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Irs 1040ez 2012 Instructions

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Irs 1040ez 2012 Instructions

Irs 1040ez 2012 instructions 4. Irs 1040ez 2012 instructions   Reporting Gains and Losses Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Information Returns Schedule D and Form 8949Long and Short Term Net Gain or Loss Treatment of Capital Losses Capital Gains Tax Rates Form 4797Mark-to-market election. Irs 1040ez 2012 instructions Introduction This chapter explains how to report capital gains and losses and ordinary gains and losses from sales, exchanges, and other dispositions of property. Irs 1040ez 2012 instructions Although this discussion refers to Schedule D (Form 1040) and Form 8949, many of the rules discussed here also apply to taxpayers other than individuals. Irs 1040ez 2012 instructions However, the rules for property held for personal use usually will not apply to taxpayers other than individuals. Irs 1040ez 2012 instructions Topics - This chapter discusses: Information returns Schedule D (Form 1040) Form 4797 Form 8949 Useful Items - You may want to see: Publication 550 Investment Income and Expenses 537 Installment Sales Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 1099-B Proceeds From Broker and Barter Exchange Transactions 1099-S Proceeds From Real Estate Transactions 4684 Casualties and Thefts 4797 Sales of Business Property 6252 Installment Sale Income 6781 Gains and Losses from Section 1256 Contracts and Straddles 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets See chapter 5 for information about getting publications and forms. Irs 1040ez 2012 instructions Information Returns If you sell or exchange certain assets, you should receive an information return showing the proceeds of the sale. Irs 1040ez 2012 instructions This information is also provided to the IRS. Irs 1040ez 2012 instructions Form 1099-B. Irs 1040ez 2012 instructions   If you sold property, such as stocks, bonds, or certain commodities, through a broker, you should receive Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or a substitute statement from the broker. Irs 1040ez 2012 instructions Use the Form 1099-B or a substitute statement to complete Form 8949 and/or Schedule D. Irs 1040ez 2012 instructions Whether or not you receive 1099-B, you must report all taxable sales of stock, bonds, commodities, etc. Irs 1040ez 2012 instructions on Form 8949 and/or Schedule D, as applicable. Irs 1040ez 2012 instructions For more information on figuring gains and losses from these transactions, see chapter 4 in Publication 550. Irs 1040ez 2012 instructions For information on reporting the gains and losses, see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). Irs 1040ez 2012 instructions Form 1099-S. Irs 1040ez 2012 instructions   An information return must be provided on certain real estate transactions. Irs 1040ez 2012 instructions Generally, the person responsible for closing the transaction (the “real estate reporting person”) must report on Form 1099-S sales or exchanges of the following types of property. Irs 1040ez 2012 instructions Land (improved or unimproved), including air space. Irs 1040ez 2012 instructions An inherently permanent structure, including any residential, commercial, or industrial building. Irs 1040ez 2012 instructions A condominium unit and its related fixtures and common elements (including land). Irs 1040ez 2012 instructions Stock in a cooperative housing corporation. Irs 1040ez 2012 instructions If you sold or exchanged any of the above types of property, the “real estate reporting person” must give you a copy of Form 1099-S or a statement containing the same information as the Form 1099-S. Irs 1040ez 2012 instructions The “real estate reporting person” could include the buyer's attorney, your attorney, the title or escrow company, a mortgage lender, your broker, the buyer's broker, or the person acquiring the biggest interest in the property. Irs 1040ez 2012 instructions   For more information see chapter 4 in Publication 550. Irs 1040ez 2012 instructions Also, see the Instructions for Form 8949. Irs 1040ez 2012 instructions Schedule D and Form 8949 Form 8949. Irs 1040ez 2012 instructions   Individuals, corporations, and partnerships, use Form 8949 to report the following. Irs 1040ez 2012 instructions    Sales or exchanges of capital assets, including stocks, bonds, etc. Irs 1040ez 2012 instructions , and real estate (if not reported on another form or schedule such as Form 4684, 4797, 6252, 6781, or 8824). Irs 1040ez 2012 instructions Include these transactions even if you did not receive a Form 1099-B or 1099-S. Irs 1040ez 2012 instructions Gains from involuntary conversions (other than from casualty or theft) of capital assets not held for business or profit. Irs 1040ez 2012 instructions Nonbusiness bad debts. Irs 1040ez 2012 instructions   Individuals, If you are filing a joint return, complete as many copies of Form 8949 as you need to report all of your and your spouse's transactions. Irs 1040ez 2012 instructions You and your spouse may list your transactions on separate forms or you may combine them. Irs 1040ez 2012 instructions However, you must include on your Schedule D the totals from all Forms 8949 for both you and your spouse. Irs 1040ez 2012 instructions    Corporations and electing large partnerships also use Form 8949 to report their share of gain or loss from a partnership, S Corporation, estate or trust. Irs 1040ez 2012 instructions   Business entities meeting certain criteria, may have an exception to some of the normal requirements for completing Form 8949. Irs 1040ez 2012 instructions See the Instructions for Form 8949. Irs 1040ez 2012 instructions Schedule D. Irs 1040ez 2012 instructions    Use Schedule D (Form 1040) to figure the overall gain or loss from transactions reported on Form 8949, and to report certain transactions you do not have to report on Form 8949. Irs 1040ez 2012 instructions Before completing Schedule D, you may have to complete other forms as shown below. Irs 1040ez 2012 instructions    Complete all applicable lines of Form 8949 before completing lines 1b, 2, 3, 8b, 9, or 10 of your applicable Schedule D. Irs 1040ez 2012 instructions Enter on Schedule D the combined totals from all your Forms 8949. Irs 1040ez 2012 instructions For a sale, exchange, or involuntary conversion of business property, complete Form 4797 (discussed later). Irs 1040ez 2012 instructions For a like-kind exchange, complete Form 8824. Irs 1040ez 2012 instructions See Reporting the exchange under Like-Kind Exchanges in chapter 1. Irs 1040ez 2012 instructions For an installment sale, complete Form 6252. Irs 1040ez 2012 instructions See Publication 537. Irs 1040ez 2012 instructions For an involuntary conversion due to casualty or theft, complete Form 4684. Irs 1040ez 2012 instructions See Publication 547, Casualties, Disasters, and Thefts. Irs 1040ez 2012 instructions For a disposition of an interest in, or property used in, an activity to which the at-risk rules apply, complete Form 6198, At-Risk Limitations. Irs 1040ez 2012 instructions See Publication 925, Passive Activity and At-Risk Rules. Irs 1040ez 2012 instructions For a disposition of an interest in, or property used in, a passive activity, complete Form 8582, Passive Activity Loss Limitations. Irs 1040ez 2012 instructions See Publication 925. Irs 1040ez 2012 instructions For gains and losses from section 1256 contracts and straddles, complete Form 6781. Irs 1040ez 2012 instructions See Publication 550. Irs 1040ez 2012 instructions Personal-use property. Irs 1040ez 2012 instructions   Report gain on the sale or exchange of property held for personal use (such as your home) on Form 8949 and Schedule D (Form 1040), as applicable. Irs 1040ez 2012 instructions Loss from the sale or exchange of property held for personal use is not deductible. Irs 1040ez 2012 instructions But if you had a loss from the sale or exchange of real estate held for personal use for which you received a Form 1099-S, report the transaction on Form 8949 and Schedule D, even though the loss is not deductible. Irs 1040ez 2012 instructions See the Instructions for Schedule D (Form 1040) and the Instructions for Form 8949 for information on how to report the transaction. Irs 1040ez 2012 instructions Long and Short Term Where you report a capital gain or loss depends on how long you own the asset before you sell or exchange it. Irs 1040ez 2012 instructions The time you own an asset before disposing of it is the holding period. Irs 1040ez 2012 instructions If you received a Form 1099-B, (or substitute statement) box 1c may help you determine whether the gain or loss is short-term or long-term. Irs 1040ez 2012 instructions If you hold a capital asset 1 year or less, the gain or loss from its disposition is short term. Irs 1040ez 2012 instructions Report it in Part I of Form 8949 and/or Schedule D, as applicable. Irs 1040ez 2012 instructions If you hold a capital asset longer than 1 year, the gain or loss from its disposition is long term. Irs 1040ez 2012 instructions Report it in Part II of Form 8949 and/or Schedule D, as applicable. Irs 1040ez 2012 instructions   Table 4-1. Irs 1040ez 2012 instructions Do I Have a Short-Term or Long-Term Gain or Loss? IF you hold the property. Irs 1040ez 2012 instructions . Irs 1040ez 2012 instructions . Irs 1040ez 2012 instructions  THEN you have a. Irs 1040ez 2012 instructions . Irs 1040ez 2012 instructions . Irs 1040ez 2012 instructions 1 year or less, Short-term capital gain or  loss. Irs 1040ez 2012 instructions More than 1 year, Long-term capital gain or  loss. Irs 1040ez 2012 instructions These distinctions are essential to correctly arrive at your net capital gain or loss. Irs 1040ez 2012 instructions Capital losses are allowed in full against capital gains plus up to $3,000 of ordinary income. Irs 1040ez 2012 instructions See Capital Gains Tax Rates, later. Irs 1040ez 2012 instructions Holding period. Irs 1040ez 2012 instructions   To figure if you held property longer than 1 year, start counting on the day following the day you acquired the property. Irs 1040ez 2012 instructions The day you disposed of the property is part of your holding period. Irs 1040ez 2012 instructions Example. Irs 1040ez 2012 instructions If you bought an asset on June 19, 2012, you should start counting on June 20, 2012. Irs 1040ez 2012 instructions If you sold the asset on June 19, 2013, your holding period is not longer than 1 year, but if you sold it on June 20, 2013, your holding period is longer than 1 year. Irs 1040ez 2012 instructions Patent property. Irs 1040ez 2012 instructions   If you dispose of patent property, you generally are considered to have held the property longer than 1 year, no matter how long you actually held it. Irs 1040ez 2012 instructions For more information, see Patents in chapter 2. Irs 1040ez 2012 instructions Inherited property. Irs 1040ez 2012 instructions   If you inherit property, you are considered to have held the property longer than 1 year, regardless of how long you actually held it. Irs 1040ez 2012 instructions Installment sale. Irs 1040ez 2012 instructions   The gain from an installment sale of an asset qualifying for long-term capital gain treatment in the year of sale continues to be long term in later tax years. Irs 1040ez 2012 instructions If it is short term in the year of sale, it continues to be short term when payments are received in later tax years. Irs 1040ez 2012 instructions    The date the installment payment is received determines the capital gains rate that should be applied not the date the asset was sold under an installment contract. Irs 1040ez 2012 instructions Nontaxable exchange. Irs 1040ez 2012 instructions   If you acquire an asset in exchange for another asset and your basis for the new asset is figured, in whole or in part, by using your basis in the old property, the holding period of the new property includes the holding period of the old property. Irs 1040ez 2012 instructions That is, it begins on the same day as your holding period for the old property. Irs 1040ez 2012 instructions Example. Irs 1040ez 2012 instructions You bought machinery on December 4, 2012. Irs 1040ez 2012 instructions On June 4, 2013, you traded this machinery for other machinery in a nontaxable exchange. Irs 1040ez 2012 instructions On December 5, 2013, you sold the machinery you got in the exchange. Irs 1040ez 2012 instructions Your holding period for this machinery began on December 5, 2012. Irs 1040ez 2012 instructions Therefore, you held it longer than 1 year. Irs 1040ez 2012 instructions Corporate liquidation. Irs 1040ez 2012 instructions   The holding period for property you receive in a liquidation generally starts on the day after you receive it if gain or loss is recognized. Irs 1040ez 2012 instructions Profit-sharing plan. Irs 1040ez 2012 instructions   The holding period of common stock withdrawn from a qualified contributory profit-sharing plan begins on the day following the day the plan trustee delivered the stock to the transfer agent with instructions to reissue the stock in your name. Irs 1040ez 2012 instructions Gift. Irs 1040ez 2012 instructions   If you receive a gift of property and your basis in it is figured using the donor's basis, your holding period includes the donor's holding period. Irs 1040ez 2012 instructions For more information on basis, see Publication 551, Basis of Assets. Irs 1040ez 2012 instructions Real property. Irs 1040ez 2012 instructions   To figure how long you held real property, start counting on the day after you received title to it or, if earlier, the day after you took possession of it and assumed the burdens and privileges of ownership. Irs 1040ez 2012 instructions   However, taking possession of real property under an option agreement is not enough to start the holding period. Irs 1040ez 2012 instructions The holding period cannot start until there is an actual contract of sale. Irs 1040ez 2012 instructions The holding period of the seller cannot end before that time. Irs 1040ez 2012 instructions Repossession. Irs 1040ez 2012 instructions   If you sell real property but keep a security interest in it and then later repossess it, your holding period for a later sale includes the period you held the property before the original sale, as well as the period after the repossession. Irs 1040ez 2012 instructions Your holding period does not include the time between the original sale and the repossession. Irs 1040ez 2012 instructions That is, it does not include the period during which the first buyer held the property. Irs 1040ez 2012 instructions Nonbusiness bad debts. Irs 1040ez 2012 instructions   Nonbusiness bad debts are short-term capital losses. Irs 1040ez 2012 instructions For information on nonbusiness bad debts, see chapter 4 of Publication 550. Irs 1040ez 2012 instructions    Net Gain or Loss The totals for short-term capital gains and losses and the totals for long-term capital gains and losses must be figured separately. Irs 1040ez 2012 instructions Net short-term capital gain or loss. Irs 1040ez 2012 instructions   Combine your short-term capital gains and losses, including your share of short-term capital gains or losses from partnerships, S corporations, and fiduciaries and any short-term capital loss carryover. Irs 1040ez 2012 instructions Do this by adding all your short-term capital gains. Irs 1040ez 2012 instructions Then add all your short-term capital losses. Irs 1040ez 2012 instructions Subtract the lesser total from the other. Irs 1040ez 2012 instructions The result is your net short-term capital gain or loss. Irs 1040ez 2012 instructions Net long-term capital gain or loss. Irs 1040ez 2012 instructions   Follow the same steps to combine your long-term capital gains and losses. Irs 1040ez 2012 instructions Include the following items. Irs 1040ez 2012 instructions Net section 1231 gain from Part I, Form 4797, after any adjustment for nonrecaptured section 1231 losses from prior tax years. Irs 1040ez 2012 instructions Capital gain distributions from regulated investment companies (mutual funds) and real estate investment trusts. Irs 1040ez 2012 instructions Your share of long-term capital gains or losses from partnerships, S corporations, and fiduciaries. Irs 1040ez 2012 instructions Any long-term capital loss carryover. Irs 1040ez 2012 instructions The result from combining these items with other long-term capital gains and losses is your net long-term capital gain or loss. Irs 1040ez 2012 instructions Net gain. Irs 1040ez 2012 instructions   If the total of your capital gains is more than the total of your capital losses, the difference is taxable. Irs 1040ez 2012 instructions Different tax rates may apply to the part that is a net capital gain. Irs 1040ez 2012 instructions See Capital Gains Tax Rates, later. Irs 1040ez 2012 instructions Net loss. Irs 1040ez 2012 instructions   If the total of your capital losses is more than the total of your capital gains, the difference is deductible. Irs 1040ez 2012 instructions But there are limits on how much loss you can deduct and when you can deduct it. Irs 1040ez 2012 instructions See Treatment of Capital Losses, next. Irs 1040ez 2012 instructions    Treatment of Capital Losses If your capital losses are more than your capital gains, you can deduct the difference as a capital loss deduction even if you do not have ordinary income to offset it. Irs 1040ez 2012 instructions The yearly limit on the amount of the capital loss you can deduct is $3,000 ($1,500 if you are married and file a separate return). Irs 1040ez 2012 instructions Table 4-2. Irs 1040ez 2012 instructions Holding Period for Different Types of Acquisitions Type of acquisition: When your holding period starts: Stocks and bonds bought on a securities market Day after trading date you bought security. Irs 1040ez 2012 instructions Ends on trading date you sold security. Irs 1040ez 2012 instructions U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions Treasury notes and bonds If bought at auction, day after notification of bid acceptance. Irs 1040ez 2012 instructions If bought through subscription, day after subscription was submitted. Irs 1040ez 2012 instructions Nontaxable exchanges Day after date you acquired old property. Irs 1040ez 2012 instructions Gift If your basis is giver's adjusted basis, same day as giver's holding period began. Irs 1040ez 2012 instructions If your basis is FMV, day after date of gift. Irs 1040ez 2012 instructions Real property bought Generally, day after date you received title to the property. Irs 1040ez 2012 instructions Real property repossessed Day after date you originally received title to the property, but does not include time between the original sale and date of repossession. Irs 1040ez 2012 instructions Capital loss carryover. Irs 1040ez 2012 instructions   Generally, you have a capital loss carryover if either of the following situations applies to you. Irs 1040ez 2012 instructions Your net loss is more than the yearly limit. Irs 1040ez 2012 instructions Your taxable income without your deduction for exemptions is less than zero. Irs 1040ez 2012 instructions If either of these situations applies to you for 2013, see Capital Losses under Reporting Capital Gains and Losses in chapter 4 of Publication 550 to figure the amount you can carryover to 2014. Irs 1040ez 2012 instructions Example. Irs 1040ez 2012 instructions Bob and Gloria Sampson sold property in 2013. Irs 1040ez 2012 instructions The sale resulted in a capital loss of $7,000. Irs 1040ez 2012 instructions The Sampsons had no other capital transactions. Irs 1040ez 2012 instructions On their joint 2013 return, the Sampsons deduct $3,000, the yearly limit. Irs 1040ez 2012 instructions They had taxable income of $2,000. Irs 1040ez 2012 instructions The unused part of the loss, $4,000 ($7,000 − $3,000), is carried over to 2014. Irs 1040ez 2012 instructions If the Sampsons' capital loss had been $2,000, it would not have been more than the yearly limit. Irs 1040ez 2012 instructions Their capital loss deduction would have been $2,000. Irs 1040ez 2012 instructions They would have no carryover to 2014. Irs 1040ez 2012 instructions Short-term and long-term losses. Irs 1040ez 2012 instructions   When you carry over a loss, it retains its original character as either long term or short term. Irs 1040ez 2012 instructions A short-term loss you carry over to the next tax year is added to short-term losses occurring in that year. Irs 1040ez 2012 instructions A long-term loss you carry over to the next tax year is added to long-term losses occurring in that year. Irs 1040ez 2012 instructions A long-term capital loss you carry over to the next year reduces that year's long-term gains before its short-term gains. Irs 1040ez 2012 instructions   If you have both short-term and long-term losses, your short-term losses are used first against your allowable capital loss deduction. Irs 1040ez 2012 instructions If, after using your short-term losses, you have not reached the limit on the capital loss deduction, use your long-term losses until you reach the limit. Irs 1040ez 2012 instructions To figure your capital loss carryover from 2013 to 2014 use the Capital Loss Carryover Worksheet in the 2013 Instructions for Schedule D (Form 1040). Irs 1040ez 2012 instructions Joint and separate returns. Irs 1040ez 2012 instructions   On a joint return, the capital gains and losses of spouses are figured as the gains and losses of an individual. Irs 1040ez 2012 instructions If you are married and filing a separate return, your yearly capital loss deduction is limited to $1,500. Irs 1040ez 2012 instructions Neither you nor your spouse can deduct any part of the other's loss. Irs 1040ez 2012 instructions   If you and your spouse once filed separate returns and are now filing a joint return, combine your separate capital loss carryovers. Irs 1040ez 2012 instructions However, if you and your spouse once filed jointly and are now filing separately, any capital loss carryover from the joint return can be deducted only on the return of the spouse who actually had the loss. Irs 1040ez 2012 instructions Death of taxpayer. Irs 1040ez 2012 instructions   Capital losses cannot be carried over after a taxpayer's death. Irs 1040ez 2012 instructions They are deductible only on the final income tax return filed on the decedent's behalf. Irs 1040ez 2012 instructions The yearly limit discussed earlier still applies in this situation. Irs 1040ez 2012 instructions Even if the loss is greater than the limit, the decedent's estate cannot deduct the difference or carry it over to following years. Irs 1040ez 2012 instructions Corporations. Irs 1040ez 2012 instructions   A corporation can deduct capital losses only up to the amount of its capital gains. Irs 1040ez 2012 instructions In other words, if a corporation has a net capital loss, it cannot be deducted in the current tax year. Irs 1040ez 2012 instructions It must be carried to other tax years and deducted from capital gains occurring in those years. Irs 1040ez 2012 instructions For more information, see Publication 542. Irs 1040ez 2012 instructions Capital Gains Tax Rates The tax rates that apply to a net capital gain are generally lower than the tax rates that apply to other income. Irs 1040ez 2012 instructions These lower rates are called the maximum capital gains rates. Irs 1040ez 2012 instructions The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss. Irs 1040ez 2012 instructions For 2013, the maximum tax rates for individuals are 0%, 15%, 20%, 25%, and 28%. Irs 1040ez 2012 instructions Also, individuals, use the Qualified Dividends and Capital Gain Worksheet in the Instructions for Form 1040, or the Schedule D Tax Computation Worksheet in the Instructions for Schedule D (Form 1040) (whichever applies) to figure your tax if you have qualified dividends or net capital gain. Irs 1040ez 2012 instructions For more information, see chapter 4 of Publication 550. Irs 1040ez 2012 instructions Also see the Instructions for Schedule D (Form 1040). Irs 1040ez 2012 instructions Unrecaptured section 1250 gain. Irs 1040ez 2012 instructions   Generally, this is the part of any long-term capital gain on section 1250 property (real property) that is due to depreciation. Irs 1040ez 2012 instructions Unrecaptured section 1250 gain cannot be more than the net section 1231 gain or include any gain otherwise treated as ordinary income. Irs 1040ez 2012 instructions Use the worksheet in the Schedule D instructions to figure your unrecaptured section 1250 gain. Irs 1040ez 2012 instructions For more information about section 1250 property and net section 1231 gain, see chapter 3. Irs 1040ez 2012 instructions Form 4797 Use Form 4797 to report: The sale or exchange of: Property used in your trade or business; Depreciable and amortizable property; Oil, gas, geothermal, or other mineral properties; and Section 126 property. Irs 1040ez 2012 instructions The involuntary conversion (from other than casualty or theft) of property used in your trade or business and capital assets held in connection with a trade or business or a transaction entered into for profit. Irs 1040ez 2012 instructions The disposition of noncapital assets (other than inventory or property held primarily for sale to customers in the ordinary course of your trade or business). Irs 1040ez 2012 instructions The disposition of capital assets not reported on Schedule D. Irs 1040ez 2012 instructions The gain or loss (including any related recapture) for partners and S corporation shareholders from certain section 179 property dispositions by partnerships (other than electing large partnerships) and S corporations. Irs 1040ez 2012 instructions The computation of recapture amounts under sections 179 and 280F(b)(2) when the business use of section 179 or listed property decreases to 50% or less. Irs 1040ez 2012 instructions Gains or losses treated as ordinary gains or losses, if you are a trader in securities or commodities and made a mark-to-market election under Internal Revenue Code section 475(f). Irs 1040ez 2012 instructions You can use Form 4797 with Form 1040, 1065, 1120, or 1120S. Irs 1040ez 2012 instructions Section 1231 gains and losses. Irs 1040ez 2012 instructions   Show any section 1231 gains and losses in Part I. Irs 1040ez 2012 instructions Carry a net gain to Schedule D (Form 1040) as a long-term capital gain. Irs 1040ez 2012 instructions Carry a net loss to Part II of Form 4797 as an ordinary loss. Irs 1040ez 2012 instructions   If you had any nonrecaptured net section 1231 losses from the preceding 5 tax years, reduce your net gain by those losses and report the amount of the reduction as an ordinary gain in Part II. Irs 1040ez 2012 instructions Report any remaining gain on Schedule D (Form 1040). Irs 1040ez 2012 instructions See Section 1231 Gains and Losses in chapter 3. Irs 1040ez 2012 instructions Ordinary gains and losses. Irs 1040ez 2012 instructions   Show any ordinary gains and losses in Part II. Irs 1040ez 2012 instructions This includes a net loss or a recapture of losses from prior years figured in Part I of Form 4797. Irs 1040ez 2012 instructions It also includes ordinary gain figured in Part III. Irs 1040ez 2012 instructions Mark-to-market election. Irs 1040ez 2012 instructions   If you made a mark-to-market election, you should report all gains and losses from trading as ordinary gains and losses in Part II of Form 4797, instead of as capital gains and losses on Form 8949 and Schedule D (Form 1040). Irs 1040ez 2012 instructions See the Instructions for Form 4797. Irs 1040ez 2012 instructions Also see Special Rules for Traders in Securities, in chapter 4 of Publication 550. Irs 1040ez 2012 instructions Ordinary income from depreciation. Irs 1040ez 2012 instructions   Figure the ordinary income from depreciation on personal property and additional depreciation on real property (as discussed in chapter 3) in Part III. Irs 1040ez 2012 instructions Carry the ordinary income to Part II of Form 4797 as an ordinary gain. Irs 1040ez 2012 instructions Carry any remaining gain to Part I as section 1231 gain, unless it is from a casualty or theft. Irs 1040ez 2012 instructions Carry any remaining gain from a casualty or theft to Form 4684. 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Contact My Local Office in Utah

Face-to-face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available.  Services are limited and not all services are available at every TAC office.  Services may vary from site to site. You can get these services on a walk-in, non-advance appointment basis.

City  Street Address  Days/Hours of Service  Telephone* 
Ogden  324 25th St.
Ogden, UT 84401 

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.)

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(801) 626-0753 
Provo  173 E. 100 North
Provo, UT 84606 

Monday-Friday - 9:00 a.m.-3:30 p.m.
(Closed for lunch 11:30 a.m. - 12:30 p.m.)

 

Services Provided

(801) 377-6971 
Salt Lake City  50 S. 200 East
Salt Lake City, UT 84111 

Monday-Friday - 8:30 a.m.-4:30 p.m.

 

Services Provided

(801) 799-6963 

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses).

For information on where to file your tax return please see Where to File Addresses.

The Taxpayer Advocate Service:  Call (801) 799-6958 in Salt Lake City or 1-877-777-4778 elsewhere, or see Publication 1546, The Taxpayer Advocate Service of the IRS. 

For further information, see Tax Topic 104.

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
50 South 200 East, MS 6610SLC
Salt Lake City, UT 84111

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The Irs 1040ez 2012 Instructions

Irs 1040ez 2012 instructions Publication 514 - Main Content Table of Contents Choosing To Take Credit or DeductionChoice Applies to All Qualified Foreign Taxes Making or Changing Your Choice Why Choose the Credit?Credit for Taxes Paid or Accrued Foreign Currency and Exchange Rates Foreign Tax Redetermination Who Can Take the Credit?U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions Citizens Resident Aliens Nonresident Aliens What Foreign Taxes Qualify for the Credit?Tax Must Be Imposed on You You Must Have Paid or Accrued the Tax Tax Must Be the Legal and Actual Foreign Tax Liability Tax Must Be an Income Tax (or Tax in Lieu of Income Tax) Foreign Taxes for Which You Cannot Take a CreditTaxes on Excluded Income Taxes for Which You Can Only Take an Itemized Deduction Taxes on Foreign Mineral Income Taxes From International Boycott Operations Taxes on Combined Foreign Oil and Gas Income Taxes of U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions Persons Controlling Foreign Corporations and Partnerships Taxes Related to a Foreign Tax Credit Splitting Event How To Figure the CreditLimit on the Credit Separate Limit Income Allocation of Foreign Taxes Foreign Taxes From a Partnership or an S Corporation Figuring the Limit Qualified Dividends Capital Gains and Losses Allocation of Foreign and U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions Losses Tax Treaties Carryback and CarryoverTime Limit on Tax Assessment Claim for Refund Taxes All Credited or All Deducted Married Couples How To Claim the CreditForm 1116 Records To Keep Simple Example — Filled-In Form 1116Part I—Taxable Income or Loss From Sources Outside the United States (for Category Checked Above) Part II—Foreign Taxes Paid or Accrued Part III—Figuring the Credit Part IV—Summary of Credits From Separate Parts III Comprehensive Example — Filled-In Form 1116Foreign earned income. Irs 1040ez 2012 instructions Employee business expenses. Irs 1040ez 2012 instructions Forms 1116 Computation of Taxable Income Part I—Taxable Income or Loss From Sources Outside the United States (for Category Checked Above) Part II—Foreign Taxes Paid or Accrued Part III—Figuring the Credit Part IV—Summary of Credits From Separate Parts III Unused Foreign Taxes How To Get Tax HelpLow Income Taxpayer Clinics Choosing To Take Credit or Deduction You can choose whether to take the amount of any qualified foreign taxes paid or accrued during the year as a foreign tax credit or as an itemized deduction. Irs 1040ez 2012 instructions You can change your choice for each year's taxes. Irs 1040ez 2012 instructions To choose the foreign tax credit, in most cases you must complete Form 1116 and attach it to your U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax return. Irs 1040ez 2012 instructions However, you may qualify for the exception that allows you to claim the foreign tax credit without using Form 1116. Irs 1040ez 2012 instructions See How To Figure the Credit , later. Irs 1040ez 2012 instructions To choose to claim the taxes as an itemized deduction, use Schedule A (Form 1040), Itemized Deductions. Irs 1040ez 2012 instructions Figure your tax both ways—claiming the credit and claiming the deduction. Irs 1040ez 2012 instructions Then fill out your return the way that benefits you more. Irs 1040ez 2012 instructions See Why Choose the Credit, later. Irs 1040ez 2012 instructions Choice Applies to All Qualified Foreign Taxes As a general rule, you must choose to take either a credit or a deduction for all qualified foreign taxes. Irs 1040ez 2012 instructions If you choose to take a credit for qualified foreign taxes, you must take the credit for all of them. Irs 1040ez 2012 instructions You cannot deduct any of them. Irs 1040ez 2012 instructions Conversely, if you choose to deduct qualified foreign taxes, you must deduct all of them. Irs 1040ez 2012 instructions You cannot take a credit for any of them. Irs 1040ez 2012 instructions See What Foreign Taxes Qualify for the Credit , later, for the meaning of qualified foreign taxes. Irs 1040ez 2012 instructions There are exceptions to this general rule, which are described next. Irs 1040ez 2012 instructions Exceptions for foreign taxes not allowed as a credit. Irs 1040ez 2012 instructions   Even if you claim a credit for other foreign taxes, you can deduct any foreign tax that is not allowed as a credit if: You paid the tax to a country for which a credit is not allowed because it provides support for acts of international terrorism, or because the United States does not have or does not conduct diplomatic relations with it or recognize its government and that government is not otherwise eligible to purchase defense articles or services under the Arms Export Control Act, You paid withholding tax on dividends from foreign corporations whose stock you did not hold for the required period of time, You paid withholding tax on income or gain (other than dividends) from property you did not hold for the required period of time, You paid withholding tax on income or gain to the extent you had to make related payments on positions in substantially similar or related property, You participated in or cooperated with an international boycott, You paid taxes in connection with the purchase or sale of oil or gas, or You paid or accrued taxes on income or gain in connection with a covered asset acquisition. Irs 1040ez 2012 instructions Covered asset acquisitions include certain acquisitions that result in a stepped-up basis for U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax purposes. Irs 1040ez 2012 instructions For more information, see Internal Revenue Code section 901(m). Irs 1040ez 2012 instructions The IRS intends to issue guidance that will explain this provision in greater detail. Irs 1040ez 2012 instructions   For more information on these items, see Taxes for Which You Can Only Take an Itemized Deduction , later, under Foreign Taxes for Which You Cannot Take a Credit. Irs 1040ez 2012 instructions Foreign taxes that are not income taxes. Irs 1040ez 2012 instructions   In most cases, only foreign income taxes qualify for the foreign tax credit. Irs 1040ez 2012 instructions Other taxes, such as foreign real and personal property taxes, do not qualify. Irs 1040ez 2012 instructions But you may be able to deduct these other taxes even if you claim the foreign tax credit for foreign income taxes. Irs 1040ez 2012 instructions   In most cases, you can deduct these other taxes only if they are expenses incurred in a trade or business or in the production of income. Irs 1040ez 2012 instructions However, you can deduct foreign real property taxes that are not trade or business expenses as an itemized deduction on Schedule A (Form 1040). Irs 1040ez 2012 instructions Carrybacks and carryovers. Irs 1040ez 2012 instructions   There is a limit on the credit you can claim in a tax year. Irs 1040ez 2012 instructions If your qualified foreign taxes exceed the credit limit, you may be able to carry over or carry back the excess to another tax year. Irs 1040ez 2012 instructions If you deduct qualified foreign taxes in a tax year, you cannot use a carryback or carryover in that year. Irs 1040ez 2012 instructions That is because you cannot take both a deduction and a credit for qualified foreign taxes in the same tax year. Irs 1040ez 2012 instructions   For more information on the limit, see How To Figure the Credit , later. Irs 1040ez 2012 instructions For more information on carrybacks and carryovers, see Carryback and Carryover , later. Irs 1040ez 2012 instructions Making or Changing Your Choice You can make or change your choice to claim a deduction or credit at any time during the period within 10 years from the regular due date for filing the return (without regard to any extension of time to file) for the tax year in which the taxes were actually paid or accrued. Irs 1040ez 2012 instructions You make or change your choice on your tax return (or on an amended return) for the year your choice is to be effective. Irs 1040ez 2012 instructions Example. Irs 1040ez 2012 instructions You paid foreign taxes for the last 13 years and chose to deduct them on your U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions income tax returns. Irs 1040ez 2012 instructions You were timely in both filing your returns and paying your U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax liability. Irs 1040ez 2012 instructions In February 2013, you file an amended return for tax year 2002 choosing to take a credit for your 2002 foreign taxes because you now realize that the credit is more advantageous than the deduction for that year. Irs 1040ez 2012 instructions Because the regular due date of your 2002 return was April 15, 2003, this choice is timely (within 10 years). Irs 1040ez 2012 instructions Because there is a limit on the credit for your 2002 foreign tax, you have unused 2002 foreign taxes. Irs 1040ez 2012 instructions Ordinarily, you first carry back unused foreign taxes arising in 2002 to, and claim them as a credit in, the 2 preceding tax years. Irs 1040ez 2012 instructions If you are unable to claim all of them in those 2 years, you carry them forward to the 10 years following the year in which they arose. Irs 1040ez 2012 instructions Because you originally chose to deduct your foreign taxes and the 10-year period for changing the choice for 2000 and 2001 has passed, you cannot change your choice and carry the unused 2002 foreign taxes back to tax years 2000 and 2001. Irs 1040ez 2012 instructions Because the 10-year periods for changing the choice have not passed for your 2003 through 2012 income tax returns, you can still choose to claim the credit for those years and carry forward any unused 2002 foreign taxes. Irs 1040ez 2012 instructions However, you must reduce the unused 2002 foreign taxes that you carry forward by the amount that would have been allowed as a carryback if you had timely carried back the foreign tax to tax years 2000 and 2001. Irs 1040ez 2012 instructions You cannot take a credit or a deduction for foreign taxes paid on income you exclude under the foreign earned income exclusion or the foreign housing exclusion. Irs 1040ez 2012 instructions See Foreign Earned Income and Housing Exclusions under Foreign Taxes for Which You Cannot Take a Credit, later. Irs 1040ez 2012 instructions Why Choose the Credit? The foreign tax credit is intended to relieve you of a double tax burden when your foreign source income is taxed by both the United States and the foreign country. Irs 1040ez 2012 instructions In most cases, if the foreign tax rate is higher than the U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions rate, there will be no U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax on the foreign income. Irs 1040ez 2012 instructions If the foreign tax rate is lower than the U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions rate, U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax on the foreign income will be limited to the difference between the rates. Irs 1040ez 2012 instructions The foreign tax credit can only reduce U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions taxes on foreign source income; it cannot reduce U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions taxes on U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions source income. Irs 1040ez 2012 instructions Although no one rule covers all situations, in most cases it is better to take a credit for qualified foreign taxes than to deduct them as an itemized deduction. Irs 1040ez 2012 instructions This is because: A credit reduces your actual U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions income tax on a dollar-for-dollar basis, while a deduction reduces only your income subject to tax, You can choose to take the foreign tax credit even if you do not itemize your deductions. Irs 1040ez 2012 instructions You then are allowed the standard deduction in addition to the credit, and If you choose to take the foreign tax credit, and the taxes paid or accrued exceed the credit limit for the tax year, you may be able to carry over or carry back the excess to another tax year. Irs 1040ez 2012 instructions (See Limit on credit under How To Figure the Credit, later. Irs 1040ez 2012 instructions ) Example 1. Irs 1040ez 2012 instructions For 2013, you and your spouse have adjusted gross income of $80,300, including $20,000 of dividend income from foreign sources. Irs 1040ez 2012 instructions None of the dividends are qualified dividends. Irs 1040ez 2012 instructions You file a joint return and can claim two $3,900 exemptions. Irs 1040ez 2012 instructions You had to pay $2,000 in foreign income taxes on the dividend income. Irs 1040ez 2012 instructions If you take the foreign taxes as an itemized deduction, your total itemized deductions are $15,000. Irs 1040ez 2012 instructions Your taxable income then is $57,500 and your tax is $7,736. Irs 1040ez 2012 instructions If you take the credit instead, your itemized deductions are only $13,000. Irs 1040ez 2012 instructions Your taxable income then is $59,500 and your tax before the credit is $8,036. Irs 1040ez 2012 instructions After the credit, however, your tax is only $6,036. Irs 1040ez 2012 instructions Therefore, your tax is $1,700 lower ($7,736 − $6,036) by taking the credit. Irs 1040ez 2012 instructions Example 2. Irs 1040ez 2012 instructions In 2013, you receive investment income of $5,000 from a foreign country, which imposes a tax of $1,500 on that income. Irs 1040ez 2012 instructions You report on your U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions return this income as well as $56,000 of U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions source wages and an allowable $49,000 partnership loss from a U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions partnership. Irs 1040ez 2012 instructions Your share of the partnership's gross income is $25,000 and your share of its expenses is $74,000. Irs 1040ez 2012 instructions You are single, entitled to one $3,900 exemption, and have other itemized deductions of $6,850. Irs 1040ez 2012 instructions If you deduct the foreign tax on your U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions return, your taxable income is a negative $250 ($5,000 + $56,000 − $49,000 − $1,500 − $6,850 − $3,900) and your tax is $0. Irs 1040ez 2012 instructions If you take the credit instead, your taxable income is $1,250 ($5,000 + $56,000 − $49,000 − $3,900 − $6,850) and your tax before the credit is $126. Irs 1040ez 2012 instructions You can take a credit of only $113 because of limits discussed later. Irs 1040ez 2012 instructions Your tax after the credit is $13 ($126 − $113), which is $13 more than if you deduct the foreign tax. Irs 1040ez 2012 instructions If you choose the credit, you will have unused foreign taxes of $1,387 ($1,500 − $113). Irs 1040ez 2012 instructions When deciding whether to take the credit or the deduction this year, you will need to consider whether you can benefit from a carryback or carryover of that unused foreign tax. Irs 1040ez 2012 instructions Credit for Taxes Paid or Accrued You can claim the credit for a qualified foreign tax in the tax year in which you pay it or accrue it, depending on your method of accounting. Irs 1040ez 2012 instructions “Tax year” refers to the tax year for which your U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions return is filed, not the tax year for which your foreign return is filed. Irs 1040ez 2012 instructions Accrual method of accounting. Irs 1040ez 2012 instructions   If you use an accrual method of accounting, you can claim the credit only in the year in which you accrue the tax. Irs 1040ez 2012 instructions You are using an accrual method of accounting if you report income when you earn it, rather than when you receive it, and you deduct your expenses when you incur them, rather than when you pay them. Irs 1040ez 2012 instructions   In most cases, foreign taxes accrue when all the events have taken place that fix the amount of the tax and your liability to pay it. Irs 1040ez 2012 instructions Generally, this occurs on the last day of the tax year for which your foreign return is filed. Irs 1040ez 2012 instructions Contesting your foreign tax liability. Irs 1040ez 2012 instructions   If you are contesting your foreign tax liability, you cannot accrue it and take a credit until the amount of foreign tax due is finally determined. Irs 1040ez 2012 instructions However, if you choose to pay the tax liability you are contesting, you can take a credit for the amount you pay before a final determination of foreign tax liability is made. Irs 1040ez 2012 instructions Once your liability is determined, the foreign tax credit is allowable for the year to which the foreign tax relates. Irs 1040ez 2012 instructions If the amount of foreign taxes taken as a credit differs from the final foreign tax liability, you may have to adjust the credit, as discussed later under Foreign Tax Redetermination . Irs 1040ez 2012 instructions You may have to post a bond. Irs 1040ez 2012 instructions   If you claim a credit for taxes accrued but not paid, you may have to post an income tax bond to guarantee your payment of any tax due in the event the amount of foreign tax paid differs from the amount claimed. Irs 1040ez 2012 instructions   The IRS can request this bond at any time without regard to the Time Limit on Tax Assessment discussed later under Carryback and Carryover. Irs 1040ez 2012 instructions Cash method of accounting. Irs 1040ez 2012 instructions   If you use the cash method of accounting, you can choose to take the credit either in the year you pay the tax or in the year you accrue it. Irs 1040ez 2012 instructions You are using the cash method of accounting if you report income in the year you actually or constructively receive it, and deduct expenses in the year you pay them. Irs 1040ez 2012 instructions Choosing to take credit in the year taxes accrue. Irs 1040ez 2012 instructions   Even if you use the cash method of accounting, you can choose to take a credit for foreign taxes in the year they accrue. Irs 1040ez 2012 instructions You make the choice by checking the box in Part II of Form 1116. Irs 1040ez 2012 instructions Once you make that choice, you must follow it in all later years and take a credit for foreign taxes in the year they accrue. Irs 1040ez 2012 instructions   In addition, the choice to take the credit when foreign taxes accrue applies to all foreign taxes qualifying for the credit. Irs 1040ez 2012 instructions You cannot take a credit for some foreign taxes when paid and take a credit for others when accrued. Irs 1040ez 2012 instructions   If you make the choice to take the credit when foreign taxes accrue and pay them in a later year, you cannot claim a deduction for any part of the previously accrued taxes. Irs 1040ez 2012 instructions Credit based on taxes paid in earlier year. Irs 1040ez 2012 instructions   If, in earlier years, you took the credit based on taxes paid, and this year you choose to take the credit based on taxes accrued, you may be able to take the credit this year for taxes from more than one year. Irs 1040ez 2012 instructions Example. Irs 1040ez 2012 instructions Last year you took the credit based on taxes paid. Irs 1040ez 2012 instructions This year you chose to take the credit based on taxes accrued. Irs 1040ez 2012 instructions During the year you paid foreign income taxes owed for last year. Irs 1040ez 2012 instructions You also accrued foreign income taxes for this year that you did not pay by the end of the year. Irs 1040ez 2012 instructions You can base the credit on your return for this year on both last year's taxes that you paid and this year's taxes that you accrued. Irs 1040ez 2012 instructions Foreign Currency and Exchange Rates U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions income tax is imposed on income expressed in U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions dollars, while in most cases the foreign tax is imposed on income expressed in foreign currency. Irs 1040ez 2012 instructions Therefore, fluctuations in the value of the foreign currency relative to the U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions dollar may affect the foreign tax credit. Irs 1040ez 2012 instructions Translating foreign currency into U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions dollars. Irs 1040ez 2012 instructions   If you receive all or part of your income or pay some or all of your expenses in foreign currency, you must translate the foreign currency into U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions dollars. Irs 1040ez 2012 instructions How and when you do this depends on your functional currency. Irs 1040ez 2012 instructions In most cases, your functional currency is the U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions dollar unless you are required to use the currency of a foreign country. Irs 1040ez 2012 instructions   You must make all federal income tax determinations in your functional currency. Irs 1040ez 2012 instructions The U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions dollar is the functional currency for all taxpayers except some qualified business units. Irs 1040ez 2012 instructions A qualified business unit is a separate and clearly identified unit of a trade or business that maintains separate books and records. Irs 1040ez 2012 instructions Unless you are self-employed, your functional currency is the U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions dollar. Irs 1040ez 2012 instructions   Even if you are self-employed and have a qualified business unit, your functional currency is the U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions dollar if any of the following apply. Irs 1040ez 2012 instructions You conduct the business primarily in dollars. Irs 1040ez 2012 instructions The principal place of business is located in the United States. Irs 1040ez 2012 instructions You choose to or are required to use the dollar as your functional currency. Irs 1040ez 2012 instructions The business books and records are not kept in the currency of the economic environment in which a significant part of the business activities is conducted. Irs 1040ez 2012 instructions   If your functional currency is the U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions dollar, you must immediately translate into dollars all items of income, expense, etc. Irs 1040ez 2012 instructions , that you receive, pay, or accrue in a foreign currency and that will affect computation of your income tax. Irs 1040ez 2012 instructions If there is more than one exchange rate, use the one that most properly reflects your income. Irs 1040ez 2012 instructions In most cases, you can get exchange rates from banks and U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions Embassies. Irs 1040ez 2012 instructions   If your functional currency is not the U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions dollar, make all income tax determinations in your functional currency. Irs 1040ez 2012 instructions At the end of the year, translate the results, such as income or loss, into U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions dollars to report on your income tax return. Irs 1040ez 2012 instructions    For more information, write to: Internal Revenue Service International Section Philadelphia, PA 19255-0725 Rate of exchange for foreign taxes paid. Irs 1040ez 2012 instructions   Use the rate of exchange in effect on the date you paid the foreign taxes to the foreign country unless you meet the exception discussed next. Irs 1040ez 2012 instructions If your tax was withheld in foreign currency, use the rate of exchange in effect for the date on which the tax was withheld. Irs 1040ez 2012 instructions If you make foreign estimated tax payments, you use the rate of exchange in effect for the date on which you made the estimated tax payment. Irs 1040ez 2012 instructions   The exchange rate rules discussed here apply even if the foreign taxes are paid or accrued with respect to a foreign tax credit splitting event (discussed later). Irs 1040ez 2012 instructions Exception. Irs 1040ez 2012 instructions   If you claim the credit for foreign taxes on an accrual basis, in most cases you must use the average exchange rate for the tax year to which the taxes relate. Irs 1040ez 2012 instructions This rule applies to accrued taxes relating to tax years beginning after 1997 and only under the following conditions. Irs 1040ez 2012 instructions The foreign taxes are paid on or after the first day of the tax year to which they relate. Irs 1040ez 2012 instructions The foreign taxes are paid not later than 2 years after the close of the tax year to which they relate. Irs 1040ez 2012 instructions The foreign tax liability is not denominated in an inflationary currency (defined in the Form 1116 instructions). Irs 1040ez 2012 instructions (This condition applies to taxes paid or accrued in tax years beginning after November 6, 2007. Irs 1040ez 2012 instructions )   For all other foreign taxes, you should use the exchange rate in effect on the date you paid them. Irs 1040ez 2012 instructions Election to use exchange rate on date paid. Irs 1040ez 2012 instructions   If you have accrued foreign taxes that you are otherwise required to convert using the average exchange rate, you may elect to use the exchange rate in effect on the date the foreign taxes are paid if the taxes are denominated in a nonfunctional foreign currency. Irs 1040ez 2012 instructions If any of the accrued taxes are unpaid, you must translate them into U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions dollars using the exchange rate on the last day of the U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax year to which those taxes relate. Irs 1040ez 2012 instructions You may make the election for all nonfunctional currency foreign income taxes or only those nonfunctional currency foreign income taxes that are attributable to qualified business units with a U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions dollar functional currency. Irs 1040ez 2012 instructions Once made, the election applies to the tax year for which made and all subsequent tax years unless revoked with the consent of the IRS. Irs 1040ez 2012 instructions The election is available for tax years beginning after 2004. Irs 1040ez 2012 instructions It must be made by the due date (including extensions) for filing the tax return for the first tax year to which the election applies. Irs 1040ez 2012 instructions Make the election by attaching a statement to the applicable tax return. Irs 1040ez 2012 instructions The statement must identify whether the election is made for all foreign taxes or only for foreign taxes attributable to qualified business units with a U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions dollar functional currency. Irs 1040ez 2012 instructions Foreign Tax Redetermination A foreign tax redetermination is any change in your foreign tax liability that may affect your U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions foreign tax credit claimed. Irs 1040ez 2012 instructions The year in which to claim the credit remains the year to which the foreign taxes paid or accrued relate, even if the change in foreign tax liability occurs in a later year. Irs 1040ez 2012 instructions If a foreign tax redetermination occurs, a redetermination of your U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax liability is required if any of the following conditions apply. Irs 1040ez 2012 instructions The accrued taxes when paid differ from the amounts claimed as a credit. Irs 1040ez 2012 instructions The accrued taxes you claimed as a credit in one tax year are not paid within 2 years after the end of that tax year. Irs 1040ez 2012 instructions If this applies to you, you must reduce the credit previously claimed by the amount of the unpaid taxes. Irs 1040ez 2012 instructions You will not be allowed a credit for the unpaid taxes until you pay them. Irs 1040ez 2012 instructions When you pay the accrued taxes, a new foreign tax redetermination occurs and you must translate the taxes into U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions dollars using the exchange rate as of the date they were paid. Irs 1040ez 2012 instructions The foreign tax credit is allowed for the year to which the foreign tax relates. Irs 1040ez 2012 instructions See Rate of exchange for foreign taxes paid , earlier, under Foreign Currency and Exchange Rates. Irs 1040ez 2012 instructions The foreign taxes you paid are refunded in whole or in part. Irs 1040ez 2012 instructions For taxes taken into account when accrued but translated into dollars on the date of payment, the dollar value of the accrued tax differs from the dollar value of the tax paid because of fluctuations in the exchange rate between the date of accrual and the date of payment. Irs 1040ez 2012 instructions However, no redetermination is required if the change in foreign tax liability for each foreign country is solely attributable to exchange rate fluctuations and is less than the smaller of: $10,000, or 2% of the total dollar amount of the foreign tax initially accrued for that foreign country for the U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax year. Irs 1040ez 2012 instructions In this case, you must adjust your U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax in the tax year in which the accrued foreign taxes are paid. Irs 1040ez 2012 instructions Notice to the Internal Revenue Service (IRS) of Redetermination You are required to notify the IRS about a foreign tax credit redetermination that affects your U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax liability for each tax year affected by the redetermination. Irs 1040ez 2012 instructions In most cases, you must file Form 1040X, Amended U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions Individual Income Tax Return, with a revised Form 1116 and a statement that contains information sufficient for the IRS to redetermine your U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax liability for the year or years affected. Irs 1040ez 2012 instructions See Contents of statement , later. Irs 1040ez 2012 instructions You are not required to attach Form 1116 for a tax year affected by a redetermination if: The amount of your creditable taxes paid or accrued during the tax year is not more than $300 ($600 if married filing a joint return) as a result of the foreign tax redetermination, and You meet the requirements listed under Exemption from foreign tax credit limit under How To Figure the Credit, later. Irs 1040ez 2012 instructions There are other exceptions to this requirement. Irs 1040ez 2012 instructions They are discussed later under Due date of notification to IRS . Irs 1040ez 2012 instructions Contents of statement. Irs 1040ez 2012 instructions   The statement must include all of the following. Irs 1040ez 2012 instructions Your name, address, and taxpayer identification number. Irs 1040ez 2012 instructions The tax year or years that are affected by the foreign tax redetermination. Irs 1040ez 2012 instructions The date or dates the foreign taxes were accrued, if applicable. Irs 1040ez 2012 instructions The date or dates the foreign taxes were paid. Irs 1040ez 2012 instructions The amount of foreign taxes paid or accrued on each date (in foreign currency) and the exchange rate used to translate each amount. Irs 1040ez 2012 instructions Information sufficient to determine any interest due from or owing to you, including the amount of any interest paid to you by the foreign government and the dates received. Irs 1040ez 2012 instructions   In the case of any foreign taxes that were not paid before the date two years after the close of the tax year to which those taxes relate, you must provide the amount of those taxes in foreign currency and the exchange rate that was used to translate that amount when originally claimed as a credit. Irs 1040ez 2012 instructions   If any foreign tax was refunded in whole or in part, you must provide the date and amount (in foreign currency) of each refund, the exchange rate that was used to translate each amount when originally claimed as a credit, and the exchange rate for the date the refund was received (for purposes of computing foreign currency gain or loss under Internal Revenue Code section 988). Irs 1040ez 2012 instructions Due date of notification to IRS. Irs 1040ez 2012 instructions   If you pay less foreign tax than you originally claimed a credit for, in most cases you must file a notification by the due date (with extensions) of your original return for your tax year in which the foreign tax redetermination occurred. Irs 1040ez 2012 instructions There is no limit on the time the IRS has to redetermine and assess the correct U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax due. Irs 1040ez 2012 instructions If you pay more foreign tax than you originally claimed a credit for, you have 10 years to file a claim for refund of U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions taxes. Irs 1040ez 2012 instructions See Time Limit on Refund Claims , later. Irs 1040ez 2012 instructions   Exceptions to this due date are explained in the next two paragraphs. Irs 1040ez 2012 instructions Multiple redeterminations of U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax liability for same tax year. Irs 1040ez 2012 instructions   Where more than one foreign tax redetermination requires a redetermination of U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax liability for the same tax year and those redeterminations occur in the same tax year or within two consecutive tax years, you can file for that tax year one notification (Form 1040X with a Form 1116 and the required statement) that reflects all those tax redeterminations. Irs 1040ez 2012 instructions If you choose to file one notification, the due date for that notification is the due date of the original return (with extensions) for the year in which the first foreign tax redetermination that reduced your foreign tax liability occurred. Irs 1040ez 2012 instructions However, foreign tax redeterminations with respect to the tax year for which a redetermination of U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax liability is required may occur after the due date for providing that notification. Irs 1040ez 2012 instructions In this situation, you may have to file more than one Form 1040X for that tax year. Irs 1040ez 2012 instructions Additional U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax due eliminated by foreign tax credit carryback or carryover. Irs 1040ez 2012 instructions   If a foreign tax redetermination requires a redetermination of U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax liability that would otherwise result in an additional amount of U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax due, but the additional tax is eliminated by a carryback or carryover of an unused foreign tax, you do not have to amend your tax return for the year affected by the redetermination. Irs 1040ez 2012 instructions Instead, you can notify the IRS by attaching a statement to the original return for the tax year in which the foreign tax redetermination occurred. Irs 1040ez 2012 instructions You must file the statement by the due date (with extensions) of that return. Irs 1040ez 2012 instructions The statement must show the amount of the unused foreign taxes paid or accrued and a detailed schedule showing the computation of the carryback or carryover (including the amounts carried back or over to the year for which a redetermination on U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax liability is required). Irs 1040ez 2012 instructions Failure-to-notify penalty. Irs 1040ez 2012 instructions   If you fail to notify the IRS of a foreign tax redetermination and cannot show reasonable cause for the failure, you may have to pay a penalty. Irs 1040ez 2012 instructions   For each month, or part of a month, that the failure continues, you pay a penalty of 5% of the tax due resulting from a redetermination of your U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax. Irs 1040ez 2012 instructions This penalty cannot be more than 25% of the tax due. Irs 1040ez 2012 instructions Foreign tax refund. Irs 1040ez 2012 instructions   If you receive a foreign tax refund without interest from the foreign government, you will not have to pay interest on the amount of tax due resulting from the adjustment to your U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax for the time before the date of the refund. Irs 1040ez 2012 instructions   However, if you receive a foreign tax refund with interest, you must pay interest to the IRS up to the amount of the interest paid to you by the foreign government. Irs 1040ez 2012 instructions The interest you must pay cannot be more than the interest you would have had to pay on taxes that were unpaid for any other reason for the same period. Irs 1040ez 2012 instructions Interest also is owed from the time you receive a refund until you pay the additional tax due. Irs 1040ez 2012 instructions Foreign tax imposed on foreign refund. Irs 1040ez 2012 instructions   If your foreign tax refund is taxed by the foreign country, you cannot take a separate credit or deduction for this additional foreign tax. Irs 1040ez 2012 instructions However, when you refigure the foreign tax credit taken for the original foreign tax, reduce the amount of the refund by the foreign tax paid on the refund. Irs 1040ez 2012 instructions Example. Irs 1040ez 2012 instructions You paid a foreign income tax of $3,000 in 2011, and received a foreign tax refund of $500 in 2013 on which a foreign tax of $100 was imposed. Irs 1040ez 2012 instructions When you refigure your credit for 2011, you must reduce the $3,000 you paid by $400. Irs 1040ez 2012 instructions Time Limit on Refund Claims You have 10 years to file a claim for refund of U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax if you find that you paid or accrued a larger foreign tax than you claimed a credit for. Irs 1040ez 2012 instructions The 10-year period begins the day after the regular due date for filing the return (without extensions) for the year in which the taxes were actually paid or accrued. Irs 1040ez 2012 instructions You have 10 years to file your claim regardless of whether you claim the credit for taxes paid or taxes accrued. Irs 1040ez 2012 instructions The 10-year period applies to claims for refund or credit based on: Fixing math errors in figuring qualified foreign taxes, Reporting qualified foreign taxes not originally reported on the return, or Any other change in the size of the credit (including one caused by correcting the foreign tax credit limit). Irs 1040ez 2012 instructions The special 10-year period also applies to making or changing your choice to claim a deduction or credit for foreign taxes. Irs 1040ez 2012 instructions See Making or Changing Your Choice discussed earlier under Choosing To Take Credit or Deduction. Irs 1040ez 2012 instructions Who Can Take the Credit? U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions citizens, resident aliens, and nonresident aliens who paid foreign income tax and are subject to U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax on foreign source income may be able to take a foreign tax credit. Irs 1040ez 2012 instructions U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions Citizens If you are a U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions citizen, you are taxed by the United States on your worldwide income wherever you live. Irs 1040ez 2012 instructions You are normally entitled to take a credit for foreign taxes you pay or accrue. Irs 1040ez 2012 instructions Resident Aliens If you are a resident alien of the United States, you can take a credit for foreign taxes subject to the same general rules as U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions citizens. Irs 1040ez 2012 instructions If you are a bona fide resident of Puerto Rico for the entire tax year, you also come under the same rules. Irs 1040ez 2012 instructions Usually, you can take a credit only for those foreign taxes imposed on income you actually or constructively received while you had resident alien status. Irs 1040ez 2012 instructions For information on alien status, see Publication 519. Irs 1040ez 2012 instructions Nonresident Aliens If you are a nonresident alien, you cannot take the credit in most cases. Irs 1040ez 2012 instructions However, you may be able to take the credit if: You were a bona fide resident of Puerto Rico during your entire tax year, or You pay or accrue tax to a foreign country or U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions possession on income from foreign sources that is effectively connected with a trade or business in the United States. Irs 1040ez 2012 instructions But if you must pay tax to a foreign country or U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions possession on income from U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions sources only because you are a citizen or a resident of that country or U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions possession, do not use that tax in figuring the amount of your credit. Irs 1040ez 2012 instructions For information on alien status and effectively connected income, see Publication 519. Irs 1040ez 2012 instructions What Foreign Taxes Qualify for the Credit? In most cases, the following four tests must be met for any foreign tax to qualify for the credit. Irs 1040ez 2012 instructions The tax must be imposed on you. Irs 1040ez 2012 instructions You must have paid or accrued the tax. Irs 1040ez 2012 instructions The tax must be the legal and actual foreign tax liability. Irs 1040ez 2012 instructions The tax must be an income tax (or a tax in lieu of an income tax). Irs 1040ez 2012 instructions Certain foreign taxes do not qualify for the credit even if the four tests are met. Irs 1040ez 2012 instructions See Foreign Taxes for Which You Cannot Take a Credit, later. Irs 1040ez 2012 instructions Tax Must Be Imposed on You You can claim a credit only for foreign taxes that are imposed on you by a foreign country or U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions possession. Irs 1040ez 2012 instructions For example, a tax that is deducted from your wages is considered to be imposed on you. Irs 1040ez 2012 instructions You cannot shift the right to claim the credit by contract or other means. Irs 1040ez 2012 instructions Foreign country. Irs 1040ez 2012 instructions   A foreign country includes any foreign state and its political subdivisions. Irs 1040ez 2012 instructions Income, war profits, and excess profits taxes paid or accrued to a foreign city or province qualify for the foreign tax credit. Irs 1040ez 2012 instructions U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions possessions. Irs 1040ez 2012 instructions   For foreign tax credit purposes, all qualified taxes paid to U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions possessions are considered foreign taxes. Irs 1040ez 2012 instructions For this purpose, U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions possessions include Puerto Rico and American Samoa. Irs 1040ez 2012 instructions   When the term “foreign country” is used in this publication, it includes U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions possessions unless otherwise stated. Irs 1040ez 2012 instructions You Must Have Paid or Accrued the Tax In most cases, you can claim the credit only if you paid or accrued the foreign tax to a foreign country or U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions possession. Irs 1040ez 2012 instructions However, the paragraphs that follow describe some instances in which you can claim the credit even if you did not directly pay or accrue the tax yourself. Irs 1040ez 2012 instructions Joint return. Irs 1040ez 2012 instructions   If you file a joint return, you can claim the credit based on the total foreign income taxes paid or accrued by you and your spouse. Irs 1040ez 2012 instructions Combined income. Irs 1040ez 2012 instructions   If foreign tax is imposed on the combined income of two or more persons (for example, spouses), the tax is allocated among, and considered paid by, these persons on a pro rata basis in proportion to each person's portion of the combined income, as determined under foreign law and Regulations section 1. Irs 1040ez 2012 instructions 901-2(f)(3)(iii). Irs 1040ez 2012 instructions Combined income with respect to each foreign tax that is imposed on a combined basis (and combined income subject to tax exemption or preferential tax rates) is computed separately, and the tax on that combined income is allocated separately. Irs 1040ez 2012 instructions   These rules apply to foreign taxes paid or accrued in tax years beginning after February 14, 2012. Irs 1040ez 2012 instructions However, you can choose to apply the new rules to foreign taxes paid or accrued in tax years beginning after December 31, 2010, and before February 15, 2012. Irs 1040ez 2012 instructions For more details, see paragraphs (f) and (h) of Regulations section 1. Irs 1040ez 2012 instructions 901-2. Irs 1040ez 2012 instructions For similar rules applicable to prior tax years, see Regulations section 1. Irs 1040ez 2012 instructions 901-2 (revised as of April 1, 2011). Irs 1040ez 2012 instructions Example. Irs 1040ez 2012 instructions You and your spouse reside in Country X, which imposes income tax on your combined incomes. Irs 1040ez 2012 instructions Both of you use the “u” as your functional currency. Irs 1040ez 2012 instructions Country X apportions tax based on income. Irs 1040ez 2012 instructions You had income of 30,000u and your spouse had income of 20,000u. Irs 1040ez 2012 instructions Your filing status on your U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions income tax return is married filing separately. Irs 1040ez 2012 instructions You can claim only 60% (30,000u/50,000u) of the foreign taxes imposed on your income on your U. Irs 1040ez 2012 instructions S income tax return. Irs 1040ez 2012 instructions Your spouse can claim only 40% (20,000u/50,000u). Irs 1040ez 2012 instructions Partner or S corporation shareholder. Irs 1040ez 2012 instructions   If you are a member of a partnership, or a shareholder in an S corporation, you can claim the credit based on your proportionate share of the foreign income taxes paid or accrued by the partnership or the S corporation. Irs 1040ez 2012 instructions These amounts will be shown on the Schedule K-1 you receive from the partnership or S corporation. Irs 1040ez 2012 instructions However, if you are a shareholder in an S corporation that in turn owns stock in a foreign corporation, you cannot claim a credit for your share of foreign taxes paid by the foreign corporation. Irs 1040ez 2012 instructions Beneficiary. Irs 1040ez 2012 instructions   If you are a beneficiary of an estate or trust, you may be able to claim the credit based on your proportionate share of foreign income taxes paid or accrued by the estate or trust. Irs 1040ez 2012 instructions This amount will be shown on the Schedule K-1 you receive from the estate or trust. Irs 1040ez 2012 instructions However, you must show that the tax was imposed on income of the estate and not on income received by the decedent. Irs 1040ez 2012 instructions Mutual fund shareholder. Irs 1040ez 2012 instructions   If you are a shareholder of a mutual fund or other regulated investment company (RIC), you may be able to claim the credit based on your share of foreign income taxes paid by the fund if it chooses to pass the credit on to its shareholders. Irs 1040ez 2012 instructions You should receive from the mutual fund or other RIC a Form 1099-DIV, or similar statement, showing your share of the foreign income, and your share of the foreign taxes paid. Irs 1040ez 2012 instructions If you do not receive this information, you will need to contact the fund. Irs 1040ez 2012 instructions Controlled foreign corporation shareholder. Irs 1040ez 2012 instructions   If you are a shareholder of a controlled foreign corporation and choose to be taxed at corporate rates on the amount you must include in gross income from that corporation, you can claim the credit based on your share of foreign taxes paid or accrued by the controlled foreign corporation. Irs 1040ez 2012 instructions If you make this election, you must claim the credit by filing Form 1118, Foreign Tax Credit—Corporations. Irs 1040ez 2012 instructions Controlled foreign corporation. Irs 1040ez 2012 instructions   A controlled foreign corporation is a foreign corporation in which U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions shareholders own more than 50% of the voting power or value of the stock. Irs 1040ez 2012 instructions You are considered a U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions shareholder if you own, directly or indirectly, 10% or more of the total voting power of all classes of the foreign corporation's stock. Irs 1040ez 2012 instructions See Internal Revenue Code sections 951(b) and 958(b) for more information. Irs 1040ez 2012 instructions Tax Must Be the Legal and Actual Foreign Tax Liability The amount of foreign tax that qualifies is not necessarily the amount of tax withheld by the foreign country. Irs 1040ez 2012 instructions Only the legal and actual foreign tax liability that you paid or accrued during the year qualifies for the credit. Irs 1040ez 2012 instructions Foreign tax refund. Irs 1040ez 2012 instructions   You cannot take a foreign tax credit for income taxes paid to a foreign country if it is reasonably certain the amount would be refunded, credited, rebated, abated, or forgiven if you made a claim. Irs 1040ez 2012 instructions   For example, the United States has tax treaties with many countries allowing U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions citizens and residents reductions in the rates of tax of those foreign countries. Irs 1040ez 2012 instructions However, some treaty countries require U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions citizens and residents to pay the tax figured without regard to the lower treaty rates and then claim a refund for the amount by which the tax actually paid is more than the amount of tax figured using the lower treaty rate. Irs 1040ez 2012 instructions The qualified foreign tax is the amount figured using the lower treaty rate and not the amount actually paid, because the excess tax is refundable. Irs 1040ez 2012 instructions Subsidy received. Irs 1040ez 2012 instructions   Tax payments a foreign country returns to you in the form of a subsidy do not qualify for the foreign tax credit. Irs 1040ez 2012 instructions This rule applies even if the subsidy is given to a person related to you, or persons who participated with you in a transaction or a related transaction. Irs 1040ez 2012 instructions A subsidy can be provided by any means but must be determined, directly or indirectly, in relation to the amount of tax, or to the base used to figure the tax. Irs 1040ez 2012 instructions   The term “subsidy” includes any type of benefit. Irs 1040ez 2012 instructions Some ways of providing a subsidy are refunds, credits, deductions, payments, or discharges of obligations. Irs 1040ez 2012 instructions Shareholder receiving refund for corporate tax in integrated system. Irs 1040ez 2012 instructions   Under some foreign tax laws and treaties, a shareholder is considered to have paid part of the tax that is imposed on the corporation. Irs 1040ez 2012 instructions You may be able to claim a refund of these taxes from the foreign government. Irs 1040ez 2012 instructions You must include the refund (including any amount withheld) in your income in the year received. Irs 1040ez 2012 instructions Any tax withheld from the refund is a qualified foreign tax. Irs 1040ez 2012 instructions Example. Irs 1040ez 2012 instructions You are a shareholder of a French corporation. Irs 1040ez 2012 instructions You receive a $100 refund of the tax paid to France by the corporation on the earnings distributed to you as a dividend. Irs 1040ez 2012 instructions The French government imposes a 15% withholding tax ($15) on the refund you received. Irs 1040ez 2012 instructions You receive a check for $85. Irs 1040ez 2012 instructions You include $100 in your income. Irs 1040ez 2012 instructions The $15 of tax withheld is a qualified foreign tax. Irs 1040ez 2012 instructions Tax Must Be an Income Tax (or Tax in Lieu of Income Tax) In most cases, only income, war profits, and excess profits taxes (income taxes) qualify for the foreign tax credit. Irs 1040ez 2012 instructions Foreign taxes on wages, dividends, interest, and royalties qualify for the credit in most cases. Irs 1040ez 2012 instructions Furthermore, foreign taxes on income can qualify even though they are not imposed under an income tax law if the tax is in lieu of an income, war profits, or excess profits tax. Irs 1040ez 2012 instructions See Taxes in Lieu of Income Taxes , later. Irs 1040ez 2012 instructions Income Tax Simply because the levy is called an income tax by the foreign taxing authority does not make it an income tax for this purpose. Irs 1040ez 2012 instructions A foreign levy is an income tax only if it meets both of the following requirements. Irs 1040ez 2012 instructions It is a tax; that is, you have to pay it and you get no specific economic benefit (discussed below) from paying it. Irs 1040ez 2012 instructions The predominant character of the tax is that of an income tax in the U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions sense. Irs 1040ez 2012 instructions A foreign levy may meet these requirements even if the foreign tax law differs from U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax law. Irs 1040ez 2012 instructions The foreign law may include in income items that U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions law does not include, or it may allow certain exclusions or deductions that U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions law does not allow. Irs 1040ez 2012 instructions Specific economic benefit. Irs 1040ez 2012 instructions   In most cases, you get a specific economic benefit if you receive, or are considered to receive, an economic benefit from the foreign country imposing the levy, and: If there is a generally imposed income tax, the economic benefit is not available on substantially the same terms to all persons subject to the income tax, or If there is no generally imposed income tax, the economic benefit is not available on substantially the same terms to the population of the foreign country in general. Irs 1040ez 2012 instructions   You are considered to receive a specific economic benefit if you have a business transaction with a person who receives a specific economic benefit from the foreign country and, under the terms and conditions of the transaction, you receive directly or indirectly all or part of the benefit. Irs 1040ez 2012 instructions   However, see the exception discussed later under Pension, unemployment, and disability fund payments . Irs 1040ez 2012 instructions Economic benefits. Irs 1040ez 2012 instructions   Economic benefits include the following. Irs 1040ez 2012 instructions Goods. Irs 1040ez 2012 instructions Services. Irs 1040ez 2012 instructions Fees or other payments. Irs 1040ez 2012 instructions Rights to use, acquire, or extract resources, patents, or other property the foreign country owns or controls. Irs 1040ez 2012 instructions Discharges of contractual obligations. Irs 1040ez 2012 instructions   In most cases, the right or privilege merely to engage in business is not an economic benefit. Irs 1040ez 2012 instructions Dual-capacity taxpayers. Irs 1040ez 2012 instructions   If you are subject to a foreign country's levy and you also receive a specific economic benefit from that foreign country, you are a “dual-capacity taxpayer. Irs 1040ez 2012 instructions ” As a dual-capacity taxpayer, you cannot claim a credit for any part of the foreign levy, unless you establish that the amount paid under a distinct element of the foreign levy is a tax, rather than a compulsory payment for a direct or indirect specific economic benefit. Irs 1040ez 2012 instructions    For more information on how to establish amounts paid under separate elements of a levy, write to: Internal Revenue Service International Section Philadelphia, PA 19255-0725 Pension, unemployment, and disability fund payments. Irs 1040ez 2012 instructions   A foreign tax imposed on an individual to pay for retirement, old-age, death, survivor, unemployment, illness, or disability benefits, or for substantially similar purposes, is not payment for a specific economic benefit if the amount of the tax does not depend on the age, life expectancy, or similar characteristics of that individual. Irs 1040ez 2012 instructions    No deduction or credit is allowed, however, for social security taxes paid or accrued to a foreign country with which the United States has a social security agreement. Irs 1040ez 2012 instructions For more information about these agreements, see Publication 54. Irs 1040ez 2012 instructions Soak-up taxes. Irs 1040ez 2012 instructions   A foreign tax is not predominantly an income tax and does not qualify for credit to the extent it is a soak-up tax. Irs 1040ez 2012 instructions A tax is a soak-up tax to the extent that liability for it depends on the availability of a credit for it against income tax imposed by another country. Irs 1040ez 2012 instructions This rule applies only if and to the extent that the foreign tax would not be imposed if the credit were not available. Irs 1040ez 2012 instructions Penalties and interest. Irs 1040ez 2012 instructions   Amounts paid to a foreign government to satisfy a liability for interest, fines, penalties, or any similar obligation are not taxes and do not qualify for the credit. Irs 1040ez 2012 instructions Taxes not based on income. Irs 1040ez 2012 instructions   Foreign taxes based on gross receipts or the number of units produced, rather than on realized net income, do not qualify unless they are imposed in lieu of an income tax, as discussed next. Irs 1040ez 2012 instructions Taxes based on assets, such as property taxes, do not qualify for the credit. Irs 1040ez 2012 instructions Taxes in Lieu of Income Taxes A tax paid or accrued to a foreign country qualifies for the credit if it is imposed in lieu of an income tax otherwise generally imposed. Irs 1040ez 2012 instructions A foreign levy is a tax in lieu of an income tax only if: It is not payment for a specific economic benefit as discussed earlier, and The tax is imposed in place of, and not in addition to, an income tax otherwise generally imposed. Irs 1040ez 2012 instructions A tax in lieu of an income tax does not have to be based on realized net income. Irs 1040ez 2012 instructions A foreign tax imposed on gross income, gross receipts or sales, or the number of units produced or exported can qualify for the credit. Irs 1040ez 2012 instructions In most cases, a soak-up tax (discussed earlier) does not qualify as a tax in lieu of an income tax. Irs 1040ez 2012 instructions However, if the foreign country imposes a soak-up tax in lieu of an income tax, the amount that does not qualify for foreign tax credit is the lesser of the following amounts. Irs 1040ez 2012 instructions The soak-up tax. Irs 1040ez 2012 instructions The foreign tax you paid that is more than the amount you would have paid if you had been subject to the generally imposed income tax. Irs 1040ez 2012 instructions Foreign Taxes for Which You Cannot Take a Credit This part discusses the foreign taxes for which you cannot take a credit. Irs 1040ez 2012 instructions These are: Taxes on excluded income, Taxes for which you can only take an itemized deduction, Taxes on foreign mineral income, Taxes from international boycott operations, A portion of taxes on combined foreign oil and gas income, Taxes of U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions persons controlling foreign corporations and partnerships who fail to file required information returns, and Taxes related to a foreign tax splitting event. Irs 1040ez 2012 instructions Taxes on Excluded Income You cannot take a credit for foreign taxes paid or accrued on certain income that is excluded from U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions gross income. Irs 1040ez 2012 instructions Foreign Earned Income and Housing Exclusions You must reduce your foreign taxes available for the credit by the amount of those taxes paid or accrued on income that is excluded from U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions income under the foreign earned income exclusion or the foreign housing exclusion. Irs 1040ez 2012 instructions See Publication 54 for more information on the foreign earned income and housing exclusions. Irs 1040ez 2012 instructions Wages completely excluded. Irs 1040ez 2012 instructions   If your wages are completely excluded, you cannot take a credit for any of the foreign taxes paid or accrued on these wages. Irs 1040ez 2012 instructions Wages partly excluded. Irs 1040ez 2012 instructions   If only part of your wages is excluded, you cannot take a credit for the foreign income taxes allocable to the excluded part. Irs 1040ez 2012 instructions You find the amount allocable to your excluded wages by multiplying the foreign tax paid or accrued on foreign earned income received or accrued during the tax year by a fraction. Irs 1040ez 2012 instructions   The numerator of the fraction is your foreign earned income and housing amounts excluded under the foreign earned income and housing exclusions for the tax year minus otherwise deductible expenses definitely related and properly apportioned to that income. Irs 1040ez 2012 instructions Deductible expenses do not include the foreign housing deduction. Irs 1040ez 2012 instructions   The denominator is your total foreign earned income received or accrued during the tax year minus all deductible expenses allocable to that income (including the foreign housing deduction). Irs 1040ez 2012 instructions If the foreign law taxes foreign earned income and some other income (for example, earned income from U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions sources or a type of income not subject to U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax), and the taxes on the other income cannot be segregated, the denominator of the fraction is the total amount of income subject to the foreign tax minus deductible expenses allocable to that income. Irs 1040ez 2012 instructions Example. Irs 1040ez 2012 instructions You are a U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions citizen and a cash basis taxpayer, employed by Company X and living in Country A. Irs 1040ez 2012 instructions Your records show the following: Foreign earned income received $125,000 Unreimbursed business travel expenses 20,000 Income tax paid to Country A 30,000 Exclusion of foreign earned  income and housing allowance 97,600     Because you can exclude part of your wages, you cannot claim a credit for part of the foreign taxes. Irs 1040ez 2012 instructions To find that part, do the following. Irs 1040ez 2012 instructions First, find the amount of business expenses allocable to excluded wages and therefore not deductible. Irs 1040ez 2012 instructions To do this, multiply the otherwise deductible expenses by a fraction. Irs 1040ez 2012 instructions That fraction is the excluded wages over your foreign earned income. Irs 1040ez 2012 instructions   $20,000 × $97,600 $125,000 = $15,616             Next, find the numerator of the fraction by which you will multiply the foreign taxes paid. Irs 1040ez 2012 instructions To do this, subtract business expenses allocable to excluded wages ($15,616) from excluded wages ($97,600). Irs 1040ez 2012 instructions The result is $81,984. Irs 1040ez 2012 instructions Then, find the denominator of the fraction by subtracting all your deductible expenses from all your foreign earned income ($125,000 − $20,000 = $105,000). Irs 1040ez 2012 instructions Finally, multiply the foreign tax you paid by the resulting fraction. Irs 1040ez 2012 instructions   $30,000 × $81,984  $105,000 = $23,424 The amount of Country A tax you cannot take a credit for is $23,424. Irs 1040ez 2012 instructions Taxes on Income From Puerto Rico Exempt From U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions Tax If you have income from Puerto Rican sources that is not taxable, you must reduce your foreign taxes paid or accrued by the taxes allocable to the exempt income. Irs 1040ez 2012 instructions For information on figuring the reduction, see Publication 570. Irs 1040ez 2012 instructions Possession Exclusion If you are a bona fide resident of American Samoa and exclude income from sources in American Samoa, you cannot take a credit for the taxes you pay or accrue on the excluded income. Irs 1040ez 2012 instructions For more information on this exclusion, see Publication 570. Irs 1040ez 2012 instructions Extraterritorial Income Exclusion You cannot take a credit for taxes you pay on qualifying foreign trade income excluded on Form 8873, Extraterritorial Income Exclusion. Irs 1040ez 2012 instructions However, see Internal Revenue Code section 943(d) for an exception for certain withholding taxes. Irs 1040ez 2012 instructions Taxes for Which You Can Only Take an Itemized Deduction You cannot claim a foreign tax credit for foreign income taxes paid or accrued under the following circumstances. Irs 1040ez 2012 instructions However, you can claim an itemized deduction for these taxes. Irs 1040ez 2012 instructions See Choosing To Take Credit or Deduction , earlier. Irs 1040ez 2012 instructions Taxes Imposed By Sanctioned Countries (Section 901(j) Income) You cannot claim a foreign tax credit for income taxes paid or accrued to any country if the income giving rise to the tax is for a period (the sanction period) during which: The Secretary of State has designated the country as one that repeatedly provides support for acts of international terrorism, The United States has severed or does not conduct diplomatic relations with the country, or The United States does not recognize the country's government, and that government is not otherwise eligible to purchase defense articles or services under the Arms Export Control Act. Irs 1040ez 2012 instructions The following countries meet this description for 2013. Irs 1040ez 2012 instructions Income taxes paid or accrued to these countries in 2013 do not qualify for the credit. Irs 1040ez 2012 instructions Cuba. Irs 1040ez 2012 instructions Iran. Irs 1040ez 2012 instructions Libya (but see Note later). Irs 1040ez 2012 instructions North Korea. Irs 1040ez 2012 instructions Sudan. Irs 1040ez 2012 instructions Syria. Irs 1040ez 2012 instructions Waiver of denial of the credit. Irs 1040ez 2012 instructions   A waiver can be granted to a sanctioned country if the President of the United States determines that granting the waiver is in the national interest of the United States and will expand trade and investment opportunities for U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions companies in the sanctioned country. Irs 1040ez 2012 instructions The President must report to Congress his intentions to grant the waiver and his reasons for granting the waiver not less than 30 days before the date on which the waiver is granted. Irs 1040ez 2012 instructions Note. Irs 1040ez 2012 instructions Effective December 10, 2004, the President granted a waiver to Libya. Irs 1040ez 2012 instructions Income taxes arising on or after this date qualify for the credit if they meet the other requirements in this publication. Irs 1040ez 2012 instructions Limit on credit. Irs 1040ez 2012 instructions   In figuring the foreign tax credit limit, discussed later, income from a sanctioned country is a separate category of foreign income unless a Presidential waiver is granted. Irs 1040ez 2012 instructions You must fill out a separate Form 1116 for this income. Irs 1040ez 2012 instructions This will prevent you from claiming a credit for foreign taxes paid or accrued to the sanctioned country. Irs 1040ez 2012 instructions Example. Irs 1040ez 2012 instructions You lived and worked in Iran until August, when you were transferred to Italy. Irs 1040ez 2012 instructions You paid taxes to each country on the income earned in that country. Irs 1040ez 2012 instructions You cannot claim a foreign tax credit for the foreign taxes paid on the income earned in Iran. Irs 1040ez 2012 instructions Because the income earned in Iran is a separate category of foreign income, you must fill out a separate Form 1116 for that income. Irs 1040ez 2012 instructions You cannot take a credit for taxes paid on the income earned in Iran, but that income is taxable by the United States. Irs 1040ez 2012 instructions Figuring the credit when a sanction ends. Irs 1040ez 2012 instructions    Table 1 lists the countries for which sanctions have ended or for which a Presidential waiver has been granted. Irs 1040ez 2012 instructions For any of these countries, you can claim a foreign tax credit for the taxes paid or accrued to that country on the income for the period that begins after the end of the sanction period or the date the Presidential waiver was granted. Irs 1040ez 2012 instructions Example. Irs 1040ez 2012 instructions The sanctions against Country X ended on July 31. Irs 1040ez 2012 instructions On August 19, you receive a distribution from a mutual fund of Country X income. Irs 1040ez 2012 instructions The fund paid Country X income tax for you on the distribution. Irs 1040ez 2012 instructions Because the distribution was made after the sanction ended, you may include the foreign tax paid on the distribution to compute your foreign tax credit. Irs 1040ez 2012 instructions Amounts for the nonsanctioned period. Irs 1040ez 2012 instructions   If a sanction period ends (or a Presidential waiver is granted) during your tax year and you are not able to determine the actual income and taxes for that period, you can allocate amounts to that period based on the number of days in the period that fall in your tax year. Irs 1040ez 2012 instructions Multiply the income or taxes for the year by the following fraction to determine the amounts allocable to that period. Irs 1040ez 2012 instructions   Number of nonsanctioned days in year  Number of days in year Example. Irs 1040ez 2012 instructions You are a calendar year filer and received $20,000 of income from Country X in 2013 on which you paid tax of $4,500. Irs 1040ez 2012 instructions Sanctions against Country X ended on July 11, 2013. Irs 1040ez 2012 instructions You are unable to determine how much of the income or tax is for the nonsanctioned period. Irs 1040ez 2012 instructions Because your tax year starts on January 1, and the Country X sanction ended on July 11, 2013, 173 days of your tax year are in the nonsanctioned period. Irs 1040ez 2012 instructions You would compute the income for the nonsanctioned period as follows. Irs 1040ez 2012 instructions 173 365 × $20,000 = $9,479             You would figure the tax for the nonsanctioned period as follows. Irs 1040ez 2012 instructions 173 365 × $4,500 = $2,133 To figure your foreign tax credit, you would use $9,479 as the income from Country X and $2,133 as the tax. Irs 1040ez 2012 instructions Further information. Irs 1040ez 2012 instructions   The rules for figuring the foreign tax credit after a country's sanction period ends are more fully explained in Revenue Ruling 92-62, Cumulative Bulletin 1992-2, page 193. Irs 1040ez 2012 instructions This Cumulative Bulletin can be found in many libraries and IRS offices. Irs 1040ez 2012 instructions Table 1. Irs 1040ez 2012 instructions Countries Removed From the Sanction List or Granted Presidential Waiver   Sanction Period Country Starting Date Ending Date Iraq February 1, 1991 June 27, 2004 Libya January 1, 1987 December 9, 2004* *Presidential waiver granted for qualified income taxes arising after December 9, 2004. Irs 1040ez 2012 instructions Taxes Imposed on Certain Dividends You cannot claim a foreign tax credit for withholding tax (defined later ) on dividends paid or accrued if either of the following applies to the dividends. Irs 1040ez 2012 instructions The dividends are on stock you held for less than 16 days during the 31-day period that begins 15 days before the ex-dividend date (defined later). Irs 1040ez 2012 instructions The dividends are for a period or periods totaling more than 366 days on preferred stock you held for less than 46 days during the 91-day period that begins 45 days before the ex-dividend date. Irs 1040ez 2012 instructions If the dividend is not for more than 366 days, rule (1) applies to the preferred stock. Irs 1040ez 2012 instructions When figuring how long you held the stock, count the day you sold it, but do not count the day you acquired it or any days on which you were protected from risk of loss. Irs 1040ez 2012 instructions Regardless of how long you held the stock, you cannot claim the credit to the extent you have an obligation under a short sale or otherwise to make payments related to the dividend for positions in substantially similar or related property. Irs 1040ez 2012 instructions Withholding tax. Irs 1040ez 2012 instructions   For this purpose, withholding tax includes any tax determined on a gross basis. Irs 1040ez 2012 instructions It does not include any tax which is in the nature of a prepayment of a tax imposed on a net basis. Irs 1040ez 2012 instructions Ex-dividend date. Irs 1040ez 2012 instructions   The ex-dividend date is the first date following the declaration of a dividend on which the purchaser of a stock is not entitled to receive the next dividend payment. Irs 1040ez 2012 instructions Example 1. Irs 1040ez 2012 instructions You bought common stock from a foreign corporation on November 3. Irs 1040ez 2012 instructions You sold the stock on November 19. Irs 1040ez 2012 instructions You received a dividend on this stock because you owned it on the ex-dividend date of November 5. Irs 1040ez 2012 instructions To claim the credit, you must have held the stock for at least 16 days within the 31-day period that began on October 21 (15 days before the ex-dividend date). Irs 1040ez 2012 instructions Because you held the stock for 16 days, from November 4 until November 19, you are entitled to the credit. Irs 1040ez 2012 instructions Example 2. Irs 1040ez 2012 instructions The facts are the same as in Example 1 except that you sold the stock on November 14. Irs 1040ez 2012 instructions You held the stock for only 11 days. Irs 1040ez 2012 instructions You are not entitled to the credit. Irs 1040ez 2012 instructions Exception. Irs 1040ez 2012 instructions   If you are a securities dealer who actively conducts business in a foreign country, you may be able to claim a foreign tax credit for qualified taxes paid on dividends regardless of how long you held the stock or whether you were obligated to make payments for positions in substantially similar or related property. Irs 1040ez 2012 instructions See section 901(k)(4) of the Internal Revenue Code for more information. Irs 1040ez 2012 instructions Taxes Withheld on Income or Gain (Other Than Dividends) For income or gain (other than dividends) paid or accrued on property, you cannot claim a foreign tax credit for withholding tax (defined later): If you have not held the property for at least 16 days during the 31-day period that begins 15 days before the date on which the right to receive the payment arises, or To the extent you have to make related payments on positions in substantially similar or related property. Irs 1040ez 2012 instructions When figuring how long you held the property, count the day you sold it, but do not count the day you acquired it or any days on which you were protected from risk of loss. Irs 1040ez 2012 instructions Withholding tax. Irs 1040ez 2012 instructions   For this purpose, withholding tax includes any tax determined on a gross basis. Irs 1040ez 2012 instructions It does not include any tax which is in the nature of a prepayment of a tax imposed on a net basis. Irs 1040ez 2012 instructions Exception for dealers. Irs 1040ez 2012 instructions   If you are a dealer in property who actively conducts business in a foreign country, you may be able to claim a foreign tax credit for qualified taxes withheld on income or gain from that property regardless of how long you held it or whether you have to make related payments on positions in substantially similar or related property. Irs 1040ez 2012 instructions See section 901(I)(2) of the Internal Revenue Code for more information. Irs 1040ez 2012 instructions Covered Asset Acquisition ???You cannot take a credit for the disqualified portion of any foreign tax paid or accrued in connection with a covered asset acquisition. Irs 1040ez 2012 instructions A covered asset acquisition includes certain acquisitions that result in a stepped-up basis for U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax purposes but not for foreign tax purposes. Irs 1040ez 2012 instructions For more information, see Internal Revenue Code section 901(m). Irs 1040ez 2012 instructions The IRS intends to issue guidance that will explain this provision in greater detail. Irs 1040ez 2012 instructions Taxes in Connection With the Purchase or Sale of Oil or Gas You cannot claim a foreign tax credit for taxes paid or accrued to a foreign country in connection with the purchase or sale of oil or gas extracted in that country if you do not have an economic interest in the oil or gas, and the purchase price or sales price is different from the fair market value of the oil or gas at the time of purchase or sale. Irs 1040ez 2012 instructions Taxes on Foreign Mineral Income You must reduce any taxes paid or accrued to a foreign country or possession on mineral income from that country or possession if you were allowed a deduction for percentage depletion for any part of the mineral income. Irs 1040ez 2012 instructions For details, see Regulations section 1. Irs 1040ez 2012 instructions 901-3. Irs 1040ez 2012 instructions Taxes From International Boycott Operations If you participate in or cooperate with an international boycott during the tax year, your foreign taxes resulting from boycott activities will reduce the total taxes available for credit. Irs 1040ez 2012 instructions See the instructions for line 12 in the Form 1116 instructions to figure this reduction. Irs 1040ez 2012 instructions In most cases, this rule does not apply to employees with wages who are working and living in boycotting countries, or to retirees with pensions who are living in these countries. Irs 1040ez 2012 instructions List of boycotting countries. Irs 1040ez 2012 instructions   A list of the countries which may require participation in or cooperation with an international boycott is published by the Department of the Treasury. Irs 1040ez 2012 instructions As of November 2013, the following countries are listed. Irs 1040ez 2012 instructions Iraq. Irs 1040ez 2012 instructions Kuwait. Irs 1040ez 2012 instructions Lebanon. Irs 1040ez 2012 instructions Libya. Irs 1040ez 2012 instructions Qatar. Irs 1040ez 2012 instructions Saudi Arabia. Irs 1040ez 2012 instructions Syria. Irs 1040ez 2012 instructions United Arab Emirates. Irs 1040ez 2012 instructions Yemen. Irs 1040ez 2012 instructions    For information concerning changes to the list, write to: Internal Revenue Service International Section Philadelphia, PA 19255-0725 Determinations of whether the boycott rule applies. Irs 1040ez 2012 instructions   You may request a determination from the Internal Revenue Service as to whether a particular operation constitutes participation in or cooperation with an international boycott. Irs 1040ez 2012 instructions The procedures for obtaining a determination from the Service are outlined in Revenue Procedure 77-9 in Cumulative Bulletin 1977-1. Irs 1040ez 2012 instructions Cumulative Bulletins are available in most IRS offices and you are welcome to read them there. Irs 1040ez 2012 instructions Public inspection. Irs 1040ez 2012 instructions   A determination and any related background file is open to public inspection. Irs 1040ez 2012 instructions However, your identity and certain other information will remain confidential. Irs 1040ez 2012 instructions Reporting requirements. Irs 1040ez 2012 instructions   You must file a report with the IRS if you or any of the following persons have operations in or related to a boycotting country or with the government, a company, or a national of a boycotting country. Irs 1040ez 2012 instructions A foreign corporation in which you own 10% or more of the voting power of all voting stock but only if you own the stock of the foreign corporation directly or through foreign entities. Irs 1040ez 2012 instructions A partnership in which you are a partner. Irs 1040ez 2012 instructions A trust you are treated as owning. Irs 1040ez 2012 instructions Form 5713 required. Irs 1040ez 2012 instructions   If you have to file a report, you must use Form 5713, International Boycott Report, and attach all supporting schedules. Irs 1040ez 2012 instructions See the Instructions for Form 5713 for information on when and where to file the form. Irs 1040ez 2012 instructions Penalty for failure to file. Irs 1040ez 2012 instructions   If you willfully fail to make a report, in addition to other penalties, you may be fined $25,000 or imprisoned for no more than one year, or both. Irs 1040ez 2012 instructions Taxes on Combined Foreign Oil and Gas Income You must reduce your foreign taxes by a portion of any foreign taxes imposed on combined foreign oil and gas income. Irs 1040ez 2012 instructions The amount of the reduction is the amount by which your foreign oil and gas taxes exceed the amount of your combined foreign oil and gas income multiplied by a fraction equal to your pre-credit U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions tax liability (Form 1040, line 44) divided by your worldwide taxable income. Irs 1040ez 2012 instructions You may be entitled to carry over to other years taxes reduced under this rule. Irs 1040ez 2012 instructions See Internal Revenue Code section 907(f). Irs 1040ez 2012 instructions Combined foreign oil and gas income means the sum of foreign oil related income and foreign oil and gas extraction income. Irs 1040ez 2012 instructions Foreign oil and gas taxes are the sum of foreign oil and gas extraction taxes and foreign oil related taxes. Irs 1040ez 2012 instructions Taxes of U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions Persons Controlling Foreign Corporations and Partnerships If you had control of a foreign corporation or a foreign partnership for the annual accounting period of that corporation or partnership that ended with or within your tax year, you may have to file an annual information return. Irs 1040ez 2012 instructions If you do not file the required information return, you may have to reduce the foreign taxes that may be used for the foreign tax credit. Irs 1040ez 2012 instructions See Penalty for not filing Form 5471 or Form 8865 , later. Irs 1040ez 2012 instructions U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions persons controlling foreign corporations. Irs 1040ez 2012 instructions   If you are a U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions citizen or resident who had control of a foreign corporation for an uninterrupted period of at least 30 days during the annual accounting period of that corporation, you may have to file an annual information return on Form 5471, Information Return of U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions Persons With Respect To Certain Foreign Corporations. Irs 1040ez 2012 instructions Under this rule, you generally had control of a foreign corporation if at any time during your tax year you owned: Stock possessing more than 50% of the total combined voting power of all classes of stock entitled to vote, or More than 50% of the total value of shares of all classes of stock of the foreign corporation. Irs 1040ez 2012 instructions U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions persons controlling foreign partnerships. Irs 1040ez 2012 instructions   If you are a U. Irs 1040ez 2012 instructions S. Irs 1040ez 2012 instructions citizen or resident who had control of a foreign partnership at any time during the partnership's tax year, you may have to file