Architect's fees, Building permit charges, Payments to contractors, Payments for rental equipment, and Inspection fees. I want to file my 2012 taxes online In addition, if you own a business and use your employees, material, and equipment to build an asset, do not deduct the following expenses. I want to file my 2012 taxes online You must include them in the asset's basis. I want to file my 2012 taxes online Employee wages paid for the construction work, reduced by any employment credits allowed; Depreciation on equipment you own while it is used in the construction; Operating and maintenance costs for equipment used in the construction; and The cost of business supplies and materials used in the construction. I want to file my 2012 taxes online    Do not include the value of your own labor, or any other labor you did not pay for, in the basis of any property you construct. I want to file my 2012 taxes online Business Assets If you purchase property to use in your business, your basis is usually its actual cost to you. I want to file my 2012 taxes online If you construct, create, or otherwise produce property, you must capitalize the costs as your basis. I want to file my 2012 taxes online In certain circumstances, you may be subject to the uniform capitalization rules, next. I want to file my 2012 taxes online Uniform Capitalization Rules The uniform capitalization rules specify the costs you add to basis in certain circumstances. I want to file my 2012 taxes online Activities subject to the rules. I want to file my 2012 taxes online   You must use the uniform capitalization rules if you do any of the following in your trade or business or activity carried on for profit. I want to file my 2012 taxes online Produce real or tangible personal property for use in the business or activity, Produce real or tangible personal property for sale to customers, or Acquire property for resale. I want to file my 2012 taxes online However, this rule does not apply to personal property if your average annual gross receipts for the 3 previous tax years are $10 million or less. I want to file my 2012 taxes online   You produce property if you construct, build, install, manufacture, develop, improve, create, raise, or grow the property. I want to file my 2012 taxes online Treat property produced for you under a contract as produced by you up to the amount you pay or costs you otherwise incur for the property. I want to file my 2012 taxes online Tangible personal property includes films, sound recordings, video tapes, books, or similar property. I want to file my 2012 taxes online    Under the uniform capitalization rules, you must capitalize all direct costs and an allocable part of most indirect costs you incur due to your production or resale activities. I want to file my 2012 taxes online To capitalize means to include certain expenses in the basis of property you produce or in your inventory costs rather than deduct them as a current expense. I want to file my 2012 taxes online You recover these costs through deductions for depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. I want to file my 2012 taxes online   Any cost you cannot use to figure your taxable income for any tax year is not subject to the uniform capitalization rules. I want to file my 2012 taxes online Example. I want to file my 2012 taxes online If you incur a business meal expense for which your deduction would be limited to 50% of the cost of the meal, that amount is subject to the uniform capitalization rules. I want to file my 2012 taxes online The nondeductible part of the cost is not subject to the uniform capitalization rules. I want to file my 2012 taxes online More information. I want to file my 2012 taxes online   For more information about these rules, see the regulations under section 263A of the Internal Revenue Code and Publication 538, Accounting Periods and Methods. I want to file my 2012 taxes online Exceptions. I want to file my 2012 taxes online   The following are not subject to the uniform capitalization rules. I want to file my 2012 taxes online Property you produce that you do not use in your trade, business, or activity conducted for profit; Qualified creative expenses you pay or incur as a free-lance (self-employed) writer, photographer, or artist that are otherwise deductible on your tax return; Property you produce under a long-term contract, except for certain home construction contracts; Research and experimental expenses deductible under section 174 of the Internal Revenue Code; and Costs for personal property acquired for resale if your (or your predecessor's) average annual gross receipts for the 3 previous tax years do not exceed $10 million. I want to file my 2012 taxes online For other exceptions to the uniform capitalization rules, see section 1. I want to file my 2012 taxes online 263A-1(b) of the regulations. I want to file my 2012 taxes online   For information on the special rules that apply to costs incurred in the business of farming, see chapter 6 of Publication 225, Farmer's Tax Guide. I want to file my 2012 taxes online Intangible Assets Intangible assets include goodwill, patents, copyrights, trademarks, trade names, and franchises. I want to file my 2012 taxes online The basis of an intangible asset is usually the cost to buy or create it. I want to file my 2012 taxes online If you acquire multiple assets, for example a going business for a lump sum, see Allocating the Basis below to figure the basis of the individual assets. I want to file my 2012 taxes online The basis of certain intangibles can be amortized. I want to file my 2012 taxes online See chapter 8 of Publication 535 for information on the amortization of these costs. I want to file my 2012 taxes online Patents. I want to file my 2012 taxes online   The basis of a patent you get for an invention is the cost of development, such as research and experimental expenditures, drawings, working models, and attorneys' and governmental fees. I want to file my 2012 taxes online If you deduct the research and experimental expenditures as current business expenses, you cannot include them in the basis of the patent. I want to file my 2012 taxes online The value of the inventor's time spent on an invention is not part of the basis. I want to file my 2012 taxes online Copyrights. I want to file my 2012 taxes online   If you are an author, the basis of a copyright will usually be the cost of getting the copyright plus copyright fees, attorneys' fees, clerical assistance, and the cost of plates that remain in your possession. I want to file my 2012 taxes online Do not include the value of your time as the author, or any other person's time you did not pay for. I want to file my 2012 taxes online Franchises, trademarks, and trade names. I want to file my 2012 taxes online   If you buy a franchise, trademark, or trade name, the basis is its cost, unless you can deduct your payments as a business expense. I want to file my 2012 taxes online Allocating the Basis If you buy multiple assets for a lump sum, allocate the amount you pay among the assets you receive. I want to file my 2012 taxes online You must make this allocation to figure your basis for depreciation and gain or loss on a later disposition of any of these assets. I want to file my 2012 taxes online See Trade or Business Acquired below. I want to file my 2012 taxes online Group of Assets Acquired If you buy multiple assets for a lump sum, you and the seller may agree to a specific allocation of the purchase price among the assets in the sales contract. I want to file my 2012 taxes online If this allocation is based on the value of each asset and you and the seller have adverse tax interests, the allocation generally will be accepted. I want to file my 2012 taxes online However, see Trade or Business Acquired, next. I want to file my 2012 taxes online Trade or Business Acquired If you acquire a trade or business, allocate the consideration paid to the various assets acquired. I want to file my 2012 taxes online Generally, reduce the consideration paid by any cash and general deposit accounts (including checking and savings accounts) received. I want to file my 2012 taxes online Allocate the remaining consideration to the other business assets received in proportion to (but not more than) their fair market value in the following order. I want to file my 2012 taxes online Certificates of deposit, U. I want to file my 2012 taxes online S. I want to file my 2012 taxes online Government securities, foreign currency, and actively traded personal property, including stock and securities. I want to file my 2012 taxes online Accounts receivable, other debt instruments, and assets you mark to market at least annually for federal income tax purposes. I want to file my 2012 taxes online Property of a kind that would properly be included in inventory if on hand at the end of the tax year or property held primarily for sale to customers in the ordinary course of business. I want to file my 2012 taxes online All other assets except section 197 intangibles, goodwill, and going concern value. I want to file my 2012 taxes online Section 197 intangibles except goodwill and going concern value. I want to file my 2012 taxes online Goodwill and going concern value (whether or not they qualify as section 197 intangibles). I want to file my 2012 taxes online Agreement. I want to file my 2012 taxes online   The buyer and seller may enter into a written agreement as to the allocation of any consideration or the fair market value (FMV) of any of the assets. I want to file my 2012 taxes online This agreement is binding on both parties unless the IRS determines the amounts are not appropriate. I want to file my 2012 taxes online Reporting requirement. I want to file my 2012 taxes online   Both the buyer and seller involved in the sale of business assets must report to the IRS the allocation of the sales price among section 197 intangibles and the other business assets. I want to file my 2012 taxes online Use Form 8594 to provide this information. I want to file my 2012 taxes online The buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. I want to file my 2012 taxes online More information. I want to file my 2012 taxes online   See Sale of a Business in chapter 2 of Publication 544 for more information. I want to file my 2012 taxes online Land and Buildings If you buy buildings and the land on which they stand for a lump sum, allocate the basis of the property among the land and the buildings so you can figure the depreciation allowable on the buildings. I want to file my 2012 taxes online Figure the basis of each asset by multiplying the lump sum by a fraction. I want to file my 2012 taxes online The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. I want to file my 2012 taxes online If you are not certain of the FMV of the land and buildings, you can allocate the basis based on their assessed values for real estate tax purposes. I want to file my 2012 taxes online Demolition of building. I want to file my 2012 taxes online   Add demolition costs and other losses incurred for the demolition of any building to the basis of the land on which the demolished building was located. I want to file my 2012 taxes online Do not claim the costs as a current deduction. I want to file my 2012 taxes online Modification of building. I want to file my 2012 taxes online   A modification of a building will not be treated as a demolition if the following conditions are satisfied. I want to file my 2012 taxes online 75 percent or more of the existing external walls of the building are retained in place as internal or external walls, and 75 percent or more of the existing internal structural framework of the building is retained in place. I want to file my 2012 taxes online   If the building is a certified historic structure, the modification must also be part of a certified rehabilitation. I want to file my 2012 taxes online   If these conditions are met, add the costs of the modifications to the basis of the building. I want to file my 2012 taxes online Subdivided lots. I want to file my 2012 taxes online   If you buy a tract of land and subdivide it, you must determine the basis of each lot. I want to file my 2012 taxes online This is necessary because you must figure the gain or loss on the sale of each individual lot. I want to file my 2012 taxes online As a result, you do not recover your entire cost in the tract until you have sold all of the lots. I want to file my 2012 taxes online   To determine the basis of an individual lot, multiply the total cost of the tract by a fraction. I want to file my 2012 taxes online The numerator is the FMV of the lot and the denominator is the FMV of the entire tract. I want to file my 2012 taxes online Future improvement costs. I want to file my 2012 taxes online   If you are a developer and sell subdivided lots before the development work is completed, you can (with IRS consent) include in the basis of the properties sold an allocation of the estimated future cost for common improvements. I want to file my 2012 taxes online See Revenue Procedure 92–29 for more information, including an explanation of the procedures for getting consent from the IRS. I want to file my 2012 taxes online Use of erroneous cost basis. I want to file my 2012 taxes online   If you made a mistake in figuring the cost basis of subdivided lots sold in previous years, you cannot correct the mistake for years for which the statute of limitations (generally 3 tax years) has expired. I want to file my 2012 taxes online Figure the basis of any remaining lots by allocating the correct original cost basis of the entire tract among the original lots. I want to file my 2012 taxes online Example. I want to file my 2012 taxes online You bought a tract of land to which you assigned a cost of $15,000. I want to file my 2012 taxes online You subdivided the land into 15 building lots of equal size and equitably divided your basis so that each lot had a basis of $1,000. I want to file my 2012 taxes online You treated the sale of each lot as a separate transaction and figured gain or loss separately on each sale. I want to file my 2012 taxes online Several years later you determine that your original basis in the tract was $22,500 and not $15,000. I want to file my 2012 taxes online You sold eight lots using $8,000 of basis in years for which the statute of limitations has expired. I want to file my 2012 taxes online You now can take $1,500 of basis into account for figuring gain or loss only on the sale of each of the remaining seven lots ($22,500 basis divided among all 15 lots). I want to file my 2012 taxes online You cannot refigure the basis of the eight lots sold in tax years barred by the statute of limitations. I want to file my 2012 taxes online Adjusted Basis Before figuring gain or loss on a sale, exchange, or other disposition of property or figuring allowable depreciation, depletion, or amortization, you must usually make certain adjustments to the basis of the property. I want to file my 2012 taxes online The result of these adjustments to the basis is the adjusted basis. I want to file my 2012 taxes online Increases to Basis Increase the basis of any property by all items properly added to a capital account. I want to file my 2012 taxes online These include the cost of any improvements having a useful life of more than 1 year. I want to file my 2012 taxes online Rehabilitation expenses also increase basis. I want to file my 2012 taxes online However, you must subtract any rehabilitation credit allowed for these expenses before you add them to your basis. I want to file my 2012 taxes online If you have to recapture any of the credit, increase your basis by the recaptured amount. I want to file my 2012 taxes online If you make additions or improvements to business property, keep separate accounts for them. I want to file my 2012 taxes online Also, you must depreciate the basis of each according to the depreciation rules that would apply to the underlying property if you had placed it in service at the same time you placed the addition or improvement in service. I want to file my 2012 taxes online For more information, see Publication 946. I want to file my 2012 taxes online The following items increase the basis of property. I want to file my 2012 taxes online The cost of extending utility service lines to the property; Impact fees; Legal fees, such as the cost of defending and perfecting title; Legal fees for obtaining a decrease in an assessment levied against property to pay for local improvements; Zoning costs; and The capitalized value of a redeemable ground rent. I want to file my 2012 taxes online Assessments for Local Improvements Increase the basis of property by assessments for items such as paving roads and building ditches that increase the value of the property assessed. I want to file my 2012 taxes online Do not deduct them as taxes. I want to file my 2012 taxes online However, you can deduct as taxes charges for maintenance, repairs, or interest charges related to the improvements. I want to file my 2012 taxes online Example. I want to file my 2012 taxes online Your city changes the street in front of your store into an enclosed pedestrian mall and assesses you and other affected landowners for the cost of the conversion. I want to file my 2012 taxes online Add the assessment to your property's basis. I want to file my 2012 taxes online In this example, the assessment is a depreciable asset. I want to file my 2012 taxes online Deducting vs. I want to file my 2012 taxes online Capitalizing Costs Do not add to your basis costs you can deduct as current expenses. I want to file my 2012 taxes online For example, amounts paid for incidental repairs or maintenance that are deductible as business expenses cannot be added to basis. I want to file my 2012 taxes online However, you can choose either to deduct or to capitalize certain other costs. I want to file my 2012 taxes online If you capitalize these costs, include them in your basis. I want to file my 2012 taxes online If you deduct them, do not include them in your basis. I want to file my 2012 taxes online See Uniform Capitalization Rules earlier. I want to file my 2012 taxes online The costs you can choose to deduct or to capitalize include the following. I want to file my 2012 taxes online Carrying charges, such as interest and taxes, that you pay to own property, except carrying charges that must be capitalized under the uniform capitalization rules; Research and experimentation costs; Intangible drilling and development costs for oil, gas, and geothermal wells; Exploration costs for new mineral deposits; Mining development costs for a new mineral deposit; Costs of establishing, maintaining, or increasing the circulation of a newspaper or other periodical; and Costs of removing architectural and transportation barriers to people with disabilities and the elderly. I want to file my 2012 taxes online If you claim the disabled access credit, you must reduce the amount you deduct or capitalize by the amount of the credit. I want to file my 2012 taxes online For more information about deducting or capitalizing costs, see chapter 7 in Publication 535. I want to file my 2012 taxes online Table 1. I want to file my 2012 taxes online Examples of Increases and Decreases to Basis Increases to Basis Decreases to Basis Capital improvements:   Putting an addition on your home   Replacing an entire roof  Paving your driveway  Installing central air conditioning Rewiring your home Exclusion from income of subsidies for energy conservation measures  Casualty or theft loss deductions and insurance reimbursements  Vehicle credits Assessments for local improvements: Water connections Sidewalks Roads Section 179 deduction  Casualty losses: Restoring damaged property Depreciation  Nontaxable corporate distributions Legal fees:  Cost of defending and perfecting a title   Zoning costs   Decreases to Basis The following are some items that reduce the basis of property. I want to file my 2012 taxes online Section 179 deduction; Nontaxable corporate distributions; Deductions previously allowed (or allowable) for amortization, depreciation, and depletion; Exclusion of subsidies for energy conservation measures; Vehicle credits; Residential energy credits; Postponed gain from sale of home; Investment credit (part or all) taken; Casualty and theft losses and insurance reimbursement; Certain canceled debt excluded from income; Rebates from a manufacturer or seller; Easements; Gas-guzzler tax; Adoption tax benefits; and Credit for employer-provided child care. I want to file my 2012 taxes online Some of these items are discussed next. I want to file my 2012 taxes online Casualties and Thefts If you have a casualty or theft loss, decrease the basis in your property by any insurance or other reimbursement and by any deductible loss not covered by insurance. I want to file my 2012 taxes online You must increase your basis in the property by the amount you spend on repairs that substantially prolong the life of the property, increase its value, or adapt it to a different use. I want to file my 2012 taxes online To make this determination, compare the repaired property to the property before the casualty. I want to file my 2012 taxes online For more information on casualty and theft losses, see Publication 547, Casualties, Disasters, and Thefts. I want to file my 2012 taxes online Easements The amount you receive for granting an easement is generally considered to be a sale of an interest in real property. I want to file my 2012 taxes online It reduces the basis of the affected part of the property. I want to file my 2012 taxes online If the amount received is more than the basis of the part of the property affected by the easement, reduce your basis in that part to zero and treat the excess as a recognized gain. I want to file my 2012 taxes online Vehicle Credits Unless you elect not to claim the qualified plug-in electric vehicle credit, the alternative motor vehicle credit, or the qualified plug-in electric drive motor vehicle credit, you may have to reduce the basis of each qualified vehicle by certain amounts reported. I want to file my 2012 taxes online For more information, see Form 8834, Qualified Plug-in Electric and Electric Vehicle Credit; Form 8910, Alternative Motor Vehicle Credit; Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit;and the related instructions. I want to file my 2012 taxes online Gas-Guzzler Tax Decrease the basis in your car by the gas-guzzler (fuel economy) tax if you begin using the car within 1 year of the date of its first sale for ultimate use. I want to file my 2012 taxes online This rule also applies to someone who later buys the car and begins using it not more than 1 year after the original sale for ultimate use. I want to file my 2012 taxes online If the car is imported, the one-year period begins on the date of entry or withdrawal of the car from the warehouse if that date is later than the date of the first sale for ultimate use. I want to file my 2012 taxes online Section 179 Deduction If you take the section 179 deduction for all or part of the cost of qualifying business property, decrease the basis of the property by the deduction. I want to file my 2012 taxes online For more information about the section 179 deduction, see Publication 946. I want to file my 2012 taxes online Exclusion of Subsidies for Energy Conservation Measures You can exclude from gross income any subsidy you received from a public utility company for the purchase or installation of any energy conservation measure for a dwelling unit. I want to file my 2012 taxes online Reduce the basis of the property for which you received the subsidy by the excluded amount. I want to file my 2012 taxes online For more information on this subsidy, see Publication 525. I want to file my 2012 taxes online Depreciation Decrease the basis of property by the depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you chose. I want to file my 2012 taxes online If you took less depreciation than you could have under the method chosen, decrease the basis by the amount you could have taken under that method. I want to file my 2012 taxes online If you did not take a depreciation deduction, reduce the basis by the full amount of the depreciation you could have taken. I want to file my 2012 taxes online Unless a timely election is made not to deduct the special depreciation allowance for property placed in service after September 10, 2001, decrease the property's basis by the special depreciation allowance you deducted or could have deducted. I want to file my 2012 taxes online If you deducted more depreciation than you should have, decrease your basis by the amount equal to the depreciation you should have deducted plus the part of the excess depreciation you deducted that actually reduced your tax liability for the year. I want to file my 2012 taxes online In decreasing your basis for depreciation, take into account the amount deducted on your tax returns as depreciation and any depreciation capitalized under the uniform capitalization rules. I want to file my 2012 taxes online For information on figuring depreciation, see Publication 946. I want to file my 2012 taxes online If you are claiming depreciation on a business vehicle, see Publication 463. I want to file my 2012 taxes online If the car is not used more than 50% for business during the tax year, you may have to recapture excess depreciation. I want to file my 2012 taxes online Include the excess depreciation in your gross income and add it to your basis in the property. I want to file my 2012 taxes online For information on the computation of excess depreciation, see chapter 4 in Publication 463. I want to file my 2012 taxes online Canceled Debt Excluded From Income If a debt you owe is canceled or forgiven, other than as a gift or bequest, you generally must include the canceled amount in your gross income for tax purposes. I want to file my 2012 taxes online A debt includes any indebtedness for which you are liable or which attaches to property you hold. I want to file my 2012 taxes online You can exclude canceled debt from income in the following situations. I want to file my 2012 taxes online Debt canceled in a bankruptcy case or when you are insolvent, Qualified farm debt, and Qualified real property business debt (provided you are not a C corporation). I want to file my 2012 taxes online If you exclude from income canceled debt under situation (1) or (2), you may have to reduce the basis of your depreciable and nondepreciable property. I want to file my 2012 taxes online However, in situation (3), you must reduce the basis of your depreciable property by the excluded amount. I want to file my 2012 taxes online For more information about canceled debt in a bankruptcy case or during insolvency, see Publication 908, Bankruptcy Tax Guide. I want to file my 2012 taxes online For more information about canceled debt that is qualified farm debt, see chapter 3 in Publication 225. I want to file my 2012 taxes online For more information about qualified real property business debt, see chapter 5 in Publication 334, Tax Guide for Small Business. I want to file my 2012 taxes online Postponed Gain From Sale of Home If you postponed gain from the sale of your main home before May 7, 1997, you must reduce the basis of your new home by the postponed gain. I want to file my 2012 taxes online For more information on the rules for the sale of a home, see Publication 523. I want to file my 2012 taxes online Adoption Tax Benefits If you claim an adoption credit for the cost of improvements you added to the basis of your home, decrease the basis of your home by the credit allowed. I want to file my 2012 taxes online This also applies to amounts you received under an employer's adoption assistance program and excluded from income. I want to file my 2012 taxes online For more information Form 8839, Qualified Adoption Expenses. I want to file my 2012 taxes online Employer-Provided Child Care If you are an employer, you can claim the employer-provided child care credit on amounts you paid or incurred to acquire, construct, rehabilitate, or expand property used as part of your qualified child care facility. I want to file my 2012 taxes online You must reduce your basis in that property by the credit claimed. I want to file my 2012 taxes online For more information, see Form 8882, Credit for Employer-Provided Child Care Facilities and Services. I want to file my 2012 taxes online Adjustments to Basis Example In January 2005, you paid $80,000 for real property to be used as a factory. I want to file my 2012 taxes online You also paid commissions of $2,000 and title search and legal fees of $600. I want to file my 2012 taxes online You allocated the total cost of $82,600 between the land and the building—$10,325 for the land and $72,275 for the building. I want to file my 2012 taxes online Immediately you spent $20,000 in remodeling the building before you placed it in service. I want to file my 2012 taxes online You were allowed depreciation of $14,526 for the years 2005 through 2009. I want to file my 2012 taxes online In 2008 you had a $5,000 casualty loss from a that was not covered by insurance on the building. I want to file my 2012 taxes online You claimed a deduction for this loss. I want to file my 2012 taxes online You spent $5,500 to repair the damages and extend the useful life of the building. I want to file my 2012 taxes online The adjusted basis of the building on January 1, 2010, is figured as follows: Original cost of building including fees and commissions $72,275 Adjustments to basis:     Add:         Improvements 20,000   Repair of damages 5,500       $97,775 Subtract:       Depreciation $14,526     Deducted casualty loss 5,000 19,526 Adjusted basis on January 1, 2010 $78,249 The basis of the land, $10,325, remains unchanged. I want to file my 2012 taxes online It is not affected by any of the above adjustments. I want to file my 2012 taxes online Basis Other Than Cost There are many times when you cannot use cost as basis. I want to file my 2012 taxes online In these cases, the fair market value or the adjusted basis of property may be used. I want to file my 2012 taxes online Adjusted basis is discussed earlier. I want to file my 2012 taxes online Fair market value (FMV). I want to file my 2012 taxes online   FMV is the price at which property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. I want to file my 2012 taxes online Sales of similar property on or about the same date may be helpful in figuring the property's FMV. I want to file my 2012 taxes online Property Received for Services If you receive property for services, include the property's FMV in income. I want to file my 2012 taxes online The amount you include in income becomes your basis. I want to file my 2012 taxes online If the services were performed for a price agreed on beforehand, it will be accepted as the FMV of the property if there is no evidence to the contrary. I want to file my 2012 taxes online Bargain Purchases A bargain purchase is a purchase of an item for less than its FMV. I want to file my 2012 taxes online If, as compensation for services, you purchase goods or other property at less than FMV, include the difference between the purchase price and the property's FMV in your income. I want to file my 2012 taxes online Your basis in the property is its FMV (your purchase price plus the amount you include in income). I want to file my 2012 taxes online If the difference between your purchase price and the FMV represents a qualified employee discount, do not include the difference in income. I want to file my 2012 taxes online However, your basis in the property is still its FMV. I want to file my 2012 taxes online See Employee Discounts in Publication 15-B. I want to file my 2012 taxes online Restricted Property If you receive property for your services and the property is subject to certain restrictions, your basis in the property is its FMV when it becomes substantially vested unless you make the election discussed later. I want to file my 2012 taxes online Property becomes substantially vested when your rights in the property or the rights of any person to whom you transfer the property are not subject to a substantial risk of forfeiture. I want to file my 2012 taxes online There is substantial risk of forfeiture when the rights to full enjoyment of the property depend on the future performance of substantial services by any person. I want to file my 2012 taxes online When the property becomes substantially vested, include the FMV, less any amount you paid for the property, in income. I want to file my 2012 taxes online Example. I want to file my 2012 taxes online Your employer gives you stock for services performed under the condition that you will have to return the stock unless you complete 5 years of service. I want to file my 2012 taxes online The stock is under a substantial risk of forfeiture and is not substantially vested when you receive it. I want to file my 2012 taxes online You do not report any income until you have completed the 5 years of service that satisfy the condition. I want to file my 2012 taxes online Fair market value. I want to file my 2012 taxes online   Figure the FMV of property you received without considering any restriction except one that by its terms will never end. I want to file my 2012 taxes online Example. I want to file my 2012 taxes online You received stock from your employer for services you performed. I want to file my 2012 taxes online If you want to sell the stock while you are still employed, you must sell the stock to your employer at book value. I want to file my 2012 taxes online At your retirement or death, you or your estate must offer to sell the stock to your employer at its book value. I want to file my 2012 taxes online This is a restriction that by its terms will never end and you must consider it when you figure the FMV. I want to file my 2012 taxes online Election. I want to file my 2012 taxes online   You can choose to include in your gross income the FMV of the property at the time of transfer, less any amount you paid for it. I want to file my 2012 taxes online If you make this choice, the substantially vested rules do not apply. I want to file my 2012 taxes online Your basis is the amount you paid plus the amount you included in income. I want to file my 2012 taxes online   See the discussion of Restricted Property in Publication 525 for more information. I want to file my 2012 taxes online Taxable Exchanges A taxable exchange is one in which the gain is taxable or the loss is deductible. I want to file my 2012 taxes online A taxable gain or deductible loss is also known as a recognized gain or loss. I want to file my 2012 taxes online If you receive property in exchange for other property in a taxable exchange, the basis of property you receive is usually its FMV at the time of the exchange. I want to file my 2012 taxes online A taxable exchange occurs when you receive cash or property not similar or related in use to the property exchanged. I want to file my 2012 taxes online Example. I want to file my 2012 taxes online You trade a tract of farm land with an adjusted basis of $3,000 for a tractor that has an FMV of $6,000. I want to file my 2012 taxes online You must report a taxable gain of $3,000 for the land. I want to file my 2012 taxes online The tractor has a basis of $6,000. I want to file my 2012 taxes online Involuntary Conversions If you receive property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, you can figure the basis of the replacement property you receive using the basis of the converted property. I want to file my 2012 taxes online Similar or related property. I want to file my 2012 taxes online   If you receive replacement property similar or related in service or use to the converted property, the replacement property's basis is the old property's basis on the date of the conversion. I want to file my 2012 taxes online However, make the following adjustments. I want to file my 2012 taxes online Decrease the basis by the following. I want to file my 2012 taxes online Any loss you recognize on the conversion, and Any money you receive that you do not spend on similar property. I want to file my 2012 taxes online Increase the basis by the following. I want to file my 2012 taxes online Any gain you recognize on the conversion, and Any cost of acquiring the replacement property. I want to file my 2012 taxes online Money or property not similar or related. I want to file my 2012 taxes online   If you receive money or property not similar or related in service or use to the converted property, and you buy replacement property similar or related in service or use to the converted property, the basis of the new property is its cost decreased by the gain not recognized on the conversion. I want to file my 2012 taxes online Example. I want to file my 2012 taxes online The state condemned your property. I want to file my 2012 taxes online The property had an adjusted basis of $26,000 and the state paid you $31,000 for it. I want to file my 2012 taxes online You realized a gain of $5,000 ($31,000 − $26,000). I want to file my 2012 taxes online You bought replacement property similar in use to the converted property for $29,000. I want to file my 2012 taxes online You recognize a gain of $2,000 ($31,000 − $29,000), the unspent part of the payment from the state. I want to file my 2012 taxes online Your gain not recognized is $3,000, the difference between the $5,000 realized gain and the $2,000 recognized gain. I want to file my 2012 taxes online The basis of the new property is figured as follows: Cost of replacement property $29,000 Minus: Gain not recognized 3,000 Basis of the replacement property $26,000 Allocating the basis. I want to file my 2012 taxes online   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. I want to file my 2012 taxes online Example. I want to file my 2012 taxes online The state in the previous example condemned your unimproved real property and the replacement property you bought was improved real property with both land and buildings. I want to file my 2012 taxes online Allocate the replacement property's $26,000 basis between land and buildings based on their respective costs. I want to file my 2012 taxes online More information. I want to file my 2012 taxes online   For more information about condemnations, see Involuntary Conversions in Publication 544. I want to file my 2012 taxes online For more information about casualty and theft losses, see Publication 547. I want to file my 2012 taxes online Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. I want to file my 2012 taxes online If you receive property in a nontaxable exchange, its basis is usually the same as the basis of the property you transferred. I want to file my 2012 taxes online A nontaxable gain or loss is also known as an unrecognized gain or loss. I want to file my 2012 taxes online Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. I want to file my 2012 taxes online To qualify as a like-kind exchange, you must hold for business or investment purposes both the property you transfer and the property you receive. I want to file my 2012 taxes online There must also be an exchange of like-kind property. I want to file my 2012 taxes online For more information, see Like-Kind Exchanges in Publication 544. I want to file my 2012 taxes online The basis of the property you receive is the same as the basis of the property you gave up. I want to file my 2012 taxes online Example. I want to file my 2012 taxes online You exchange real estate (adjusted basis $50,000, FMV $80,000) held for investment for other real estate (FMV $80,000) held for investment. I want to file my 2012 taxes online Your basis in the new property is the same as the basis of the old ($50,000). I want to file my 2012 taxes online Exchange expenses. I want to file my 2012 taxes online   Exchange expenses are generally the closing costs you pay. I want to file my 2012 taxes online They include such items as brokerage commissions, attorney fees, deed preparation fees, etc. I want to file my 2012 taxes online Add them to the basis of the like-kind property received. I want to file my 2012 taxes online Property plus cash. I want to file my 2012 taxes online   If you trade property in a like-kind exchange and also pay money, the basis of the property received is the basis of the property you gave up increased by the money you paid. I want to file my 2012 taxes online Example. I want to file my 2012 taxes online You trade in a truck (adjusted basis $3,000) for another truck (FMV $7,500) and pay $4,000. I want to file my 2012 taxes online Your basis in the new truck is $7,000 (the $3,000 basis of the old truck plus the $4,000 paid). I want to file my 2012 taxes online Special rules for related persons. I want to file my 2012 taxes online   If a like-kind exchange takes place directly or indirectly between related persons and either party disposes of the property within 2 years after the exchange, the exchange no longer qualifies for like-kind exchange treatment. I want to file my 2012 taxes online Each person must report any gain or loss not recognized on the original exchange. I want to file my 2012 taxes online Each person reports it on the tax return filed for the year in which the later disposition occurs. I want to file my 2012 taxes online If this rule applies, the basis of the property received in the original exchange will be its fair market value. I want to file my 2012 taxes online   These rules generally do not apply to the following kinds of property dispositions. I want to file my 2012 taxes online Dispositions due to the death of either related person, Involuntary conversions, and Dispositions in which neither the original exchange nor the subsequent disposition had as a main purpose the avoidance of federal income tax. I want to file my 2012 taxes online Related persons. I want to file my 2012 taxes online   Generally, related persons are ancestors, lineal descendants, brothers and sisters (whole or half), and a spouse. I want to file my 2012 taxes online   For other related persons (for example, two corporations, an individual and a corporation, a grantor and fiduciary, etc. I want to file my 2012 taxes online ), see Nondeductible Loss in chapter 2 of Publication 544. I want to file my 2012 taxes online Exchange of business property. I want to file my 2012 taxes online   Exchanging the assets of one business for the assets of another business is a multiple property exchange. I want to file my 2012 taxes online For information on figuring basis, see Multiple Property Exchanges in chapter 1 of Publication 544. I want to file my 2012 taxes online Partially Nontaxable Exchange A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like property. I want to file my 2012 taxes online The basis of the property you receive is the same as the basis of the property you gave up, with the following adjustments. I want to file my 2012 taxes online Decrease the basis by the following amounts. I want to file my 2012 taxes online Any money you receive, and Any loss you recognize on the exchange. I want to file my 2012 taxes online Increase the basis by the following amounts. I want to file my 2012 taxes online Any additional costs you incur, and Any gain you recognize on the exchange. I want to file my 2012 taxes online If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. I want to file my 2012 taxes online Example. I want to file my 2012 taxes online You traded a truck (adjusted basis $6,000) for a new truck (FMV $5,200) and $1,000 cash. I want to file my 2012 taxes online You realized a gain of $200 ($6,200 − $6,000). I want to file my 2012 taxes online This is the FMV of the truck received plus the cash minus the adjusted basis of the truck you traded ($5,200 + $1,000 – $6,000). I want to file my 2012 taxes online You include all the gain in income (recognized gain) because the gain is less than the cash received. I want to file my 2012 taxes online Your basis in the new truck is: Adjusted basis of old truck $6,000 Minus: Cash received (adjustment 1(a)) 1,000   $5,000 Plus: Gain recognized (adjustment 2(b)) 200 Basis of new truck $5,200 Allocation of basis. I want to file my 2012 taxes online   Allocate the basis first to the unlike property, other than money, up to its FMV on the date of the exchange. I want to file my 2012 taxes online The rest is the basis of the like property. I want to file my 2012 taxes online Example. I want to file my 2012 taxes online You had an adjusted basis of $15,000 in real estate you held for investment. I want to file my 2012 taxes online You exchanged it for other real estate to be held for investment with an FMV of $12,500, a truck with an FMV of $3,000, and $1,000 cash. I want to file my 2012 taxes online The truck is unlike property. I want to file my 2012 taxes online You realized a gain of $1,500 ($16,500 − $15,000). I want to file my 2012 taxes online This is the FMV of the real estate received plus the FMV of the truck received plus the cash minus the adjusted basis of the real estate you traded ($12,500 + $3,000 + $1,000 – $15,000). I want to file my 2012 taxes online You include in income (recognize) all $1,500 of the gain because it is less than the FMV of the unlike property plus the cash received. I want to file my 2012 taxes online Your basis in the properties you received is figured as follows. I want to file my 2012 taxes online Adjusted basis of real estate transferred $15,000 Minus: Cash received (adjustment 1(a)) 1,000   $14,000 Plus: Gain recognized (adjustment 2(b)) 1,500 Total basis of properties received $15,500 Allocate the total basis of $15,500 first to the unlike property — the truck ($3,000). I want to file my 2012 taxes online This is the truck's FMV. I want to file my 2012 taxes online The rest ($12,500) is the basis of the real estate. I want to file my 2012 taxes online Sale and Purchase If you sell property and buy similar property in two mutually dependent transactions, you may have to treat the sale and purchase as a single nontaxable exchange. I want to file my 2012 taxes online Example. I want to file my 2012 taxes online You are a salesperson and you use one of your cars 100% for business. I want to file my 2012 taxes online You have used this car in your sales activities for 2 years and have depreciated it. I want to file my 2012 taxes online Your adjusted basis in the car is $22,600 and its FMV is $23,100. I want to file my 2012 taxes online You are interested in a new car, which sells for $28,000. I want to file my 2012 taxes online If you trade your old car and pay $4,900 for the new one, your basis for depreciation for the new car would be $27,500 ($4,900 plus the $22,600 basis of your old car). I want to file my 2012 taxes online However, you want a higher basis for depreciating the new car, so you agree to pay the dealer $28,000 for the new car if he will pay you $23,100 for your old car. I want to file my 2012 taxes online Because the two transactions are dependent on each other, you are treated as having exchanged your old car for the new one and paid $4,900 ($28,000 − $23,100). I want to file my 2012 taxes online Your basis for depreciating the new car is $27,500, the same as if you traded the old car. I want to file my 2012 taxes online Partial Business Use of Property If you have property used partly for business and partly for personal use, and you exchange it in a nontaxable exchange for property to be used wholly or partly in your business, the basis of the property you receive is figured as if you had exchanged two properties. I want to file my 2012 taxes online The first is an exchange of like-kind property. I want to file my 2012 taxes online The second is personal-use property on which gain is recognized and loss is not recognized. I want to file my 2012 taxes online First, figure your adjusted basis in the property as if you transferred two separate properties. I want to file my 2012 taxes online Figure the adjusted basis of each part of the property by taking into account any adjustments to basis. I want to file my 2012 taxes online Deduct the depreciation you took or could have taken from the adjusted basis of the business part. I want to file my 2012 taxes online Then figure the amount realized for your property and allocate it to the business and nonbusiness parts of the property. I want to file my 2012 taxes online The business part of the property is permitted to be exchanged tax free. I want to file my 2012 taxes online However, you must recognize any gain from the exchange of the nonbusiness part. I want to file my 2012 taxes online You are deemed to have received, in exchange for the nonbusiness part, an amount equal to its FMV on the date of the exchange. I want to file my 2012 taxes online The basis of the property you acquired is the total basis of the property transferred (adjusted to the date of the exchange), increased by any gain recognized on the nonbusiness part. I want to file my 2012 taxes online If the nonbusiness part of the property transferred is your main home, you may qualify to exclude from income all or part of the gain on that part. I want to file my 2012 taxes online For more information, see Publication 523. I want to file my 2012 taxes online Trade of car used partly in business. I want to file my 2012 taxes online   If you trade in a car you used partly in your business for another car you will use in your business, your basis for depreciation of the new car is not the same as your basis for figuring a gain or loss on its sale. I want to file my 2012 taxes online   For information on figuring your basis for depreciation, see Publication 463. I want to file my 2012 taxes online Property Transferred From a Spouse The basis of property transferred to you or transferred in trust for your benefit by your spouse (or former spouse if the transfer is incident to divorce), is the same as your spouse's adjusted basis. I want to file my 2012 taxes online However, adjust your basis for any gain recognized by your spouse or former spouse on property transferred in trust. I want to file my 2012 taxes online This rule applies only to a transfer of property in trust in which the liabilities assumed, plus the liabilities to which the property is subject, are more than the adjusted basis of the property transferred. I want to file my 2012 taxes online If the property transferred to you is a series E, series EE, or series I United States savings bond, the transferor must include in income the interest accrued to the date of transfer. I want to file my 2012 taxes online Your basis in the bond immediately after the transfer is equal to the transferor's basis increased by the interest income includible in the transferor's income. I want to file my 2012 taxes online For more information on these bonds, see Publication 550. I want to file my 2012 taxes online At the time of the transfer, the transferor must give you the records necessary to determine the adjusted basis and holding period of the property as of the date of transfer. I want to file my 2012 taxes online For more information, see Publication 504, Divorced or Separated Individuals. I want to file my 2012 taxes online Property Received as a Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined earlier) to the donor just before it was given to you, its FMV at the time it was given to you, and any gift tax paid on it. I want to file my 2012 taxes online FMV Less Than Donor's Adjusted Basis If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. I want to file my 2012 taxes online Your basis for figuring gain is the same as the donor's adjusted basis plus or minus any required adjustment to basis while you held the property. I want to file my 2012 taxes online Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustment to basis while you held the property (see Adjusted Basis earlier). I want to file my 2012 taxes online If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and have a gain, you have neither gain nor loss on the sale or disposition of the property. I want to file my 2012 taxes online Example. I want to file my 2012 taxes online You received an acre of land as a gift. I want to file my 2012 taxes online At the time of the gift, the land had an FMV of $8,000. I want to file my 2012 taxes online The donor's adjusted basis was $10,000. I want to file my 2012 taxes online After you received the land, no events occurred to increase or decrease your basis. I want to file my 2012 taxes online If you sell the land for $12,000, you will have a $2,000 gain because you must use the donor's adjusted basis ($10,000) at the time of the gift as your basis to figure gain. I want to file my 2012 taxes online If you sell the land for $7,000, you will have a $1,000 loss because you must use the FMV ($8,000) at the time of the gift as your basis to figure a loss. I want to file my 2012 taxes online If the sales price is between $8,000 and $10,000, you have neither gain nor loss. I want to file my 2012 taxes online For instance, if the sales price was $9,000 and you tried to figure a gain using the donor's adjusted basis ($10,000), you would get a $1,000 loss. I want to file my 2012 taxes online If you then tried to figure a loss using the FMV ($8,000), you would get a $1,000 gain. I want to file my 2012 taxes online Business property. I want to file my 2012 taxes online   If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deduction is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property. I want to file my 2012 taxes online FMV Equal to or More Than Donor's Adjusted Basis If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift. I want to file my 2012 taxes online Increase your basis by all or part of any gift tax paid, depending on the date of the gift. I want to file my 2012 taxes online Also, for figuring gain or loss from a sale or other disposition of the property, or for figuring depreciation, depletion, or amortization deductions on business property, you must increase or decrease your basis by any required adjustments to basis while you held the property. I want to file my 2012 taxes online See Adjusted Basis earlier. I want to file my 2012 taxes online Gift received before 1977. I want to file my 2012 taxes online   If you received a gift before 1977, increase your basis in the gift (the donor's adjusted basis) by any gift tax paid on it. I want to file my 2012 taxes online However, do not increase your basis above the FMV of the gift at the time it was given to you. I want to file my 2012 taxes online Example 1. I want to file my 2012 taxes online You were given a house in 1976 with an FMV of $21,000. I want to file my 2012 taxes online The donor's adjusted basis was $20,000. I want to file my 2012 taxes online The donor paid a gift tax of $500. I want to file my 2012 taxes online Your basis is $20,500, the donor's adjusted basis plus the gift tax paid. I want to file my 2012 taxes online Example 2. I want to file my 2012 taxes online If, in Example 1, the gift tax paid had been $1,500, your basis would be $21,000. I want to file my 2012 taxes online This is the donor's adjusted basis plus the gift tax paid, limited to the FMV of the house at the time you received the gift. I want to file my 2012 taxes online Gift received after 1976. I want to file my 2012 taxes online   If you received a gift after 1976, increase your basis in the gift (the donor's adjusted basis) by the part of the gift tax paid on it that is due to the net increase in value of the gift. I want to file my 2012 taxes online Figure the increase by multiplying the gift tax paid by a fraction. I want to file my 2012 taxes online The numerator of the fraction is the net increase in value of the gift and the denominator is the amount of the gift. I want to file my 2012 taxes online   The net increase in value of the gift is the FMV of the gift less the donor's adjusted basis. I want to file my 2012 taxes online The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. I want to file my 2012 taxes online For information on the gift tax, see Publication 950, Introduction to Estate and Gift Taxes. I want to file my 2012 taxes online Example. I want to file my 2012 taxes online In 2010, you received a gift of property from your mother that had an FMV of $50,000. I want to file my 2012 taxes online Her adjusted basis was $20,000. I want to file my 2012 taxes online The amount of the gift for gift tax purposes was $37,000 ($50,000 minus the $13,000 annual exclusion). I want to file my 2012 taxes online She paid a gift tax of $9,000. I want to file my 2012 taxes online Your basis, $27,290, is figured as follows: Fair market value $50,000 Minus: Adjusted basis 20,000 Net increase in value $30,000 Gift tax paid $9,000 Multiplied by ($30,000 ÷ $37,000) . I want to file my 2012 taxes online 81 Gift tax due to net increase in value $7,290 Adjusted basis of property to your mother 20,000 Your basis in the property $27,290 Inherited Property Special rules apply to property acquired from a decedent who died in 2010. I want to file my 2012 taxes online See Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, for details. I want to file my 2012 taxes online If you inherited property from a decedent who died before 2010, your basis in property you inherit from a decedent is generally one of the following. I want to file my 2012 taxes online The FMV of the property at the date of the individual's death. I want to file my 2012 taxes online The FMV on the alternate valuation date if the personal representative for the estate chooses to use alternate valuation. I want to file my 2012 taxes online For information on the alternate valuation date, see the Instructions for Form 706. I want to file my 2012 taxes online The value under the special-use valuation method for real property used in farming or a closely held business if chosen for estate tax purposes. I want to file my 2012 taxes online This method is discussed later. I want to file my 2012 taxes online The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement. I want to file my 2012 taxes online For information on a qualified conservation easement, see the Instructions for Form 706. I want to file my 2012 taxes online If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes. I want to file my 2012 taxes online For more information, see the Instructions for Form 706. I want to file my 2012 taxes online Appreciated property. I want to file my 2012 taxes online   The above rule does not apply to appreciated property you receive from a decedent if you or your spouse originally gave the property to the decedent within 1 year before the decedent's death. I want to file my 2012 taxes online Your basis in this property is the same as the decedent's adjusted basis in the property immediately before his or her death, rather than its FMV. I want to file my 2012 taxes online Appreciated property is any property whose FMV on the day it was given to the decedent is more than its adjusted basis. I want to file my 2012 taxes online Community Property In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), husband and wife are each usually considered to own half the community property. I want to file my 2012 taxes online When either spouse dies, the total value of the community property, even the part belonging to the surviving spouse, generally becomes the basis of the entire property. I want to file my 2012 taxes online For this rule to apply, at least half the value of the community property interest must be includable in the decedent's gross estate, whether or not the estate must file a return. I want to file my 2012 taxes online For example, you and your spouse owned community property that had a basis of $80,000. I want to file my 2012 taxes online When your spouse died, half the FMV of the community interest was includible in your spouse's estate. I want to file my 2012 taxes online The FMV of the community interest was $100,000. I want to file my 2012 taxes online The basis of your half of the property after the death of your spouse is $50,000 (half of the $100,000 FMV). I want to file my 2012 taxes online The basis of the other half to your spouse's heirs is also $50,000. I want to file my 2012 taxes online For more information on community property, see Publication 555, Community Property. I want to file my 2012 taxes online Property Held by Surviving Tenant The following example explains the rule for the basis of property held by a surviving tenant in joint tenancy or tenancy by the entirety. I want to file my 2012 taxes online Example. I want to file my 2012 taxes online John and Jim owned, as joint tenants with right of survivorship, business property they purchased for $30,000. I want to file my 2012 taxes online John furnished two-thirds of the purchase price and Jim furnished one-third. I want to file my 2012 taxes online Depreciation deductions allowed before John's death were $12,000. I want to file my 2012 taxes online Under local law, each had a half interest in the income from the property. I want to file my 2012 taxes online At the date of John's death, the property had an FMV of $60,000, two-thirds of which is includable in John's estate. I want to file my 2012 taxes online Jim figures his basis in the property at the date of John's death as follows: Interest Jim bought with his own funds—1/3 of $30,000 cost $10,000   Interest Jim received on John's death—2/3 of $60,000 FMV 40,000 $50,000 Minus: ½ of $12,000 depreciation before John's death 6,000 Jim's basis at the date of John's death $44,000 If Jim had not contributed any part of the purchase price, his basis at the date of John's death would be $54,000. I want to file my 2012 taxes online This is figured by subtracting from the $60,000 FMV, the $6,000 depreciation allocated to Jim's half interest before the date of death. I want to file my 2012 taxes online If under local law Jim had no interest in the income from the property and he contributed no part of the purchase price, his basis at John's death would be $60,000, the FMV of the property. I want to file my 2012 taxes online Qualified Joint Interest Include one-half of the value of a qualified joint interest in the decedent's gross estate. I want to file my 2012 taxes online It does not matter how much each spouse contributed to the purchase price. I want to file my 2012 taxes online Also, it does not matter which spouse dies first. I want to file my 2012 taxes online A qualified joint interest is any interest in property held by husband and wife as either of the following. I want to file my 2012 taxes online Tenants by the entirety, or Joint tenants with right of survivorship if husband and wife are the only joint tenants. I want to file my 2012 taxes online Basis. I want to file my 2012 taxes online   As the surviving spouse, your basis in property you owned with your spouse as a qualified joint interest is the cost of your half of the property with certain adjustments. I want to file my 2012 taxes online Decrease the cost by any deductions allowed to you for depreciation and depletion. I want to file my 2012 taxes online Increase the reduced cost by your basis in the half you inherited. I want to file my 2012 taxes online Farm or Closely Held Business Under certain conditions, when a person dies the executor or personal representative of that person's estate can choose to value the qualified real property on other than its FMV. I want to file my 2012 taxes online If so, the executor or personal representative values the qualified real property based on its use as a farm or its use in a closely held business. I want to file my 2012 taxes online If the executor or personal representative chooses this method of valuation for estate tax purposes, that value is the basis of the property for the heirs. I want to file my 2012 taxes online Qualified heirs should be able to get the necessary value from the executor or personal representative of the estate. I want to file my 2012 taxes online Special-use valuation. I want to file my 2012 taxes online   If you are a qualified heir who received special-use valuation property, your basis in the property is the estate's or trust's basis in that property immediately before the distribution. I want to file my 2012 taxes online Increase your basis by any gain recognized by the estate or trust because of post-death appreciation. I want to file my 2012 taxes online Post-death appreciation is the property's FMV on the date of distribution minus the property's FMV either on the date of the individual's death or the alternate valuation date. I want to file my 2012 taxes online Figure all FMVs without regard to the special-use valuation. I want to file my 2012 taxes online   You can elect to increase your basis in special-use valuation property if it becomes subject to the additional estate tax. I want to file my 2012 taxes online This tax is assessed if, within 10 years after the death of the decedent, you transfer the property to a person who is not a member of your family or the property stops being used as a farm or in a closely held business. I want to file my 2012 taxes online   To increase your basis in the property, you must make an irrevocable election and pay interest on the additional estate tax figured from the date 9 months after the decedent's death until the date of the payment of the additional estate tax. I want to file my 2012 taxes online If you meet these requirements, increase your basis in the property to its FMV on the date of the decedent's death or the alternate valuation date. I want to file my 2012 taxes online The increase in your basis is considered to have occurred immediately before the event that results in the additional estate tax. I want to file my 2012 taxes online   You make the election by filing with Form 706-A a statement that does all of the following. I want to file my 2012 taxes online Contains your name, address, and taxpayer identification number and those of the estate; Identifies the election as an election under section 1016(c) of the Internal Revenue Code; Specifies the property for which the election is made; and Provides any additional information required by the Instructions for Form 706-A. I want to file my 2012 taxes online   For more information, see the Instructions for Form 706 and the Instructions for Form 706-A. I want to file my 2012 taxes online Property Changed to Business or Rental Use If you hold property for personal use and then change it to business use or use it to produce rent, you must figure its basis for depreciation. I want to file my 2012 taxes online An example of changing property held for personal use to business use would be renting out your former main home. I want to file my 2012 taxes online Basis for depreciation. I want to file my 2012 taxes online   The basis for depreciation is the lesser of the following amounts. I want to file my 2012 taxes online The FMV of the property on the date of the change, or Your adjusted basis on the date of the change. I want to file my 2012 taxes online Example. I want to file my 2012 taxes online Several years ago you paid $160,000 to have your home built on a lot that cost $25,000. I want to file my 2012 taxes online You paid $20,000 for permanent improvements to the house and claimed a $2,000 casualty loss deduction for damage to the house before changing the property to rental use last year. I want to file my 2012 taxes online Because land is not depreciable, you include only the cost of the house when figuring the basis for depreciation. I want to file my 2012 taxes online Your adjusted basis in the house when you changed its use was $178,000 ($160,000 + $20,000 − $2,000). I want to file my 2012 taxes online On the same date, your property had an FMV of $180,000, of which $15,000 was for the land and $165,000 was for the house. I want to file my 2012 taxes online The basis for figuring depreciation on the house is its FMV on the date of change ($165,000) because it is less than your adjusted basis ($178,000). I want to file my 2012 taxes online Sale of property. I want to file my 2012 taxes online   If you later sell or dispose of property changed to business or rental use, the basis of the property you use will depend on whether you are figuring gain or loss. I want to file my 2012 taxes online Gain. I want to file my 2012 taxes online   The basis for figuring a gain is your adjusted basis when you sell the property. I want to file my 2012 taxes online Example. I want to file my 2012 taxes online Assume the same facts as in the previous example except that you sell the property at a gain after being allowed depreciation deductions of $37,500. I want to file my 2012 taxes online Your adjusted basis for figuring gain is $165,500 ($178,000 + $25,000 (land) − $37,500). I want to file my 2012 taxes online Loss. I want to file my 2012 taxes online   Figure the basis for a loss starting with the smaller of your adjusted basis or the FMV of the property at the time of the change to business or rental use. I want to file my 2012 taxes online Then adjust this amount for the period after the change in the property's use, as discussed earlier under Adjusted Basis, to arrive at a basis for loss. I want to file my 2012 taxes online Example. I want to file my 2012 taxes online Assume the same facts as in the previous example, except that you sell the property at a loss after being allowed depreciation deductions of $37,500. I want to file my 2012 taxes online In this case, you would start with the FMV on the date of the change to rental use ($180,000) because it is less than the adjusted basis of $203,000 ($178,000 + $25,000) on that date. I want to file my 2012 taxes online Reduce that amount ($180,000) by the depreciation deductions to arrive at a basis for loss of $142,500 ($180,000 − $37,500). I want to file my 2012 taxes online How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. I want to file my 2012 taxes online By selecting the method that is best for you, you will have quick and easy access to tax help. I want to file my 2012 taxes online Contacting your Taxpayer Advocate. I want to file my 2012 taxes online   The Taxpayer Advocate Service (TAS) is an independent organization within the IRS. I want to file my 2012 taxes online We help taxpayers who are experiencing economic harm, such as not being able to provide necessities like housing, transportation, or food; taxpayers who are seeking help in resolving tax problems with the IRS; and those who believe that an IRS system or procedure is not working as it should. I want to file my 2012 taxes online Here are seven things every taxpayer should know about TAS. I want to file my 2012 taxes online TAS is your voice at the IRS. I want to file my 2012 taxes online Our service is free, confidential, and tailored to meet your needs. I want to file my 2012 taxes online You may be eligible for our help if you have tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you believe an IRS procedure just isn't working as it should. I want to file my 2012 taxes online We help taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation. I want to file my 2012 taxes online This includes businesses as well as individuals. I want to file my 2012 taxes online Our employees know the IRS and how to navigate it. I want to file my 2012 taxes online If you qualify for our help, we'll assign your case to an advocate who will listen to your problem, help you understand what needs to be done to resolve it, and stay with you every step of the way until your problem is resolved. I want to file my 2012 taxes online We have at least one local taxpayer advocate in every state, the District of Columbia, and Puerto Rico. I want to file my 2012 taxes online You can call your local advocate, whose number is in your phone book, in Publication 1546, Taxpayer Advocate Service—Your Voice at the IRS, and on our website at www. I want to file my 2012 taxes online irs. I want to file my 2012 taxes online gov/advocate. I want to file my 2012 taxes online You can also call our toll-free line at 1-877-777-4778 or TTY/TDD 1-800-829-4059. I want to file my 2012 taxes online You can learn about your rights and responsibilities as a taxpayer by visiting our online tax toolkit at www. I want to file my 2012 taxes online taxtoolkit. I want to file my 2012 taxes online irs. I want to file my 2012 taxes online gov. I want to file my 2012 taxes online You can get updates on hot tax topics by visiting our YouTube channel at www. I want to file my 2012 taxes online youtube. I want to file my 2012 taxes online com/tasnta and our Facebook page at www. I want to file my 2012 taxes online facebook. I want to file my 2012 taxes online com/YourVoiceAtIRS, or by following our tweets at www. I want to file my 2012 taxes online twitter. I want to file my 2012 taxes online com/YourVoiceAtIRS. I want to file my 2012 taxes online Low Income Taxpayer Clinics (LITCs). I want to file my 2012 taxes online   The Low Income Taxpayer Clinic program serves individuals who have a problem with the IRS and whose income is below a certain level. I want to file my 2012 taxes online LITCs are independent from the IRS. I want to file my 2012 taxes online Most LITCs can provide representation before the IRS or in court on audits, tax collection disputes, and other issues for free or a small fee. I want to file my 2012 taxes online If an individual's native language is not English, some clinics can provide multilingual information about taxpayer rights and responsibilities. I want to file my 2012 taxes online For more information, see Publication 4134, Low Income Taxpayer Clinic List. I want to file my 2012 taxes online This publication is available at IRS. I want to file my 2012 taxes online gov, by calling 1-800-TAX-FORM (1-800-829-3676), or at your local IRS office. I want to file my 2012 taxes online Free tax services. I want to file my 2012 taxes online   Publication 910, IRS Guide to Free Tax Services, is your guide to IRS services and resources. I want to file my 2012 taxes online Learn about free tax information from the IRS, including publications, services, and education and assistance programs. I want to file my 2012 taxes online The publication also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on the telephone. I want to file my 2012 taxes online The majority of the information and services listed in this publication are available to you free of charge. I want to file my 2012 taxes online If there is a fee associated with a resource or service, it is listed in the publication. I want to file my 2012 taxes online   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with d
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I want to file my 2012 taxes online 10. I want to file my 2012 taxes online   Self-Employment (SE) Tax Table of Contents Who Must Pay SE Tax?Special Rules and Exceptions Figuring Earnings Subject to SE Tax Farm Optional Method Using Both Optional Methods Reporting Self-Employment Tax The SE tax rules apply no matter how old you are and even if you are already receiving social security and Medicare benefits. I want to file my 2012 taxes online Who Must Pay SE Tax? Generally, you must pay SE tax and file Schedule SE (Form 1040) if your net earnings from self-employment were $400 or more. I want to file my 2012 taxes online Use Schedule SE to figure net earnings from self-employment. I want to file my 2012 taxes online Sole proprietor or independent contractor. I want to file my 2012 taxes online   If you are self-employed as a sole proprietor or independent contractor, you generally use Schedule C or C-EZ (Form 1040) to figure your earnings subject to SE tax. I want to file my 2012 taxes online SE tax rate. I want to file my 2012 taxes online    For 2013, the SE tax rate on net earnings is 15. I want to file my 2012 taxes online 3% (12. I want to file my 2012 taxes online 4% social security tax plus 2. I want to file my 2012 taxes online 9% Medicare tax). I want to file my 2012 taxes online Maximum earnings subject to self-employment tax. I want to file my 2012 taxes online    Only the first $113,700 of your combined wages, tips, and net earnings in 2013 is subject to any combination of the 12. I want to file my 2012 taxes online 4% social security part of SE tax, social security tax, or railroad retirement (tier 1) tax. I want to file my 2012 taxes online   All of your combined wages, tips, and net earnings in 2013 are subject to any combination of the 2. I want to file my 2012 taxes online 9% Medicare part of SE tax, social security tax, or railroad retirement (tier 1) tax. I want to file my 2012 taxes online   If your wages and tips are subject to either social security or railroad retirement (tier 1) tax, or both, and total at least $113,700, do not pay the 12. I want to file my 2012 taxes online 4% social security part of the SE tax on any of your net earnings. I want to file my 2012 taxes online However, you must pay the 2. I want to file my 2012 taxes online 9% Medicare part of the SE tax on all your net earnings. I want to file my 2012 taxes online Special Rules and Exceptions Aliens. I want to file my 2012 taxes online   Generally, resident aliens must pay self-employment tax under the same rules that apply to U. I want to file my 2012 taxes online S. I want to file my 2012 taxes online citizens. I want to file my 2012 taxes online Nonresident aliens are not subject to SE tax unless an international social security agreement in effect determines that they are covered under the U. I want to file my 2012 taxes online S. I want to file my 2012 taxes online social security system. I want to file my 2012 taxes online However, residents of the Virgin Islands, Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, or American Samoa are subject to self-employment tax, as they are considered U. I want to file my 2012 taxes online S. I want to file my 2012 taxes online residents for self-employment tax purposes. I want to file my 2012 taxes online For more information on aliens, see Publication 519, U. I want to file my 2012 taxes online S. I want to file my 2012 taxes online Tax Guide for Aliens. I want to file my 2012 taxes online Child employed by parent. I want to file my 2012 taxes online   You are not subject to SE tax if you are under age 18 and you are working for your father or mother. I want to file my 2012 taxes online Church employee. I want to file my 2012 taxes online    If you work for a church or a qualified church-controlled organization (other than as a minister or member of a religious order) that elected an exemption from social security and Medicare taxes, you are subject to SE tax if you receive $108. I want to file my 2012 taxes online 28 or more in wages from the church or organization. I want to file my 2012 taxes online For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. I want to file my 2012 taxes online Fishing crew member. I want to file my 2012 taxes online   If you are a member of the crew on a boat that catches fish or other water life, your earnings are subject to SE tax if all the following conditions apply. I want to file my 2012 taxes online You do not get any pay for the work except your share of the catch or a share of the proceeds from the sale of the catch, unless the pay meets all the following conditions. I want to file my 2012 taxes online The pay is not more than $100 per trip. I want to file my 2012 taxes online The pay is received only if there is a minimum catch. I want to file my 2012 taxes online The pay is solely for additional duties (such as mate, engineer, or cook) for which additional cash pay is traditional in the fishing industry. I want to file my 2012 taxes online You get a share of the catch or a share of the proceeds from the sale of the catch. I want to file my 2012 taxes online Your share depends on the amount of the catch. I want to file my 2012 taxes online The boat's operating crew normally numbers fewer than 10 individuals. I want to file my 2012 taxes online (An operating crew is considered as normally made up of fewer than 10 if the average size of the crew on trips made during the last four calendar quarters is fewer than 10. I want to file my 2012 taxes online ) Notary public. I want to file my 2012 taxes online   Fees you receive for services you perform as a notary public are reported on Schedule C or C-EZ but are not subject to self-employment tax (see the Instructions for Schedule SE (Form 1040)). I want to file my 2012 taxes online State or local government employee. I want to file my 2012 taxes online   You are subject to SE tax if you are an employee of a state or local government, are paid solely on a fee basis, and your services are not covered under a federal-state social security agreement. I want to file my 2012 taxes online Foreign government or international organization employee. I want to file my 2012 taxes online   You are subject to SE tax if both the following conditions are true. I want to file my 2012 taxes online You are a U. I want to file my 2012 taxes online S. I want to file my 2012 taxes online citizen employed in the United States, Puerto Rico, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, or the Virgin Islands by: A foreign government, A wholly-owned agency of a foreign government, or An international organization. I want to file my 2012 taxes online Your employer is not required to withhold social security and Medicare taxes from your wages. I want to file my 2012 taxes online U. I want to file my 2012 taxes online S. I want to file my 2012 taxes online citizen or resident alien residing abroad. I want to file my 2012 taxes online    If you are a self-employed U. I want to file my 2012 taxes online S. I want to file my 2012 taxes online citizen or resident alien living outside the United States, in most cases you must pay SE tax. I want to file my 2012 taxes online Do not reduce your foreign earnings from self-employment by your foreign earned income exclusion. I want to file my 2012 taxes online Exception. I want to file my 2012 taxes online    The United States has social security agreements with many countries to eliminate double taxation under two social security systems. I want to file my 2012 taxes online Under these agreements, you generally must only pay social security and Medicare taxes to the country in which you live. I want to file my 2012 taxes online The country to which you must pay the tax will issue a certificate which serves as proof of exemption from social security tax in the other country. I want to file my 2012 taxes online   For more information, see the Instructions for Schedule SE (Form 1040). I want to file my 2012 taxes online More Than One Business If you have earnings subject to SE tax from more than one trade, business, or profession, you must combine the net profit (or loss) from each to determine your total earnings subject to SE tax. I want to file my 2012 taxes online A loss from one business reduces your profit from another business. I want to file my 2012 taxes online Community Property Income If any of the income from a trade or business, other than a partnership, is community property income under state law, it is included in the earnings subject to SE tax of the spouse carrying on the trade or business. I want to file my 2012 taxes online Gain or Loss Do not include in earnings subject to SE tax a gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers. I want to file my 2012 taxes online It does not matter whether the disposition is a sale, exchange, or an involuntary conversion. I want to file my 2012 taxes online Lost Income Payments If you are self-employed and reduce or stop your business activities, any payment you receive from insurance or other sources for the lost business income is included in earnings subject to SE tax. I want to file my 2012 taxes online If you are not working when you receive the payment, it still relates to your business and is included in earnings subject to SE tax, even though your business is temporarily inactive. I want to file my 2012 taxes online Figuring Earnings Subject to SE Tax Methods for Figuring Net Earnings There are three ways to figure your net earnings from self-employment. I want to file my 2012 taxes online The regular method. I want to file my 2012 taxes online The nonfarm optional method. I want to file my 2012 taxes online The farm optional method. I want to file my 2012 taxes online You must use the regular method unless you are eligible to use one or both of the optional methods. I want to file my 2012 taxes online Why use an optional method?    You may want to use the optional methods (discussed later) when you have a loss or a small net profit and any one of the following applies. I want to file my 2012 taxes online You want to receive credit for social security benefit coverage. I want to file my 2012 taxes online You incurred child or dependent care expenses for which you could claim a credit. I want to file my 2012 taxes online (An optional method may increase your earned income, which could increase your credit. I want to file my 2012 taxes online ) You are entitled to the earned income credit. I want to file my 2012 taxes online (An optional method may increase your earned income, which could increase your credit. I want to file my 2012 taxes online ) You are entitled to the additional child tax credit. I want to file my 2012 taxes online (An optional method may increase your earned income, which could increase your credit. I want to file my 2012 taxes online ) Effects of using an optional method. I want to file my 2012 taxes online   Using an optional method could increase your SE tax. I want to file my 2012 taxes online Paying more SE tax could result in your getting higher benefits when you retire. I want to file my 2012 taxes online   If you use either or both optional methods, you must figure and pay the SE tax due under these methods even if you would have had a smaller tax or no tax using the regular method. I want to file my 2012 taxes online   The optional methods may be used only to figure your SE tax. I want to file my 2012 taxes online To figure your income tax, include your actual earnings in gross income, regardless of which method you use to determine SE tax. I want to file my 2012 taxes online Regular Method Multiply your total earnings subject to SE tax by 92. I want to file my 2012 taxes online 35% (. I want to file my 2012 taxes online 9235) to get your net earnings under the regular method. I want to file my 2012 taxes online See Short Schedule SE, line 4, or Long Schedule SE, line 4a. I want to file my 2012 taxes online Net earnings figured using the regular method are also called actual net earnings. I want to file my 2012 taxes online Nonfarm Optional Method Use the nonfarm optional method only for earnings that do not come from farming. I want to file my 2012 taxes online You may use this method if you meet all the following tests. I want to file my 2012 taxes online You are self-employed on a regular basis. I want to file my 2012 taxes online This means that your actual net earnings from self-employment were $400 or more in at least 2 of the 3 tax years before the one for which you use this method. I want to file my 2012 taxes online The net earnings can be from either farm or nonfarm earnings or both. I want to file my 2012 taxes online You have used this method less than 5 years. I want to file my 2012 taxes online (There is a 5-year lifetime limit. I want to file my 2012 taxes online ) The years do not have to be one after another. I want to file my 2012 taxes online Your net nonfarm profits were: Less than $5,024, and Less than 72. I want to file my 2012 taxes online 189% of your gross nonfarm income. I want to file my 2012 taxes online Net nonfarm profits. I want to file my 2012 taxes online   Net nonfarm profit generally is the total of the amounts from: Line 31, Schedule C (Form 1040), Line 3, Schedule C-EZ (Form 1040), Box 14, code A, Schedule K-1 (Form 1065) (from nonfarm partnerships), and Box 9, code J1, Schedule K-1 (Form 1065-B). I want to file my 2012 taxes online   However, you may need to adjust the amount reported on Schedule K-1 if you are a general partner or if it is a loss. I want to file my 2012 taxes online Gross nonfarm income. I want to file my 2012 taxes online   Your gross nonfarm income generally is the total of the amounts from: Line 7, Schedule C (Form 1040), Line 1, Schedule C-EZ (Form 1040), Box 14, code C, Schedule K-1 (Form 1065) (from nonfarm partnerships), and Box 9, code J2, Schedule K-1 (Form 1065-B). I want to file my 2012 taxes online Figuring Nonfarm Net Earnings If you meet the three tests explained earlier, use the following table to figure your net earnings from self-employment under the nonfarm optional method. I want to file my 2012 taxes online Table 10-1. I want to file my 2012 taxes online Figuring Nonfarm Net Earnings IF your gross nonfarm income is. I want to file my 2012 taxes online . I want to file my 2012 taxes online . I want to file my 2012 taxes online THEN your net earnings are equal to. I want to file my 2012 taxes online . I want to file my 2012 taxes online . I want to file my 2012 taxes online $6,960 or less Two-thirds of your gross nonfarm income. I want to file my 2012 taxes online More than $6,960 $4,640 Actual net earnings. I want to file my 2012 taxes online   Your actual net earnings are 92. I want to file my 2012 taxes online 35% of your total earnings subject to SE tax (that is, multiply total earnings subject to SE tax by 92. I want to file my 2012 taxes online 35% (. I want to file my 2012 taxes online 9235) to get actual net earnings). I want to file my 2012 taxes online Actual net earnings are equivalent to net earnings figured using the regular method. I want to file my 2012 taxes online Optional net earnings less than actual net earnings. I want to file my 2012 taxes online   You cannot use this method to report an amount less than your actual net earnings from self-employment. I want to file my 2012 taxes online Gross nonfarm income of $6,960 or less. I want to file my 2012 taxes online   The following examples illustrate how to figure net earnings when gross nonfarm income is $6,960 or less. I want to file my 2012 taxes online Example 1. I want to file my 2012 taxes online Net nonfarm profit less than $5,024 and less than 72. I want to file my 2012 taxes online 189% of gross nonfarm income. I want to file my 2012 taxes online Ann Green runs a craft business. I want to file my 2012 taxes online Her actual net earnings from self-employment were $800 in 2011 and $900 in 2012. I want to file my 2012 taxes online She meets the test for being self-employed on a regular basis. I want to file my 2012 taxes online She has used the nonfarm optional method less than 5 years. I want to file my 2012 taxes online Her gross income and net profit in 2013 are as follows: Gross nonfarm income $5,400 Net nonfarm profit $1,200 Ann's actual net earnings for 2013 are $1,108 ($1,200 × . I want to file my 2012 taxes online 9235). I want to file my 2012 taxes online Because her net profit is less than $5,024 and less than 72. I want to file my 2012 taxes online 189% of her gross income, she can use the nonfarm optional method to figure net earnings of $3,600 (2/3 × $5,400). I want to file my 2012 taxes online Because these net earnings are higher than her actual net earnings, she can report net earnings of $3,600 for 2013. I want to file my 2012 taxes online Example 2. I want to file my 2012 taxes online Net nonfarm profit less than $5,024 but not less than 72. I want to file my 2012 taxes online 189% of gross nonfarm income. I want to file my 2012 taxes online Assume that in Example 1 Ann's gross income is $1,000 and her net profit is $800. I want to file my 2012 taxes online She must use the regular method to figure her net earnings. I want to file my 2012 taxes online She cannot use the nonfarm optional method because her net profit is not less than 72. I want to file my 2012 taxes online 189% of her gross income. I want to file my 2012 taxes online Example 3. I want to file my 2012 taxes online Net loss from a nonfarm business. I want to file my 2012 taxes online Assume that in Example 1 Ann has a net loss of $700. I want to file my 2012 taxes online She can use the nonfarm optional method and report $3,600 (2/3 × $5,400) as her net earnings. I want to file my 2012 taxes online Example 4. I want to file my 2012 taxes online Nonfarm net earnings less than $400. I want to file my 2012 taxes online Assume that in Example 1 Ann has gross income of $525 and a net profit of $175. I want to file my 2012 taxes online In this situation, she would not pay any SE tax under either the regular method or the nonfarm optional method because her net earnings under both methods are less than $400. I want to file my 2012 taxes online Gross nonfarm income of more than $6,960. I want to file my 2012 taxes online   The following examples illustrate how to figure net earnings when gross nonfarm income is more than $6,960. I want to file my 2012 taxes online Example 1. I want to file my 2012 taxes online Net nonfarm profit less than $5,024 and less than 72. I want to file my 2012 taxes online 189% of gross nonfarm income. I want to file my 2012 taxes online John White runs an appliance repair shop. I want to file my 2012 taxes online His actual net earnings from self-employment were $10,500 in 2011 and $9,500 in 2012. I want to file my 2012 taxes online He meets the test for being self-employed on a regular basis. I want to file my 2012 taxes online He has used the nonfarm optional method less than 5 years. I want to file my 2012 taxes online His gross income and net profit in 2013 are as follows: Gross nonfarm income $12,000 Net nonfarm profit $1,200 John's actual net earnings for 2013 are $1,108 ($1,200 × . I want to file my 2012 taxes online 9235). I want to file my 2012 taxes online Because his net profit is less than $5,024 and less than 72. I want to file my 2012 taxes online 189% of his gross income, he can use the nonfarm optional method to figure net earnings of $4,640. I want to file my 2012 taxes online Because these net earnings are higher than his actual net earnings, he can report net earnings of $4,640 for 2013. I want to file my 2012 taxes online Example 2. I want to file my 2012 taxes online Net nonfarm profit not less than $5,024. I want to file my 2012 taxes online Assume that in Example 1 John's net profit is $5,400. I want to file my 2012 taxes online He must use the regular method. I want to file my 2012 taxes online He cannot use the nonfarm optional method because his net nonfarm profit is not less than $5,024. I want to file my 2012 taxes online Example 3. I want to file my 2012 taxes online Net loss from a nonfarm business. I want to file my 2012 taxes online Assume that in Example 1 John has a net loss of $700. I want to file my 2012 taxes online He can use the nonfarm optional method and report $4,640 as his net earnings from self-employment. I want to file my 2012 taxes online Farm Optional Method Use the farm optional method only for earnings from a farming business. I want to file my 2012 taxes online See Publication 225 for information about this method. I want to file my 2012 taxes online Using Both Optional Methods If you have both farm and nonfarm earnings, you may be able to use both optional methods to determine your net earnings from self-employment. I want to file my 2012 taxes online To figure your net earnings using both optional methods, you must: Figure your farm and nonfarm net earnings separately under each method. I want to file my 2012 taxes online Do not combine farm earnings with nonfarm earnings to figure your net earnings under either method. I want to file my 2012 taxes online Add the net earnings figured under each method to arrive at your total net earnings from self-employment. I want to file my 2012 taxes online You can report less than your total actual farm and nonfarm net earnings but not less than actual nonfarm net earnings. I want to file my 2012 taxes online If you use both optional methods, you can report no more than $4,640 as your combined net earnings from self-employment. I want to file my 2012 taxes online Example. I want to file my 2012 taxes online You are a self-employed farmer. I want to file my 2012 taxes online You also operate a retail grocery store. I want to file my 2012 taxes online Your gross income, actual net earnings from self-employment, and optional farm and optional nonfarm net earnings from self-employment are shown in Table 10-2. I want to file my 2012 taxes online Table 10-2. I want to file my 2012 taxes online Example—Farm and Nonfarm Earnings Income and Earnings Farm Nonfarm Gross income $3,000 $6,000 Actual net earnings $900 $500 Optional net earnings (2/3 of gross income) $2,000 $4,000 Table 10-3 shows four methods or combinations of methods you can use to figure net earnings from self-employment using the farm and nonfarm gross income and actual net earnings shown in Table 10-2. I want to file my 2012 taxes online Method 1. I want to file my 2012 taxes online Using the regular method for both farm and nonfarm income. I want to file my 2012 taxes online Method 2. I want to file my 2012 taxes online Using the optional method for farm income and the regular method for nonfarm income. I want to file my 2012 taxes online Method 3. I want to file my 2012 taxes online Using the regular method for farm income and the optional method for nonfarm income. I want to file my 2012 taxes online Method 4. I want to file my 2012 taxes online Using the optional method for both farm and nonfarm income. I want to file my 2012 taxes online Note. I want to file my 2012 taxes online Actual net earnings is the same as net earnings figured using the regular method. I want to file my 2012 taxes online Table 10-3. I want to file my 2012 taxes online Example—Net Earnings Net Earnings 1 2 3 4 Actual  farm $ 900   $ 900   Optional  farm   $ 2,000   $ 2,000 Actual nonfarm $ 500 $ 500     Optional nonfarm     $4,000 $4,000 Amount you can report: $1,400 $2,500 $4,900 $4,640* *Limited to $4,640 because you used both optional methods. I want to file my 2012 taxes online Fiscal Year Filer If you use a tax year other than the calendar year, you must use the tax rate and maximum earnings limit in effect at the beginning of your tax year. I want to file my 2012 taxes online Even if the tax rate or maximum earnings limit changes during your tax year, continue to use the same rate and limit throughout your tax year. I want to file my 2012 taxes online Reporting Self-Employment Tax Use Schedule SE (Form 1040) to figure and report your SE tax. I want to file my 2012 taxes online Then enter the SE tax on line 56 of Form 1040 and attach Schedule SE to Form 1040. I want to file my 2012 taxes online Most taxpayers can use Section A—Short Schedule SE to figure their SE tax. I want to file my 2012 taxes online However, certain taxpayers must use Section B—Long Schedule SE. I want to file my 2012 taxes online If you have to pay SE tax, you must file Form 1040 (with Schedule SE attached) even if you do not otherwise have to file a federal income tax return. I want to file my 2012 taxes online Joint return. I want to file my 2012 taxes online   Even if you file a joint return, you cannot file a joint Schedule SE. I want to file my 2012 taxes online This is true whether one spouse or both spouses have earnings subject to SE tax. I want to file my 2012 taxes online If both of you have earnings subject to SE tax, each of you must complete a separate Schedule SE. I want to file my 2012 taxes online However, if one spouse uses the Short Schedule SE and the other spouse has to use the Long Schedule SE, both can use the same form. I want to file my 2012 taxes online Attach both schedules to the joint return. I want to file my 2012 taxes online More than one business. I want to file my 2012 taxes online   If you have more than one trade or business, you must combine the net profit (or loss) from each business to figure your SE tax. I want to file my 2012 taxes online A loss from one business will reduce your profit from another business. I want to file my 2012 taxes online File one Schedule SE showing the earnings from self-employment, but file a separate Schedule C, C-EZ, or F for each business. I want to file my 2012 taxes online Example. I want to file my 2012 taxes online You are the sole proprietor of two separate businesses. I want to file my 2012 taxes online You operate a restaurant that made a net profit of $25,000. I want to file my 2012 taxes online You also have a cabinetmaking business that had a net loss of $500. I want to file my 2012 taxes online You must file a Schedule C for the restaurant showing your net profit of $25,000 and another Schedule C for the cabinetmaking business showing your net loss of $500. I want to file my 2012 taxes online You file Schedule SE showing total earnings subject to SE tax of $24,500. I want to file my 2012 taxes online Prev  Up  Next   Home   More Online Publications