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Irs 1040ez Form 2012

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Irs 1040ez Form 2012

Irs 1040ez form 2012 Publication 595 - Main Contents Table of Contents Capital Construction FundCCF Accounts Types of Accounts You Must Maintain Within a CCF Tax Treatment of CCF Deposits Tax Treatment of CCF Earnings Tax Treatment of CCF Withdrawals More Information How To Get Tax Help Capital Construction Fund The following sections discuss CCF accounts and the types of bookkeeping accounts you must maintain when you invest in a CCF account. Irs 1040ez form 2012 They also discuss the income tax treatment of CCF deposits, earnings, and withdrawals. Irs 1040ez form 2012 CCF Accounts This section explains who can open a CCF account and how to use the account to defer income tax. Irs 1040ez form 2012 Opening a CCF account. Irs 1040ez form 2012   If you are a U. Irs 1040ez form 2012 S. Irs 1040ez form 2012 citizen and you own or lease one or more eligible vessels (defined later), you can open a CCF account. Irs 1040ez form 2012 However, before you open your CCF account, you must enter into an agreement with the Secretary of Commerce through the NMFS. Irs 1040ez form 2012 This agreement will establish the following. Irs 1040ez form 2012 Agreement vessels. Irs 1040ez form 2012 Eligible vessels named in the agreement that will be the basis for the deferral of income tax. Irs 1040ez form 2012 Planned use of withdrawals. Irs 1040ez form 2012 Use of CCF funds to acquire, build, or rebuild a vessel. Irs 1040ez form 2012 CCF depository. Irs 1040ez form 2012 Where your CCF funds will be held. Irs 1040ez form 2012    You can request an application kit or get additional information from NMFS at the following address. Irs 1040ez form 2012 NOAA/NMFS, Financial Services Division, F/MB5 Capital Construction Fund Program 1315 East-West Highway Silver Spring, MD 20910-3282    You can obtain information on the Capital Construction Fund Program at the following website: www. Irs 1040ez form 2012 nmfs. Irs 1040ez form 2012 noaa. Irs 1040ez form 2012 gov/mb/financial_services/ccf. Irs 1040ez form 2012 htm. Irs 1040ez form 2012    You can call NMFS to request an application kit or get additional information at (301) 713-2393 (ext. Irs 1040ez form 2012 204). Irs 1040ez form 2012 Their fax number is (301) 713-1939. Irs 1040ez form 2012 Eligible vessels. Irs 1040ez form 2012   There are two types of vessels that may be considered eligible, those weighing 5 tons or more and those weighing less than 5 tons. Irs 1040ez form 2012 For each type, certain requirements must be met. Irs 1040ez form 2012 Vessel weighing 5 tons or more. Irs 1040ez form 2012   To be considered eligible, the vessel must meet all the following requirements. Irs 1040ez form 2012 Be built or rebuilt in the United States. Irs 1040ez form 2012 Be documented under the laws of the United States. Irs 1040ez form 2012 Be used commercially in the fisheries of the United States. Irs 1040ez form 2012 Be operated in the foreign or domestic commerce of the United States. Irs 1040ez form 2012 Vessel weighing less than 5 tons. Irs 1040ez form 2012   A small vessel, weighing at least 2 net tons but less than 5 net tons, must meet all the following requirements to be considered eligible. Irs 1040ez form 2012 Be built or rebuilt in the United States. Irs 1040ez form 2012 Be owned by a U. Irs 1040ez form 2012 S. Irs 1040ez form 2012 citizen. Irs 1040ez form 2012 Have a home port in the United States. Irs 1040ez form 2012 Be used commercially in the fisheries of the United States. Irs 1040ez form 2012 Deferring tax on CCF deposits and earnings. Irs 1040ez form 2012   You can use a CCF account to defer income tax by taking the following actions. Irs 1040ez form 2012 Making deposits to your CCF account from taxable income. Irs 1040ez form 2012 Excluding from income deposits assigned to certain accounts (discussed later). Irs 1040ez form 2012 Making withdrawals from your CCF account when you acquire, build, or rebuild fishing vessels. Irs 1040ez form 2012 Reducing the basis of fishing vessels you acquire, build, or rebuild to recapture amounts previously excluded from tax. Irs 1040ez form 2012    Reporting requirements. Irs 1040ez form 2012 Beginning with the tax year in which you establish your agreement, you must report annual deposit and withdrawal activity to the NMFS on NOAA Form 34-82. Irs 1040ez form 2012 This form is due within 30 days after you file your federal income tax return even if no deposits or withdrawals are made. Irs 1040ez form 2012 For more information, contact the NMFS at the address or phone number given earlier. Irs 1040ez form 2012 Types of Accounts You Must Maintain Within a CCF This section discusses the three types of bookkeeping accounts you must maintain when you invest in a CCF account. Irs 1040ez form 2012 Your total CCF deposits and earnings for any given year are limited to the amount attributed to these three accounts for that year. Irs 1040ez form 2012 Capital account. Irs 1040ez form 2012   The capital account consists primarily of amounts attributable to the following items. Irs 1040ez form 2012 Allowable depreciation deductions for agreement vessels. Irs 1040ez form 2012 Any nontaxable return of capital from either (a) or (b), below. Irs 1040ez form 2012 The sale or other disposition of agreement vessels. Irs 1040ez form 2012 Insurance or indemnity proceeds attributable to agreement vessels. Irs 1040ez form 2012 Any tax-exempt interest earned on state or local bonds in your CCF account. Irs 1040ez form 2012 Capital gain account. Irs 1040ez form 2012   The capital gain account consists of amounts attributable to the following items reduced by any capital losses from assets held in your CCF account for more than 6 months. Irs 1040ez form 2012 Any capital gain from either of the following sources. Irs 1040ez form 2012 The sale or other disposition of agreement vessels held for more than 6 months. Irs 1040ez form 2012 Insurance or indemnity proceeds attributable to agreement vessels held for more than 6 months. Irs 1040ez form 2012 Any capital gain from assets held in your CCF account for more than 6 months. Irs 1040ez form 2012 Ordinary income account. Irs 1040ez form 2012   The ordinary income account consists of amounts attributable to the following items. Irs 1040ez form 2012 Any earnings (without regard to the carryback of any net operating or net capital loss) from the operation of agreement vessels in the fisheries of the United States or in the foreign or domestic commerce of the United States. Irs 1040ez form 2012 Any capital gain from the following sources reduced by any capital losses from assets held in your CCF account for 6 months or less. Irs 1040ez form 2012 The sale or other disposition of agreement vessels held for 6 months or less. Irs 1040ez form 2012 Insurance or indemnity proceeds attributable to agreement vessels held for 6 months or less. Irs 1040ez form 2012 Any capital gain from assets held in your CCF account for 6 months or less. Irs 1040ez form 2012 Any ordinary income (such as depreciation recapture) from either of the following sources. Irs 1040ez form 2012 The sale or other disposition of agreement vessels. Irs 1040ez form 2012 Insurance or indemnity proceeds attributable to agreement vessels. Irs 1040ez form 2012 Any interest (not including tax-exempt interest from state and local bonds), most dividends, and other ordinary income earned on the assets in your CCF account. Irs 1040ez form 2012 Tax Treatment of CCF Deposits This section explains the tax treatment of income used as the basis for CCF deposits. Irs 1040ez form 2012 Capital gains. Irs 1040ez form 2012   Do not report any transaction that produces a capital gain if you deposit the net proceeds into your CCF account. Irs 1040ez form 2012 This treatment applies to either of the following transactions. Irs 1040ez form 2012 The sale or other disposition of an agreement vessel. Irs 1040ez form 2012 The receipt of insurance or indemnity proceeds attributable to an agreement vessel. Irs 1040ez form 2012 Depreciation recapture. Irs 1040ez form 2012   Do not report any transaction that produces depreciation recapture if you deposit the net proceeds into your CCF account. Irs 1040ez form 2012 This treatment applies to either of the following transactions. Irs 1040ez form 2012 The sale or other disposition of an agreement vessel. Irs 1040ez form 2012 The receipt of insurance or indemnity proceeds attributable to an agreement vessel. Irs 1040ez form 2012 Earnings from operations. Irs 1040ez form 2012   Report earnings from the operation of agreement vessels on your Schedule C or C-EZ (Form 1040) even if you deposit part of these earnings into your CCF account. Irs 1040ez form 2012 You subtract any part of the earnings you deposited into your CCF account from the amount you would otherwise enter as taxable income on Form 1040, line 43 (for 2005). Irs 1040ez form 2012 Next to line 43, write “CCF” and the amount of the deposits. Irs 1040ez form 2012 Do not deduct these CCF deposits on Schedule C or C-EZ (Form 1040). Irs 1040ez form 2012 If you deposit earnings from operations into your CCF account and you must complete other forms such as Form 6251, Alternative Minimum Tax (Individuals), or a worksheet for Schedule D (Form 1040), you will need to make an extra computation. Irs 1040ez form 2012 When the other form instructs you to use the amount from Form 1040, line 41 (for 2005), do not use that amount. Irs 1040ez form 2012 Instead, add Form 1040, lines 42 and 43 (for 2005), and use that amount. Irs 1040ez form 2012 Self-employment tax. Irs 1040ez form 2012   You must use your net profit or loss from your fishing business to figure your self-employment tax. Irs 1040ez form 2012 Do not reduce your net profit or loss by any earnings from operations you deposit into your CCF account. Irs 1040ez form 2012    Partnerships and S corporations. Irs 1040ez form 2012 The deduction for partnership earnings from operations deposited into a CCF account is separately stated on Schedule K (Form 1065), line 13d, and allocated to the partners on Schedule K-1 (Form 1065), box 13 (for 2005). Irs 1040ez form 2012   The deduction for S corporation earnings deposited into a CCF account is separately stated on Schedule K (Form 1120S), line 12d, and allocated to the shareholders on Schedule K-1 (Form 1120S), box 12 (for 2005). Irs 1040ez form 2012 Tax Treatment of CCF Earnings This section explains the tax treatment of the earnings from the assets in your CCF account when the earnings are redeposited or left in your account. Irs 1040ez form 2012 However, if you choose to withdraw the earnings in the year earned, you must generally pay income tax on them. Irs 1040ez form 2012 Capital gains. Irs 1040ez form 2012   Do not report any capital gains from the sale of capital assets held in your CCF account. Irs 1040ez form 2012 This includes capital gain distributions reported to you on Form 1099-DIV or a substitute statement. Irs 1040ez form 2012 However, you should attach a statement to your tax return to list the payers and the amounts and to identify the capital gains as “CCF account earnings. Irs 1040ez form 2012 ” Interest and dividends. Irs 1040ez form 2012   Do not report any ordinary income (such as interest and dividends) you earn on the assets in your CCF account. Irs 1040ez form 2012 However, you should attach a statement to your return to list the payers and the amounts and to identify them as “CCF account earnings. Irs 1040ez form 2012 ”   If you are required to file Schedule B (Form 1040), you can add these earnings to the list of payers and amounts on line 1 or line 5 and identify them as “CCF earnings. Irs 1040ez form 2012 ” Then, subtract the same amounts from the list and identify them as “CCF deposits. Irs 1040ez form 2012 ” Tax-exempt interest. Irs 1040ez form 2012   Do not report tax-exempt interest from state or local bonds you held in your CCF account. Irs 1040ez form 2012 You are not required to report this interest on Form 1040, line 8b. Irs 1040ez form 2012 Tax Treatment of CCF Withdrawals This section discusses the tax treatment of amounts you withdraw from your CCF account during the year. Irs 1040ez form 2012 Qualified Withdrawals A qualified withdrawal from a CCF account is one that is approved by NMFS for either of the following uses. Irs 1040ez form 2012 Acquiring, building, or rebuilding qualified vessels (defined next). Irs 1040ez form 2012 Making principal payments on the mortgage of a qualified vessel. Irs 1040ez form 2012 NMFS will not approve amounts withdrawn to purchase nets not continuously attached to the vessel, such as seine nets, gill set-nets, and gill drift-nets. Irs 1040ez form 2012 NMFS will approve amounts withdrawn to purchase trawl nets. Irs 1040ez form 2012 Qualified vessel. Irs 1040ez form 2012   This is any vessel that meets all of the following requirements. Irs 1040ez form 2012 The vessel was built or rebuilt in the United States. Irs 1040ez form 2012 The vessel is documented under the laws of the United States. Irs 1040ez form 2012 The person maintaining the CCF account agrees with the Secretary of Commerce that the vessel will be operated in United States foreign trade, Great Lakes trade, noncontiguous domestic trade, or the fisheries of the United States. Irs 1040ez form 2012 How to determine the source of qualified withdrawals. Irs 1040ez form 2012   When you make a qualified withdrawal, the amount is treated as being withdrawn in the following order from the accounts listed below. Irs 1040ez form 2012 The capital account. Irs 1040ez form 2012 The capital gain account. Irs 1040ez form 2012 The ordinary income account. Irs 1040ez form 2012 Excluding qualified withdrawals from tax. Irs 1040ez form 2012   Do not report on your income tax return any qualified withdrawals from your CCF account. Irs 1040ez form 2012 Reduce the depreciable basis of fishing vessels you acquire, build, or rebuild when you make a qualified withdrawal from either the capital gain or the ordinary income account. Irs 1040ez form 2012 Nonqualified Withdrawals A nonqualified withdrawal from a CCF account is generally any withdrawal that is not a qualified withdrawal. Irs 1040ez form 2012 Qualified withdrawals are defined under Qualified Withdrawals, earlier. Irs 1040ez form 2012 Examples. Irs 1040ez form 2012   Examples of nonqualified withdrawals include the following amounts from either the ordinary income account or the capital gain account. Irs 1040ez form 2012 Amounts remaining in a CCF account upon termination of your agreement with NMFS. Irs 1040ez form 2012 Amounts you withdraw and use to make principal payments on the mortgage of a vessel if the basis of that vessel and the bases of other vessels you own have already been reduced to zero. Irs 1040ez form 2012 Amounts determined by the IRS to cause your CCF account balance to exceed the amount appropriate to meet your planned use of withdrawals. Irs 1040ez form 2012 You will generally be given 3 years to revise your plans to cover this excess balance. Irs 1040ez form 2012 Amounts you leave in your account for more than 25 years. Irs 1040ez form 2012 There is a graduated schedule under which the percentage applied to determine the amount of the nonqualified withdrawal increases from 20% in the 26th year to 100% in the 30th year. Irs 1040ez form 2012 How to determine the source of nonqualified withdrawals. Irs 1040ez form 2012    When you make a nonqualified withdrawal from your CCF account, the amount is treated as being withdrawn in the following order from the accounts listed below. Irs 1040ez form 2012 The ordinary income account. Irs 1040ez form 2012 The capital gain account. Irs 1040ez form 2012 The capital account. Irs 1040ez form 2012 Paying tax on nonqualified withdrawals. Irs 1040ez form 2012   In general, nonqualified withdrawals are taxed separately from your other gross income and at the highest marginal tax rate in effect for the year of withdrawal. Irs 1040ez form 2012 However, nonqualified withdrawals treated as made from the capital gain account are taxed at a rate that cannot exceed 15% for individuals and 34% for corporations. Irs 1040ez form 2012    Partnerships and S corporations. Irs 1040ez form 2012 Taxable nonqualified partnership withdrawals are separately stated on Schedule K (Form 1065), line 20c, and allocated to the partners on Schedule K-1 (Form 1065), box 20 (for 2005). Irs 1040ez form 2012 Taxable nonqualified withdrawals by an S corporation are separately stated on Schedule K (Form 1120S), line 17d, and allocated to the shareholders on Schedule K-1 (Form 1120S), box 17. Irs 1040ez form 2012 Interest. Irs 1040ez form 2012   You must pay interest on the additional tax due to nonqualified withdrawals that are treated as made from either the ordinary income or the capital gain account. Irs 1040ez form 2012 The interest period begins on the last date for paying tax for the year for which you deposited the amount you withdrew from your CCF account. Irs 1040ez form 2012 The period ends on the last date for paying tax for the year in which you make the nonqualified withdrawal. Irs 1040ez form 2012 The interest rate on the nonqualified withdrawal is simple interest. Irs 1040ez form 2012 The rate is subject to change annually and is published in the Federal Register. Irs 1040ez form 2012    You also can call NMFS at (301) 713-2393 (ext. Irs 1040ez form 2012 204) to get the current interest rate. Irs 1040ez form 2012 Interest deduction. Irs 1040ez form 2012   You can deduct the interest you pay on a nonqualified withdrawal as a trade or business expense. Irs 1040ez form 2012 Reporting the additional tax and interest. Irs 1040ez form 2012   Attach a statement to your income tax return showing your computation of the tax and the interest on a nonqualified withdrawal. Irs 1040ez form 2012 Include the tax and interest on Form 1040, line 63 (for 2005). Irs 1040ez form 2012 To the left of line 63, write in the amount of tax and interest and “CCF. Irs 1040ez form 2012 ” Tax benefit rule. Irs 1040ez form 2012   If any portion of your nonqualified withdrawal is properly attributable to contributions (not earnings on the contributions) you made to the CCF account that did not reduce your tax liability for any tax year prior to the withdrawal year, the following tax treatment applies. Irs 1040ez form 2012 The part that did not reduce your tax liability for any year prior to the withdrawal year is not taxed. Irs 1040ez form 2012 That part is allowed as a net operating loss deduction. Irs 1040ez form 2012 More Information This section briefly discussed the CCF program. Irs 1040ez form 2012 For more detailed information, see the following legislative authorities. Irs 1040ez form 2012 Section 607 of the Merchant Marine Act of 1936, as amended (46 U. Irs 1040ez form 2012 S. Irs 1040ez form 2012 C. Irs 1040ez form 2012 1177). Irs 1040ez form 2012 Chapter 2, Part 259 of title 50 of the Code of Federal Regulations (50 C. Irs 1040ez form 2012 F. Irs 1040ez form 2012 R. Irs 1040ez form 2012 , Part 259). Irs 1040ez form 2012 Subchapter A, Part 3 of title 26 of the Code of Federal Regulations (26 C. Irs 1040ez form 2012 F. Irs 1040ez form 2012 R. Irs 1040ez form 2012 , Part 3). Irs 1040ez form 2012 Section 7518 of the Internal Revenue Code (IRC 7518). Irs 1040ez form 2012 The application kit you can obtain from NMFS at the address or phone number given earlier may contain copies of some of these sources of additional information. Irs 1040ez form 2012 Also, see their web page at www. Irs 1040ez form 2012 nmfs. Irs 1040ez form 2012 noaa. Irs 1040ez form 2012 gov/mb/financial_services/ccf. Irs 1040ez form 2012 htm. Irs 1040ez form 2012 How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. Irs 1040ez form 2012 By selecting the method that is best for you, you will have quick and easy access to tax help. Irs 1040ez form 2012 Contacting your Taxpayer Advocate. Irs 1040ez form 2012   If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate. Irs 1040ez form 2012   The Taxpayer Advocate independently represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. Irs 1040ez form 2012 While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review. Irs 1040ez form 2012   To contact your Taxpayer Advocate: Call the Taxpayer Advocate toll free at 1-877-777-4778, Call, write, or fax the Taxpayer Advocate office in your area, Call 1-800-829-4059 if you are a TTY/TDD user, or Visit www. Irs 1040ez form 2012 irs. Irs 1040ez form 2012 gov/advocate. Irs 1040ez form 2012   For more information, see Publication 1546, How To Get Help With Unresolved Tax Problems (now available in Chinese, Korean, Russian, and Vietnamese, in addition to English and Spanish). Irs 1040ez form 2012 Free tax services. Irs 1040ez form 2012   To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. Irs 1040ez form 2012 It contains a list of free tax publications and an index of tax topics. Irs 1040ez form 2012 It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics. Irs 1040ez form 2012 Internet. Irs 1040ez form 2012 You can access the IRS website 24 hours a day, 7 days a week, at www. Irs 1040ez form 2012 irs. Irs 1040ez form 2012 gov to: E-file your return. Irs 1040ez form 2012 Find out about commercial tax preparation and e-file services available free to eligible taxpayers. Irs 1040ez form 2012 Check the status of your refund. Irs 1040ez form 2012 Click on Where's My Refund. Irs 1040ez form 2012 Be sure to wait at least 6 weeks from the date you filed your return (3 weeks if you filed electronically). Irs 1040ez form 2012 Have your tax return available because you will need to know your social security number, your filing status, and the exact whole dollar amount of your refund. Irs 1040ez form 2012 Download forms, instructions, and publications. Irs 1040ez form 2012 Order IRS products online. Irs 1040ez form 2012 Research your tax questions online. Irs 1040ez form 2012 Search publications online by topic or keyword. Irs 1040ez form 2012 View Internal Revenue Bulletins (IRBs) published in the last few years. Irs 1040ez form 2012 Figure your withholding allowances using our Form W-4 calculator. Irs 1040ez form 2012 Sign up to receive local and national tax news by email. Irs 1040ez form 2012 Get information on starting and operating a small business. Irs 1040ez form 2012 Phone. Irs 1040ez form 2012 Many services are available by phone. Irs 1040ez form 2012 Ordering forms, instructions, and publications. Irs 1040ez form 2012 Call 1-800-829-3676 to order current-year forms, instructions, and publications and prior-year forms and instructions. Irs 1040ez form 2012 You should receive your order within 10 days. Irs 1040ez form 2012 Asking tax questions. Irs 1040ez form 2012 Call the IRS with your tax questions at 1-800-829-1040. Irs 1040ez form 2012 Solving problems. Irs 1040ez form 2012 You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. Irs 1040ez form 2012 An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Irs 1040ez form 2012 Call your local Taxpayer Assistance Center for an appointment. Irs 1040ez form 2012 To find the number, go to www. Irs 1040ez form 2012 irs. Irs 1040ez form 2012 gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. Irs 1040ez form 2012 TTY/TDD equipment. Irs 1040ez form 2012 If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications. Irs 1040ez form 2012 TeleTax topics. Irs 1040ez form 2012 Call 1-800-829-4477 and press 2 to listen to pre-recorded messages covering various tax topics. Irs 1040ez form 2012 Refund information. Irs 1040ez form 2012 If you would like to check the status of your refund, call 1-800-829-4477 and press 1 for automated refund information and follow the recorded instructions or call 1-800-829-1954. Irs 1040ez form 2012 Be sure to wait at least 6 weeks from the date you filed your return (3 weeks if you filed electronically). Irs 1040ez form 2012 Have your tax return available because you will need to know your social security number, your filing status, and the exact whole dollar amount of your refund. Irs 1040ez form 2012 Evaluating the quality of our telephone services. Irs 1040ez form 2012 To ensure that IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. Irs 1040ez form 2012 One method is for a second IRS representative to sometimes listen in on or record telephone calls. Irs 1040ez form 2012 Another is to ask some callers to complete a short survey at the end of the call. Irs 1040ez form 2012 Walk-in. Irs 1040ez form 2012 Many products and services are available on a walk-in basis. Irs 1040ez form 2012 Products. Irs 1040ez form 2012 You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Irs 1040ez form 2012 Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD-ROM or photocopy from reproducible proofs. Irs 1040ez form 2012 Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes. Irs 1040ez form 2012 Services. Irs 1040ez form 2012 You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. Irs 1040ez form 2012 An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Irs 1040ez form 2012 If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you're more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. Irs 1040ez form 2012 No appointment is necessary, but if you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. Irs 1040ez form 2012 A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. Irs 1040ez form 2012 To find the number, go to www. Irs 1040ez form 2012 irs. Irs 1040ez form 2012 gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. Irs 1040ez form 2012 Mail. Irs 1040ez form 2012 You can send your order for forms, instructions, and publications to the address below and receive a response within 10 business days after your request is received. Irs 1040ez form 2012 National Distribution Center P. Irs 1040ez form 2012 O. Irs 1040ez form 2012 Box 8903 Bloomington, IL 61702-8903 CD-ROM for tax products. Irs 1040ez form 2012 You can order Publication 1796, IRS Tax Products on CD-ROM, and obtain: A CD that is released twice so you have the latest products. Irs 1040ez form 2012 The first release ships in late December and the final release ships in late February. Irs 1040ez form 2012 Current-year forms, instructions, and publications. Irs 1040ez form 2012 Prior-year forms, instructions, and publications. Irs 1040ez form 2012 Tax Map: an electronic research tool and finding aid. Irs 1040ez form 2012 Tax law frequently asked questions (FAQs). Irs 1040ez form 2012 Tax Topics from the IRS telephone response system. Irs 1040ez form 2012 Fill-in, print, and save features for most tax forms. Irs 1040ez form 2012 Internal Revenue Bulletins. Irs 1040ez form 2012 Toll-free and email technical support. Irs 1040ez form 2012 Buy the CD-ROM from National Technical Information Service (NTIS) at www. Irs 1040ez form 2012 irs. Irs 1040ez form 2012 gov/cdorders for $25 (no handling fee) or call 1-877-233-6767 toll free to buy the CD-ROM for $25 (plus a $5 handling fee). Irs 1040ez form 2012 CD-ROM for small businesses. Irs 1040ez form 2012 Publication 3207, Small Business Resource Guide CD-ROM, has a new look and enhanced navigation features. Irs 1040ez form 2012 This CD includes: Helpful information, such as how to prepare a business plan, find financing for your business, and much more. Irs 1040ez form 2012 All the business tax forms, instructions, and publications needed to successfully manage a business. Irs 1040ez form 2012 Tax law changes. Irs 1040ez form 2012 IRS Tax Map to help you find forms, instructions, and publications by searching on a keyword or topic. Irs 1040ez form 2012 Web links to various government agencies, business associations, and IRS organizations. Irs 1040ez form 2012 “Rate the Product” survey—your opportunity to suggest changes for future editions. Irs 1040ez form 2012 An updated version of this CD is available each year in early April. Irs 1040ez form 2012 You can get a free copy by calling 1-800-829-3676 or by visiting www. Irs 1040ez form 2012 irs. Irs 1040ez form 2012 gov/smallbiz. Irs 1040ez form 2012 Prev  Up  Next   Home   More Online Publications
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Understanding your CP53 Notice

We can't provide your refund through direct deposit, so we're sending you a refund check by mail.

Printable samples of this notice (PDF)

Tax publications you may find useful

How to get help

Calling the 1-800 number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 


What you need to do

Your refund should arrive 3-4 weeks from the date of your notice. Please call the number listed on your notice if you haven't received your refund check after 4 weeks.


Answers to Common Questions

Why can’t the IRS send me a direct deposit refund for my return from two years ago?
Direct Deposit is only available for current year returns. All other refunds are paid by check.

I just moved. Can you recall the check and send a new one to my new address?
Refund checks are mailed only to the address of record, which is the address provided on the tax return or the result of a permanent address change request submitted after the return is filed. You may request a change of address by calling the number shown on your notice, or by filing Form 8822, Change of Address.

What do I need to do to get my refund through direct deposit next year?
When filing your tax return, complete the requested banking information in the "Refund" section of your tax form if you want to direct deposit the entire amount into one account. If you want to deposit into more than one account, you must file Form 8888, Direct Deposit of Refund to More Than One Account, with your return.


Tips for next year

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about e-file.

Page Last Reviewed or Updated: 04-Mar-2014

The Irs 1040ez Form 2012

Irs 1040ez form 2012 Publication 541 - Main Content Table of Contents Forming a PartnershipOrganizations Classified as Partnerships Family Partnership Partnership Agreement Terminating a PartnershipIRS e-file (Electronic Filing) Exclusion From Partnership Rules Partnership Return (Form 1065) Partnership DistributionsSubstantially appreciated inventory items. Irs 1040ez form 2012 Partner's Gain or Loss Partner's Basis for Distributed Property Transactions Between Partnership and PartnersGuaranteed Payments Sale or Exchange of Property Contribution of Property Contribution of Services Basis of Partner's InterestAdjusted Basis Effect of Partnership Liabilities Disposition of Partner's InterestSale, Exchange, or Other Transfer Payments for Unrealized Receivables and Inventory Items Liquidation at Partner's Retirement or Death Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)Partnership Item. Irs 1040ez form 2012 Small Partnerships and the Small Partnership Exception Small Partnership TEFRA Election Role of Tax Matters Partner (TMP) in TEFRA Proceedings Statute of Limitations and TEFRA Amended Returns and Administrative Adjustment Requests (AARs) How To Get Tax Help Forming a Partnership The following sections contain general information about partnerships. Irs 1040ez form 2012 Organizations Classified as Partnerships An unincorporated organization with two or more members is generally classified as a partnership for federal tax purposes if its members carry on a trade, business, financial operation, or venture and divide its profits. Irs 1040ez form 2012 However, a joint undertaking merely to share expenses is not a partnership. Irs 1040ez form 2012 For example, co-ownership of property maintained and rented or leased is not a partnership unless the co-owners provide services to the tenants. Irs 1040ez form 2012 The rules you must use to determine whether an organization is classified as a partnership changed for organizations formed after 1996. Irs 1040ez form 2012 Organizations formed after 1996. Irs 1040ez form 2012   An organization formed after 1996 is classified as a partnership for federal tax purposes if it has two or more members and it is none of the following. Irs 1040ez form 2012 An organization formed under a federal or state law that refers to it as incorporated or as a corporation, body corporate, or body politic. Irs 1040ez form 2012 An organization formed under a state law that refers to it as a joint-stock company or joint-stock association. Irs 1040ez form 2012 An insurance company. Irs 1040ez form 2012 Certain banks. Irs 1040ez form 2012 An organization wholly owned by a state, local, or foreign government. Irs 1040ez form 2012 An organization specifically required to be taxed as a corporation by the Internal Revenue Code (for example, certain publicly traded partnerships). Irs 1040ez form 2012 Certain foreign organizations identified in section 301. Irs 1040ez form 2012 7701-2(b)(8) of the regulations. Irs 1040ez form 2012 A tax-exempt organization. Irs 1040ez form 2012 A real estate investment trust. Irs 1040ez form 2012 An organization classified as a trust under section 301. Irs 1040ez form 2012 7701-4 of the regulations or otherwise subject to special treatment under the Internal Revenue Code. Irs 1040ez form 2012 Any other organization that elects to be classified as a corporation by filing Form 8832. Irs 1040ez form 2012 For more information, see the instructions for Form 8832. Irs 1040ez form 2012 Limited liability company. Irs 1040ez form 2012   A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. Irs 1040ez form 2012 Unlike a partnership, none of the members of an LLC are personally liable for its debts. Irs 1040ez form 2012 An LLC may be classified for federal income tax purposes as either a partnership, a corporation, or an entity disregarded as an entity separate from its owner by applying the rules in Regulations section 301. Irs 1040ez form 2012 7701-3. Irs 1040ez form 2012 See Form 8832 and section 301. Irs 1040ez form 2012 7701-3 of the regulations for more details. Irs 1040ez form 2012 A domestic LLC with at least two members that does not file Form 8832 is classified as a partnership for federal income tax purposes. Irs 1040ez form 2012 Organizations formed before 1997. Irs 1040ez form 2012   An organization formed before 1997 and classified as a partnership under the old rules will generally continue to be classified as a partnership as long as the organization has at least two members and does not elect to be classified as a corporation by filing Form 8832. Irs 1040ez form 2012 Community property. Irs 1040ez form 2012    Spouses who own a qualified entity (defined later) can choose to classify the entity as a partnership for federal tax purposes by filing the appropriate partnership tax returns. Irs 1040ez form 2012 They can choose to classify the entity as a sole proprietorship by filing a Schedule C (Form 1040) listing one spouse as the sole proprietor. Irs 1040ez form 2012 A change in reporting position will be treated for federal tax purposes as a conversion of the entity. Irs 1040ez form 2012   A qualified entity is a business entity that meets all the following requirements. Irs 1040ez form 2012 The business entity is wholly owned by spouses as community property under the laws of a state, a foreign country, or a possession of the United States. Irs 1040ez form 2012 No person other than one or both spouses would be considered an owner for federal tax purposes. Irs 1040ez form 2012 The business entity is not treated as a corporation. Irs 1040ez form 2012   For more information about community property, see Publication 555, Community Property. Irs 1040ez form 2012 Publication 555 discusses the community property laws of Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Irs 1040ez form 2012 Family Partnership Members of a family can be partners. Irs 1040ez form 2012 However, family members (or any other person) will be recognized as partners only if one of the following requirements is met. Irs 1040ez form 2012 If capital is a material income-producing factor, they acquired their capital interest in a bona fide transaction (even if by gift or purchase from another family member), actually own the partnership interest, and actually control the interest. Irs 1040ez form 2012 If capital is not a material income-producing factor, they joined together in good faith to conduct a business. Irs 1040ez form 2012 They agreed that contributions of each entitle them to a share in the profits, and some capital or service has been (or is) provided by each partner. Irs 1040ez form 2012 Capital is material. Irs 1040ez form 2012   Capital is a material income-producing factor if a substantial part of the gross income of the business comes from the use of capital. Irs 1040ez form 2012 Capital is ordinarily an income-producing factor if the operation of the business requires substantial inventories or investments in plants, machinery, or equipment. Irs 1040ez form 2012 Capital is not material. Irs 1040ez form 2012   In general, capital is not a material income-producing factor if the income of the business consists principally of fees, commissions, or other compensation for personal services performed by members or employees of the partnership. Irs 1040ez form 2012 Capital interest. Irs 1040ez form 2012   A capital interest in a partnership is an interest in its assets that is distributable to the owner of the interest in either of the following situations. Irs 1040ez form 2012 The owner withdraws from the partnership. Irs 1040ez form 2012 The partnership liquidates. Irs 1040ez form 2012   The mere right to share in earnings and profits is not a capital interest in the partnership. Irs 1040ez form 2012 Gift of capital interest. Irs 1040ez form 2012   If a family member (or any other person) receives a gift of a capital interest in a partnership in which capital is a material income-producing factor, the donee's distributive share of partnership income is subject to both of the following restrictions. Irs 1040ez form 2012 It must be figured by reducing the partnership income by reasonable compensation for services the donor renders to the partnership. Irs 1040ez form 2012 The donee's distributive share of partnership income attributable to donated capital must not be proportionately greater than the donor's distributive share attributable to the donor's capital. Irs 1040ez form 2012 Purchase. Irs 1040ez form 2012   For purposes of determining a partner's distributive share, an interest purchased by one family member from another family member is considered a gift from the seller. Irs 1040ez form 2012 The fair market value of the purchased interest is considered donated capital. Irs 1040ez form 2012 For this purpose, members of a family include only spouses, ancestors, and lineal descendants (or a trust for the primary benefit of those persons). Irs 1040ez form 2012 Example. Irs 1040ez form 2012 A father sold 50% of his business to his son. Irs 1040ez form 2012 The resulting partnership had a profit of $60,000. Irs 1040ez form 2012 Capital is a material income-producing factor. Irs 1040ez form 2012 The father performed services worth $24,000, which is reasonable compensation, and the son performed no services. Irs 1040ez form 2012 The $24,000 must be allocated to the father as compensation. Irs 1040ez form 2012 Of the remaining $36,000 of profit due to capital, at least 50%, or $18,000, must be allocated to the father since he owns a 50% capital interest. Irs 1040ez form 2012 The son's share of partnership profit cannot be more than $18,000. Irs 1040ez form 2012 Business owned and operated by spouses. Irs 1040ez form 2012   If spouses carry on a business together and share in the profits and losses, they may be partners whether or not they have a formal partnership agreement. Irs 1040ez form 2012 If so, they should report income or loss from the business on Form 1065. Irs 1040ez form 2012 They should not report the income on a Schedule C (Form 1040) in the name of one spouse as a sole proprietor. Irs 1040ez form 2012 However, the spouses can elect not to treat the joint venture as a partnership by making a Qualified Joint Venture Election. Irs 1040ez form 2012 Qualified Joint Venture Election. Irs 1040ez form 2012   A "qualified joint venture," whose only members are spouses filing a joint return, can elect not to be treated as a partnership for federal tax purposes. Irs 1040ez form 2012 A qualified joint venture conducts a trade or business where: the only members of the joint venture are spouses filing jointly; both spouses elect not to be treated as a partnership; both spouses materially participate in the trade or business (see Passive Activity Limitations in the Instructions for Form 1065 for a definition of material participation); and the business is co-owned by both spouses and is not held in the name of a state law entity such as a partnership or LLC. Irs 1040ez form 2012   Under this election, a qualified joint venture conducted by spouses who file a joint return is not treated as a partnership for federal tax purposes and therefore does not have a Form 1065 filing requirement. Irs 1040ez form 2012 All items of income, gain, deduction, loss, and credit are divided between the spouses based on their respective interests in the venture. Irs 1040ez form 2012 Each spouse takes into account his or her respective share of these items as a sole proprietor. Irs 1040ez form 2012 Each spouse would account for his or her respective share on the appropriate form, such as Schedule C (Form 1040). Irs 1040ez form 2012 For purposes of determining net earnings from self-employment, each spouse's share of income or loss from a qualified joint venture is taken into account just as it is for federal income tax purposes (i. Irs 1040ez form 2012 e. Irs 1040ez form 2012 , based on their respective interests in the venture). Irs 1040ez form 2012   If the spouses do not make the election to treat their respective interests in the joint venture as sole proprietorships, each spouse should carry his or her share of the partnership income or loss from Schedule K-1 (Form 1065) to their joint or separate Form(s) 1040. Irs 1040ez form 2012 Each spouse should include his or her respective share of self-employment income on a separate Schedule SE (Form 1040), Self-Employment Tax. Irs 1040ez form 2012   This generally does not increase the total tax on the return, but it does give each spouse credit for social security earnings on which retirement benefits are based. Irs 1040ez form 2012 However, this may not be true if either spouse exceeds the social security tax limitation. Irs 1040ez form 2012   For more information on qualified joint ventures, go to IRS. Irs 1040ez form 2012 gov, enter “Election for Qualified Joint Ventures” in the search box and select the link reading “Election for Husband and Wife Unincorporated Businesses. Irs 1040ez form 2012 ” Partnership Agreement The partnership agreement includes the original agreement and any modifications. Irs 1040ez form 2012 The modifications must be agreed to by all partners or adopted in any other manner provided by the partnership agreement. Irs 1040ez form 2012 The agreement or modifications can be oral or written. Irs 1040ez form 2012 Partners can modify the partnership agreement for a particular tax year after the close of the year but not later than the date for filing the partnership return for that year. Irs 1040ez form 2012 This filing date does not include any extension of time. Irs 1040ez form 2012 If the partnership agreement or any modification is silent on any matter, the provisions of local law are treated as part of the agreement. Irs 1040ez form 2012 Terminating a Partnership A partnership terminates when one of the following events takes place. Irs 1040ez form 2012 All its operations are discontinued and no part of any business, financial operation, or venture is continued by any of its partners in a partnership. Irs 1040ez form 2012 At least 50% of the total interest in partnership capital and profits is sold or exchanged within a 12-month period, including a sale or exchange to another partner. Irs 1040ez form 2012 Unlike other partnerships, an electing large partnership does not terminate on the sale or exchange of 50% or more of the partnership interests within a 12-month period. Irs 1040ez form 2012 See section 1. Irs 1040ez form 2012 708-1(b) of the regulations for more information on the termination of a partnership. Irs 1040ez form 2012 For special rules that apply to a merger, consolidation, or division of a partnership, see sections 1. Irs 1040ez form 2012 708-1(c) and 1. Irs 1040ez form 2012 708-1(d) of the regulations. Irs 1040ez form 2012 Date of termination. Irs 1040ez form 2012   The partnership's tax year ends on the date of termination. Irs 1040ez form 2012 For the event described in (1), above, the date of termination is the date the partnership completes the winding up of its affairs. Irs 1040ez form 2012 For the event described in (2), above, the date of termination is the date of the sale or exchange of a partnership interest that, by itself or together with other sales or exchanges in the preceding 12 months, transfers an interest of 50% or more in both capital and profits. Irs 1040ez form 2012 Short period return. Irs 1040ez form 2012   If a partnership is terminated before the end of what would otherwise be its tax year, Form 1065 must be filed for the short period, which is the period from the beginning of the tax year through the date of termination. Irs 1040ez form 2012 The return is due the 15th day of the fourth month following the date of termination. Irs 1040ez form 2012 See Partnership Return (Form 1065), later, for information about filing Form 1065. Irs 1040ez form 2012 Conversion of partnership into limited liability company (LLC). Irs 1040ez form 2012   The conversion of a partnership into an LLC classified as a partnership for federal tax purposes does not terminate the partnership. Irs 1040ez form 2012 The conversion is not a sale, exchange, or liquidation of any partnership interest; the partnership's tax year does not close; and the LLC can continue to use the partnership's taxpayer identification number. Irs 1040ez form 2012   However, the conversion may change some of the partners' bases in their partnership interests if the partnership has recourse liabilities that become nonrecourse liabilities. Irs 1040ez form 2012 Because the partners share recourse and nonrecourse liabilities differently, their bases must be adjusted to reflect the new sharing ratios. Irs 1040ez form 2012 If a decrease in a partner's share of liabilities exceeds the partner's basis, he or she must recognize gain on the excess. Irs 1040ez form 2012 For more information, see Effect of Partnership Liabilities under Basis of Partner's Interest, later. Irs 1040ez form 2012   The same rules apply if an LLC classified as a partnership is converted into a partnership. Irs 1040ez form 2012 IRS e-file (Electronic Filing) Please click here for the text description of the image. Irs 1040ez form 2012 e-file Certain partnerships with more than 100 partners are required to file Form 1065, Schedules K-1, and related forms and schedules electronically (e-file). Irs 1040ez form 2012 Other partnerships generally have the option to file electronically. Irs 1040ez form 2012 For details about IRS e-file, see the Form 1065 instructions. Irs 1040ez form 2012 Exclusion From Partnership Rules Certain partnerships that do not actively conduct a business can choose to be completely or partially excluded from being treated as partnerships for federal income tax purposes. Irs 1040ez form 2012 All the partners must agree to make the choice, and the partners must be able to compute their own taxable income without computing the partnership's income. Irs 1040ez form 2012 However, the partners are not exempt from the rule that limits a partner's distributive share of partnership loss to the adjusted basis of the partner's partnership interest. Irs 1040ez form 2012 Nor are they exempt from the requirement of a business purpose for adopting a tax year for the partnership that differs from its required tax year. Irs 1040ez form 2012 Investing partnership. Irs 1040ez form 2012   An investing partnership can be excluded if the participants in the joint purchase, retention, sale, or exchange of investment property meet all the following requirements. Irs 1040ez form 2012 They own the property as co-owners. Irs 1040ez form 2012 They reserve the right separately to take or dispose of their shares of any property acquired or retained. Irs 1040ez form 2012 They do not actively conduct business or irrevocably authorize some person acting in a representative capacity to purchase, sell, or exchange the investment property. Irs 1040ez form 2012 Each separate participant can delegate authority to purchase, sell, or exchange his or her share of the investment property for the time being for his or her account, but not for a period of more than a year. Irs 1040ez form 2012 Operating agreement partnership. Irs 1040ez form 2012   An operating agreement partnership group can be excluded if the participants in the joint production, extraction, or use of property meet all the following requirements. Irs 1040ez form 2012 They own the property as co-owners, either in fee or under lease or other form of contract granting exclusive operating rights. Irs 1040ez form 2012 They reserve the right separately to take in kind or dispose of their shares of any property produced, extracted, or used. Irs 1040ez form 2012 They do not jointly sell services or the property produced or extracted. Irs 1040ez form 2012 Each separate participant can delegate authority to sell his or her share of the property produced or extracted for the time being for his or her account, but not for a period of time in excess of the minimum needs of the industry, and in no event for more than one year. Irs 1040ez form 2012 However, this exclusion does not apply to an unincorporated organization one of whose principal purposes is cycling, manufacturing, or processing for persons who are not members of the organization. Irs 1040ez form 2012 Electing the exclusion. Irs 1040ez form 2012   An eligible organization that wishes to be excluded from the partnership rules must make the election not later than the time for filing the partnership return for the first tax year for which exclusion is desired. Irs 1040ez form 2012 This filing date includes any extension of time. Irs 1040ez form 2012 See Regulations section 1. Irs 1040ez form 2012 761-2(b) for the procedures to follow. Irs 1040ez form 2012 Partnership Return (Form 1065) Every partnership that engages in a trade or business or has gross income must file an information return on Form 1065 showing its income, deductions, and other required information. Irs 1040ez form 2012 The partnership return must show the names and addresses of each partner and each partner's distributive share of taxable income. Irs 1040ez form 2012 The return must be signed by a general partner. Irs 1040ez form 2012 If a limited liability company is treated as a partnership, it must file Form 1065 and one of its members must sign the return. Irs 1040ez form 2012 A partnership is not considered to engage in a trade or business, and is not required to file a Form 1065, for any tax year in which it neither receives income nor pays or incurs any expenses treated as deductions or credits for federal income tax purposes. Irs 1040ez form 2012 See the Instructions for Form 1065 for more information about who must file Form 1065. Irs 1040ez form 2012 Partnership Distributions Partnership distributions include the following. Irs 1040ez form 2012 A withdrawal by a partner in anticipation of the current year's earnings. Irs 1040ez form 2012 A distribution of the current year's or prior years' earnings not needed for working capital. Irs 1040ez form 2012 A complete or partial liquidation of a partner's interest. Irs 1040ez form 2012 A distribution to all partners in a complete liquidation of the partnership. Irs 1040ez form 2012 A partnership distribution is not taken into account in determining the partner's distributive share of partnership income or loss. Irs 1040ez form 2012 If any gain or loss from the distribution is recognized by the partner, it must be reported on his or her return for the tax year in which the distribution is received. Irs 1040ez form 2012 Money or property withdrawn by a partner in anticipation of the current year's earnings is treated as a distribution received on the last day of the partnership's tax year. Irs 1040ez form 2012 Effect on partner's basis. Irs 1040ez form 2012   A partner's adjusted basis in his or her partnership interest is decreased (but not below zero) by the money and adjusted basis of property distributed to the partner. Irs 1040ez form 2012 See Adjusted Basis under Basis of Partner's Interest, later. Irs 1040ez form 2012 Effect on partnership. Irs 1040ez form 2012   A partnership generally does not recognize any gain or loss because of distributions it makes to partners. Irs 1040ez form 2012 The partnership may be able to elect to adjust the basis of its undistributed property. Irs 1040ez form 2012 Certain distributions treated as a sale or exchange. Irs 1040ez form 2012   When a partnership distributes the following items, the distribution may be treated as a sale or exchange of property rather than a distribution. Irs 1040ez form 2012 Unrealized receivables or substantially appreciated inventory items distributed in exchange for any part of the partner's interest in other partnership property, including money. Irs 1040ez form 2012 Other property (including money) distributed in exchange for any part of a partner's interest in unrealized receivables or substantially appreciated inventory items. Irs 1040ez form 2012   See Payments for Unrealized Receivables and Inventory Items under Disposition of Partner's Interest, later. Irs 1040ez form 2012   This treatment does not apply to the following distributions. Irs 1040ez form 2012 A distribution of property to the partner who contributed the property to the partnership. Irs 1040ez form 2012 Payments made to a retiring partner or successor in interest of a deceased partner that are the partner's distributive share of partnership income or guaranteed payments. Irs 1040ez form 2012 Substantially appreciated inventory items. Irs 1040ez form 2012   Inventory items of the partnership are considered to have appreciated substantially in value if, at the time of the distribution, their total fair market value is more than 120% of the partnership's adjusted basis for the property. Irs 1040ez form 2012 However, if a principal purpose for acquiring inventory property is to avoid ordinary income treatment by reducing the appreciation to less than 120%, that property is excluded. Irs 1040ez form 2012 Partner's Gain or Loss A partner generally recognizes gain on a partnership distribution only to the extent any money (and marketable securities treated as money) included in the distribution exceeds the adjusted basis of the partner's interest in the partnership. Irs 1040ez form 2012 Any gain recognized is generally treated as capital gain from the sale of the partnership interest on the date of the distribution. Irs 1040ez form 2012 If partnership property (other than marketable securities treated as money) is distributed to a partner, he or she generally does not recognize any gain until the sale or other disposition of the property. Irs 1040ez form 2012 For exceptions to these rules, see Distribution of partner's debt and Net precontribution gain, later. Irs 1040ez form 2012 Also, see Payments for Unrealized Receivables and Inventory Items under Disposition of Partner's Interest, later. Irs 1040ez form 2012 Example. Irs 1040ez form 2012 The adjusted basis of Jo's partnership interest is $14,000. Irs 1040ez form 2012 She receives a distribution of $8,000 cash and land that has an adjusted basis of $2,000 and a fair market value of $3,000. Irs 1040ez form 2012 Because the cash received does not exceed the basis of her partnership interest, Jo does not recognize any gain on the distribution. Irs 1040ez form 2012 Any gain on the land will be recognized when she sells or otherwise disposes of it. Irs 1040ez form 2012 The distribution decreases the adjusted basis of Jo's partnership interest to $4,000 [$14,000 − ($8,000 + $2,000)]. Irs 1040ez form 2012 Marketable securities treated as money. Irs 1040ez form 2012   Generally, a marketable security distributed to a partner is treated as money in determining whether gain is recognized on the distribution. Irs 1040ez form 2012 This treatment, however, does not generally apply if that partner contributed the security to the partnership or an investment partnership made the distribution to an eligible partner. Irs 1040ez form 2012   The amount treated as money is the security's fair market value when distributed, reduced (but not below zero) by the excess (if any) of: The partner's distributive share of the gain that would be recognized had the partnership sold all its marketable securities at their fair market value immediately before the transaction resulting in the distribution, over The partner's distributive share of the gain that would be recognized had the partnership sold all such securities it still held after the distribution at the fair market value in (1). Irs 1040ez form 2012   For more information, including the definition of marketable securities, see section 731(c) of the Internal Revenue Code. Irs 1040ez form 2012 Loss on distribution. Irs 1040ez form 2012   A partner does not recognize loss on a partnership distribution unless all the following requirements are met. Irs 1040ez form 2012 The adjusted basis of the partner's interest in the partnership exceeds the distribution. Irs 1040ez form 2012 The partner's entire interest in the partnership is liquidated. Irs 1040ez form 2012 The distribution is in money, unrealized receivables, or inventory items. Irs 1040ez form 2012   There are exceptions to these general rules. Irs 1040ez form 2012 See the following discussions. Irs 1040ez form 2012 Also, see Liquidation at Partner's Retirement or Death under Disposition of Partner's Interest, later. Irs 1040ez form 2012 Distribution of partner's debt. Irs 1040ez form 2012   If a partnership acquires a partner's debt and extinguishes the debt by distributing it to the partner, the partner will recognize capital gain or loss to the extent the fair market value of the debt differs from the basis of the debt (determined under the rules discussed in Partner's Basis for Distributed Property, later). Irs 1040ez form 2012   The partner is treated as having satisfied the debt for its fair market value. Irs 1040ez form 2012 If the issue price (adjusted for any premium or discount) of the debt exceeds its fair market value when distributed, the partner may have to include the excess amount in income as canceled debt. Irs 1040ez form 2012   Similarly, a deduction may be available to a corporate partner if the fair market value of the debt at the time of distribution exceeds its adjusted issue price. Irs 1040ez form 2012 Net precontribution gain. Irs 1040ez form 2012   A partner generally must recognize gain on the distribution of property (other than money) if the partner contributed appreciated property to the partnership during the 7-year period before the distribution. Irs 1040ez form 2012   The gain recognized is the lesser of the following amounts. Irs 1040ez form 2012 The excess of: The fair market value of the property received in the distribution, over The adjusted basis of the partner's interest in the partnership immediately before the distribution, reduced (but not below zero) by any money received in the distribution. Irs 1040ez form 2012 The “net precontribution gain” of the partner. Irs 1040ez form 2012 This is the net gain the partner would recognize if all the property contributed by the partner within 7 years of the distribution, and held by the partnership immediately before the distribution, were distributed to another partner, other than a partner who owns more than 50% of the partnership. Irs 1040ez form 2012 For information about the distribution of contributed property to another partner, see Contribution of Property , under Transactions Between Partnership and Partners, later. Irs 1040ez form 2012   The character of the gain is determined by reference to the character of the net precontribution gain. Irs 1040ez form 2012 This gain is in addition to any gain the partner must recognize if the money distributed is more than his or her basis in the partnership. Irs 1040ez form 2012 For these rules, the term “money” includes marketable securities treated as money, as discussed earlier. Irs 1040ez form 2012 Effect on basis. Irs 1040ez form 2012   The adjusted basis of the partner's interest in the partnership is increased by any net precontribution gain recognized by the partner. Irs 1040ez form 2012 Other than for purposes of determining the gain, the increase is treated as occurring immediately before the distribution. Irs 1040ez form 2012 See Basis of Partner's Interest , later. Irs 1040ez form 2012   The partnership must adjust its basis in any property the partner contributed within 7 years of the distribution to reflect any gain that partner recognizes under this rule. Irs 1040ez form 2012 Exceptions. Irs 1040ez form 2012   Any part of a distribution that is property the partner previously contributed to the partnership is not taken into account in determining the amount of the excess distribution or the partner's net precontribution gain. Irs 1040ez form 2012 For this purpose, the partner's previously contributed property does not include a contributed interest in an entity to the extent its value is due to property contributed to the entity after the interest was contributed to the partnership. Irs 1040ez form 2012   Recognition of gain under this rule also does not apply to a distribution of unrealized receivables or substantially appreciated inventory items if the distribution is treated as a sale or exchange, as discussed earlier. Irs 1040ez form 2012 Partner's Basis for Distributed Property Unless there is a complete liquidation of a partner's interest, the basis of property (other than money) distributed to the partner by a partnership is its adjusted basis to the partnership immediately before the distribution. Irs 1040ez form 2012 However, the basis of the property to the partner cannot be more than the adjusted basis of his or her interest in the partnership reduced by any money received in the same transaction. Irs 1040ez form 2012 Example 1. Irs 1040ez form 2012 The adjusted basis of Emily's partnership interest is $30,000. Irs 1040ez form 2012 She receives a distribution of property that has an adjusted basis of $20,000 to the partnership and $4,000 in cash. Irs 1040ez form 2012 Her basis for the property is $20,000. Irs 1040ez form 2012 Example 2. Irs 1040ez form 2012 The adjusted basis of Steve's partnership interest is $10,000. Irs 1040ez form 2012 He receives a distribution of $4,000 cash and property that has an adjusted basis to the partnership of $8,000. Irs 1040ez form 2012 His basis for the distributed property is limited to $6,000 ($10,000 − $4,000, the cash he receives). Irs 1040ez form 2012 Complete liquidation of partner's interest. Irs 1040ez form 2012   The basis of property received in complete liquidation of a partner's interest is the adjusted basis of the partner's interest in the partnership reduced by any money distributed to the partner in the same transaction. Irs 1040ez form 2012 Partner's holding period. Irs 1040ez form 2012   A partner's holding period for property distributed to the partner includes the period the property was held by the partnership. Irs 1040ez form 2012 If the property was contributed to the partnership by a partner, then the period it was held by that partner is also included. Irs 1040ez form 2012 Basis divided among properties. Irs 1040ez form 2012   If the basis of property received is the adjusted basis of the partner's interest in the partnership (reduced by money received in the same transaction), it must be divided among the properties distributed to the partner. Irs 1040ez form 2012 For property distributed after August 5, 1997, allocate the basis using the following rules. Irs 1040ez form 2012 Allocate the basis first to unrealized receivables and inventory items included in the distribution by assigning a basis to each item equal to the partnership's adjusted basis in the item immediately before the distribution. Irs 1040ez form 2012 If the total of these assigned bases exceeds the allocable basis, decrease the assigned bases by the amount of the excess. Irs 1040ez form 2012 Allocate any remaining basis to properties other than unrealized receivables and inventory items by assigning a basis to each property equal to the partnership's adjusted basis in the property immediately before the distribution. Irs 1040ez form 2012 If the allocable basis exceeds the total of these assigned bases, increase the assigned bases by the amount of the excess. Irs 1040ez form 2012 If the total of these assigned bases exceeds the allocable basis, decrease the assigned bases by the amount of the excess. Irs 1040ez form 2012 Allocating a basis increase. Irs 1040ez form 2012   Allocate any basis increase required in rule (2), above, first to properties with unrealized appreciation to the extent of the unrealized appreciation. Irs 1040ez form 2012 If the basis increase is less than the total unrealized appreciation, allocate it among those properties in proportion to their respective amounts of unrealized appreciation. Irs 1040ez form 2012 Allocate any remaining basis increase among all the properties in proportion to their respective fair market values. Irs 1040ez form 2012 Example. Irs 1040ez form 2012 Eun's basis in her partnership interest is $55,000. Irs 1040ez form 2012 In a distribution in liquidation of her entire interest, she receives properties A and B, neither of which is inventory or unrealized receivables. Irs 1040ez form 2012 Property A has an adjusted basis to the partnership of $5,000 and a fair market value of $40,000. Irs 1040ez form 2012 Property B has an adjusted basis to the partnership of $10,000 and a fair market value of $10,000. Irs 1040ez form 2012 To figure her basis in each property, Eun first assigns bases of $5,000 to property A and $10,000 to property B (their adjusted bases to the partnership). Irs 1040ez form 2012 This leaves a $40,000 basis increase (the $55,000 allocable basis minus the $15,000 total of the assigned bases). Irs 1040ez form 2012 She first allocates $35,000 to property A (its unrealized appreciation). Irs 1040ez form 2012 The remaining $5,000 is allocated between the properties based on their fair market values. Irs 1040ez form 2012 $4,000 ($40,000/$50,000) is allocated to property A and $1,000 ($10,000/$50,000) is allocated to property B. Irs 1040ez form 2012 Eun's basis in property A is $44,000 ($5,000 + $35,000 + $4,000) and her basis in property B is $11,000 ($10,000 + $1,000). Irs 1040ez form 2012 Allocating a basis decrease. Irs 1040ez form 2012   Use the following rules to allocate any basis decrease required in rule (1) or rule (2), earlier. Irs 1040ez form 2012 Allocate the basis decrease first to items with unrealized depreciation to the extent of the unrealized depreciation. Irs 1040ez form 2012 If the basis decrease is less than the total unrealized depreciation, allocate it among those items in proportion to their respective amounts of unrealized depreciation. Irs 1040ez form 2012 Allocate any remaining basis decrease among all the items in proportion to their respective assigned basis amounts (as decreased in (1)). Irs 1040ez form 2012 Example. Irs 1040ez form 2012 Armando's basis in his partnership interest is $20,000. Irs 1040ez form 2012 In a distribution in liquidation of his entire interest, he receives properties C and D, neither of which is inventory or unrealized receivables. Irs 1040ez form 2012 Property C has an adjusted basis to the partnership of $15,000 and a fair market value of $15,000. Irs 1040ez form 2012 Property D has an adjusted basis to the partnership of $15,000 and a fair market value of $5,000. Irs 1040ez form 2012 To figure his basis in each property, Armando first assigns bases of $15,000 to property C and $15,000 to property D (their adjusted bases to the partnership). Irs 1040ez form 2012 This leaves a $10,000 basis decrease (the $30,000 total of the assigned bases minus the $20,000 allocable basis). Irs 1040ez form 2012 He allocates the entire $10,000 to property D (its unrealized depreciation). Irs 1040ez form 2012 Armando's basis in property C is $15,000 and his basis in property D is $5,000 ($15,000 − $10,000). Irs 1040ez form 2012 Distributions before August 6, 1997. Irs 1040ez form 2012   For property distributed before August 6, 1997, allocate the basis using the following rules. Irs 1040ez form 2012 Allocate the basis first to unrealized receivables and inventory items included in the distribution to the extent of the partnership's adjusted basis in those items. Irs 1040ez form 2012 If the partnership's adjusted basis in those items exceeded the allocable basis, allocate the basis among the items in proportion to their adjusted bases to the partnership. Irs 1040ez form 2012 Allocate any remaining basis to other distributed properties in proportion to their adjusted bases to the partnership. Irs 1040ez form 2012 Partner's interest more than partnership basis. Irs 1040ez form 2012   If the basis of a partner's interest to be divided in a complete liquidation of the partner's interest is more than the partnership's adjusted basis for the unrealized receivables and inventory items distributed, and if no other property is distributed to which the partner can apply the remaining basis, the partner has a capital loss to the extent of the remaining basis of the partnership interest. Irs 1040ez form 2012 Special adjustment to basis. Irs 1040ez form 2012   A partner who acquired any part of his or her partnership interest in a sale or exchange or upon the death of another partner may be able to choose a special basis adjustment for property distributed by the partnership. Irs 1040ez form 2012 To choose the special adjustment, the partner must have received the distribution within 2 years after acquiring the partnership interest. Irs 1040ez form 2012 Also, the partnership must not have chosen the optional adjustment to basis when the partner acquired the partnership interest. Irs 1040ez form 2012   If a partner chooses this special basis adjustment, the partner's basis for the property distributed is the same as it would have been if the partnership had chosen the optional adjustment to basis. Irs 1040ez form 2012 However, this assigned basis is not reduced by any depletion or depreciation that would have been allowed or allowable if the partnership had previously chosen the optional adjustment. Irs 1040ez form 2012   The choice must be made with the partner's tax return for the year of the distribution if the distribution includes any property subject to depreciation, depletion, or amortization. Irs 1040ez form 2012 If the choice does not have to be made for the distribution year, it must be made with the return for the first year in which the basis of the distributed property is pertinent in determining the partner's income tax. Irs 1040ez form 2012   A partner choosing this special basis adjustment must attach a statement to his or her tax return that the partner chooses under section 732(d) of the Internal Revenue Code to adjust the basis of property received in a distribution. Irs 1040ez form 2012 The statement must show the computation of the special basis adjustment for the property distributed and list the properties to which the adjustment has been allocated. Irs 1040ez form 2012 Example. Irs 1040ez form 2012 Chin Ho purchased a 25% interest in X partnership for $17,000 cash. Irs 1040ez form 2012 At the time of the purchase, the partnership owned inventory having a basis to the partnership of $14,000 and a fair market value of $16,000. Irs 1040ez form 2012 Thus, $4,000 of the $17,000 he paid was attributable to his share of inventory with a basis to the partnership of $3,500. Irs 1040ez form 2012 Within 2 years after acquiring his interest, Chin Ho withdrew from the partnership and for his entire interest received cash of $1,500, inventory with a basis to the partnership of $3,500, and other property with a basis of $6,000. Irs 1040ez form 2012 The value of the inventory received was 25% of the value of all partnership inventory. Irs 1040ez form 2012 (It is immaterial whether the inventory he received was on hand when he acquired his interest. Irs 1040ez form 2012 ) Since the partnership from which Chin Ho withdrew did not make the optional adjustment to basis, he chose to adjust the basis of the inventory received. Irs 1040ez form 2012 His share of the partnership's basis for the inventory is increased by $500 (25% of the $2,000 difference between the $16,000 fair market value of the inventory and its $14,000 basis to the partnership at the time he acquired his interest). Irs 1040ez form 2012 The adjustment applies only for purposes of determining his new basis in the inventory, and not for purposes of partnership gain or loss on disposition. Irs 1040ez form 2012 The total to be allocated among the properties Chin Ho received in the distribution is $15,500 ($17,000 basis of his interest − $1,500 cash received). Irs 1040ez form 2012 His basis in the inventory items is $4,000 ($3,500 partnership basis + $500 special adjustment). Irs 1040ez form 2012 The remaining $11,500 is allocated to his new basis for the other property he received. Irs 1040ez form 2012 Mandatory adjustment. Irs 1040ez form 2012   A partner does not always have a choice of making this special adjustment to basis. Irs 1040ez form 2012 The special adjustment to basis must be made for a distribution of property (whether or not within 2 years after the partnership interest was acquired) if all the following conditions existed when the partner received the partnership interest. Irs 1040ez form 2012 The fair market value of all partnership property (other than money) was more than 110% of its adjusted basis to the partnership. Irs 1040ez form 2012 If there had been a liquidation of the partner's interest immediately after it was acquired, an allocation of the basis of that interest under the general rules (discussed earlier under Basis divided among properties) would have decreased the basis of property that could not be depreciated, depleted, or amortized and increased the basis of property that could be. Irs 1040ez form 2012 The optional basis adjustment, if it had been chosen by the partnership, would have changed the partner's basis for the property actually distributed. Irs 1040ez form 2012 Required statement. Irs 1040ez form 2012   Generally, if a partner chooses a special basis adjustment and notifies the partnership, or if the partnership makes a distribution for which the special basis adjustment is mandatory, the partnership must provide a statement to the partner. Irs 1040ez form 2012 The statement must provide information necessary for the partner to compute the special basis adjustment. Irs 1040ez form 2012 Marketable securities. Irs 1040ez form 2012   A partner's basis in marketable securities received in a partnership distribution, as determined in the preceding discussions, is increased by any gain recognized by treating the securities as money. Irs 1040ez form 2012 See Marketable securities treated as money under Partner's Gain or Loss, earlier. Irs 1040ez form 2012 The basis increase is allocated among the securities in proportion to their respective amounts of unrealized appreciation before the basis increase. Irs 1040ez form 2012 Transactions Between Partnership and Partners For certain transactions between a partner and his or her partnership, the partner is treated as not being a member of the partnership. Irs 1040ez form 2012 These transactions include the following. Irs 1040ez form 2012 Performing services for, or transferring property to, a partnership if: There is a related allocation and distribution to a partner, and The entire transaction, when viewed together, is properly characterized as occurring between the partnership and a partner not acting in the capacity of a partner. Irs 1040ez form 2012 Transferring money or other property to a partnership if: There is a related transfer of money or other property by the partnership to the contributing partner or another partner, and The transfers together are properly characterized as a sale or exchange of property. Irs 1040ez form 2012 Payments by accrual basis partnership to cash basis partner. Irs 1040ez form 2012   A partnership that uses an accrual method of accounting cannot deduct any business expense owed to a cash basis partner until the amount is paid. Irs 1040ez form 2012 However, this rule does not apply to guaranteed payments made to a partner, which are generally deductible when accrued. Irs 1040ez form 2012 Guaranteed Payments Guaranteed payments are those made by a partnership to a partner that are determined without regard to the partnership's income. Irs 1040ez form 2012 A partnership treats guaranteed payments for services, or for the use of capital, as if they were made to a person who is not a partner. Irs 1040ez form 2012 This treatment is for purposes of determining gross income and deductible business expenses only. Irs 1040ez form 2012 For other tax purposes, guaranteed payments are treated as a partner's distributive share of ordinary income. Irs 1040ez form 2012 Guaranteed payments are not subject to income tax withholding. Irs 1040ez form 2012 The partnership generally deducts guaranteed payments on line 10 of Form 1065 as a business expense. Irs 1040ez form 2012 They are also listed on Schedules K and K-1 of the partnership return. Irs 1040ez form 2012 The individual partner reports guaranteed payments on Schedule E (Form 1040) as ordinary income, along with his or her distributive share of the partnership's other ordinary income. Irs 1040ez form 2012 Guaranteed payments made to partners for organizing the partnership or syndicating interests in the partnership are capital expenses. Irs 1040ez form 2012 Generally, organizational and syndication expenses are not deductible by the partnership. Irs 1040ez form 2012 However, a partnership can elect to deduct a portion of its organizational expenses and amortize the remaining expenses (see Business start-up and organizational costs in the Instructions for Form 1065). Irs 1040ez form 2012 Organizational expenses (if the election is not made) and syndication expenses paid to partners must be reported on the partners' Schedule K-1 as guaranteed payments. Irs 1040ez form 2012 Minimum payment. Irs 1040ez form 2012   If a partner is to receive a minimum payment from the partnership, the guaranteed payment is the amount by which the minimum payment is more than the partner's distributive share of the partnership income before taking into account the guaranteed payment. Irs 1040ez form 2012 Example. Irs 1040ez form 2012 Under a partnership agreement, Divya is to receive 30% of the partnership income, but not less than $8,000. Irs 1040ez form 2012 The partnership has net income of $20,000. Irs 1040ez form 2012 Divya's share, without regard to the minimum guarantee, is $6,000 (30% × $20,000). Irs 1040ez form 2012 The guaranteed payment that can be deducted by the partnership is $2,000 ($8,000 − $6,000). Irs 1040ez form 2012 Divya's income from the partnership is $8,000, and the remaining $12,000 of partnership income will be reported by the other partners in proportion to their shares under the partnership agreement. Irs 1040ez form 2012 If the partnership net income had been $30,000, there would have been no guaranteed payment since her share, without regard to the guarantee, would have been greater than the guarantee. Irs 1040ez form 2012 Self-employed health insurance premiums. Irs 1040ez form 2012   Premiums for health insurance paid by a partnership on behalf of a partner, for services as a partner, are treated as guaranteed payments. Irs 1040ez form 2012 The partnership can deduct the payments as a business expense, and the partner must include them in gross income. Irs 1040ez form 2012 However, if the partnership accounts for insurance paid for a partner as a reduction in distributions to the partner, the partnership cannot deduct the premiums. Irs 1040ez form 2012   A partner who qualifies can deduct 100% of the health insurance premiums paid by the partnership on his or her behalf as an adjustment to income. Irs 1040ez form 2012 The partner cannot deduct the premiums for any calendar month, or part of a month, in which the partner is eligible to participate in any subsidized health plan maintained by any employer of the partner, the partner's spouse, the partner's dependents, or any children under age 27 who are not dependents. Irs 1040ez form 2012 For more information on the self-employed health insurance deduction, see chapter 6 in Publication 535. Irs 1040ez form 2012 Including payments in partner's income. Irs 1040ez form 2012   Guaranteed payments are included in income in the partner's tax year in which the partnership's tax year ends. Irs 1040ez form 2012 Example 1. Irs 1040ez form 2012 Under the terms of a partnership agreement, Erica is entitled to a fixed annual payment of $10,000 without regard to the income of the partnership. Irs 1040ez form 2012 Her distributive share of the partnership income is 10%. Irs 1040ez form 2012 The partnership has $50,000 of ordinary income after deducting the guaranteed payment. Irs 1040ez form 2012 She must include ordinary income of $15,000 ($10,000 guaranteed payment + $5,000 ($50,000 × 10%) distributive share) on her individual income tax return for her tax year in which the partnership's tax year ends. Irs 1040ez form 2012 Example 2. Irs 1040ez form 2012 Lamont is a calendar year taxpayer who is a partner in a partnership. Irs 1040ez form 2012 The partnership uses a fiscal year that ended January 31, 2013. Irs 1040ez form 2012 Lamont received guaranteed payments from the partnership from February 1, 2012, until December 31, 2012. Irs 1040ez form 2012 He must include these guaranteed payments in income for 2013 and report them on his 2013 income tax return. Irs 1040ez form 2012 Payments resulting in loss. Irs 1040ez form 2012   If guaranteed payments to a partner result in a partnership loss in which the partner shares, the partner must report the full amount of the guaranteed payments as ordinary income. Irs 1040ez form 2012 The partner separately takes into account his or her distributive share of the partnership loss, to the extent of the adjusted basis of the partner's partnership interest. Irs 1040ez form 2012 Sale or Exchange of Property Special rules apply to a sale or exchange of property between a partnership and certain persons. Irs 1040ez form 2012 Losses. Irs 1040ez form 2012   Losses will not be allowed from a sale or exchange of property (other than an interest in the partnership) directly or indirectly between a partnership and a person whose direct or indirect interest in the capital or profits of the partnership is more than 50%. Irs 1040ez form 2012   If the sale or exchange is between two partnerships in which the same persons directly or indirectly own more than 50% of the capital or profits interests in each partnership, no deduction of a loss is allowed. Irs 1040ez form 2012   The basis of each partner's interest in the partnership is decreased (but not below zero) by the partner's share of the disallowed loss. Irs 1040ez form 2012   If the purchaser later sells the property, only the gain realized that is greater than the loss not allowed will be taxable. Irs 1040ez form 2012 If any gain from the sale of the property is not recognized because of this rule, the basis of each partner's interest in the partnership is increased by the partner's share of that gain. Irs 1040ez form 2012 Gains. Irs 1040ez form 2012   Gains are treated as ordinary income in a sale or exchange of property directly or indirectly between a person and a partnership, or between two partnerships, if both of the following tests are met. Irs 1040ez form 2012 More than 50% of the capital or profits interest in the partnership(s) is directly or indirectly owned by the same person(s). Irs 1040ez form 2012 The property in the hands of the transferee immediately after the transfer is not a capital asset. Irs 1040ez form 2012 Property that is not a capital asset includes accounts receivable, inventory, stock-in-trade, and depreciable or real property used in a trade or business. Irs 1040ez form 2012 More than 50% ownership. Irs 1040ez form 2012   To determine if there is more than 50% ownership in partnership capital or profits, the following rules apply. Irs 1040ez form 2012 An interest directly or indirectly owned by, or for, a corporation, partnership, estate, or trust is considered to be owned proportionately by, or for, its shareholders, partners, or beneficiaries. Irs 1040ez form 2012 An individual is considered to own the interest directly or indirectly owned by, or for, the individual's family. Irs 1040ez form 2012 For this rule, “family” includes only brothers, sisters, half-brothers, half-sisters, spouses, ancestors, and lineal descendants. Irs 1040ez form 2012 If a person is considered to own an interest using rule (1), that person (the “constructive owner”) is treated as if actually owning that interest when rules (1) and (2) are applied. Irs 1040ez form 2012 However, if a person is considered to own an interest using rule (2), that person is not treated as actually owning that interest in reapplying rule (2) to make another person the constructive owner. Irs 1040ez form 2012 Example. Irs 1040ez form 2012 Individuals A and B and Trust T are equal partners in Partnership ABT. Irs 1040ez form 2012 A's husband, AH, is the sole beneficiary of Trust T. Irs 1040ez form 2012 Trust T's partnership interest will be attributed to AH only for the purpose of further attributing the interest to A. Irs 1040ez form 2012 As a result, A is a more-than-50% partner. Irs 1040ez form 2012 This means that any deduction for losses on transactions between her and ABT will not be allowed, and gain from property that in the hands of the transferee is not a capital asset is treated as ordinary, rather than capital, gain. Irs 1040ez form 2012 More information. Irs 1040ez form 2012   For more information on these special rules, see Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. Irs 1040ez form 2012 Contribution of Property Usually, neither the partner nor the partnership recognizes a gain or loss when property is contributed to the partnership in exchange for a partnership interest. Irs 1040ez form 2012 This applies whether a partnership is being formed or is already operating. Irs 1040ez form 2012 The partnership's holding period for the property includes the partner's holding period. Irs 1040ez form 2012 The contribution of limited partnership interests in one partnership for limited partnership interests in another partnership qualifies as a tax-free contribution of property to the second partnership if the transaction is made for business purposes. Irs 1040ez form 2012 The exchange is not subject to the rules explained later under Disposition of Partner's Interest. Irs 1040ez form 2012 Disguised sales. Irs 1040ez form 2012   A contribution of money or other property to the partnership followed by a distribution of different property from the partnership to the partner is treated not as a contribution and distribution, but as a sale of property, if both of the following tests are met. Irs 1040ez form 2012 The distribution would not have been made but for the contribution. Irs 1040ez form 2012 The partner's right to the distribution does not depend on the success of partnership operations. Irs 1040ez form 2012   All facts and circumstances are considered in determining if the contribution and distribution are more properly characterized as a sale. Irs 1040ez form 2012 However, if the contribution and distribution occur within 2 years of each other, the transfers are presumed to be a sale unless the facts clearly indicate that the transfers are not a sale. Irs 1040ez form 2012 If the contribution and distribution occur more than 2 years apart, the transfers are presumed not to be a sale unless the facts clearly indicate that the transfers are a sale. Irs 1040ez form 2012 Form 8275 required. Irs 1040ez form 2012   A partner must attach Form 8275, Disclosure Statement, (or other statement) to his or her return if the partner contributes property to a partnership and, within 2 years (before or after the contribution), the partnership transfers money or other consideration to the partner. Irs 1040ez form 2012 For exceptions to this requirement, see section 1. Irs 1040ez form 2012 707-3(c)(2) of the regulations. Irs 1040ez form 2012   A partnership must attach Form 8275 (or other statement) to its return if it distributes property to a partner, and, within 2 years (before or after the distribution), the partner transfers money or other consideration to the partnership. Irs 1040ez form 2012   Form 8275 must include the following information. Irs 1040ez form 2012 A caption identifying the statement as a disclosure under section 707 of the Internal Revenue Code. Irs 1040ez form 2012 A description of the transferred property or money, including its value. Irs 1040ez form 2012 A description of any relevant facts in determining if the transfers are properly viewed as a disguised sale. Irs 1040ez form 2012 See section 1. Irs 1040ez form 2012 707-3(b)(2) of the regulations for a description of the facts and circumstances considered in determining if the transfers are a disguised sale. Irs 1040ez form 2012 Contribution to partnership treated as investment company. Irs 1040ez form 2012   Gain is recognized when property is contributed (in exchange for an interest in the partnership) to a partnership that would be treated as an investment company if it were incorporated. Irs 1040ez form 2012   A partnership is generally treated as an investment company if over 80% of the value of its assets is held for investment and consists of certain readily marketable items. Irs 1040ez form 2012 These items include money, stocks and other equity interests in a corporation, and interests in regulated investment companies and real estate investment trusts. Irs 1040ez form 2012 For more information, see section 351(e)(1) of the Internal Revenue Code and the related regulations. Irs 1040ez form 2012 Whether a partnership is treated as an investment company under this test is ordinarily determined immediately after the transfer of property. Irs 1040ez form 2012   This rule applies to limited partnerships and general partnerships, regardless of whether they are privately formed or publicly syndicated. Irs 1040ez form 2012 Contribution to foreign partnership. Irs 1040ez form 2012   A domestic partnership that contributed property after August 5, 1997, to a foreign partnership in exchange for a partnership interest may have to file Form 8865 if either of the following apply. Irs 1040ez form 2012 Immediately after the contribution, the partnership owned, directly or indirectly, at least a 10% interest in the foreign partnership. Irs 1040ez form 2012 The fair market value of the property contributed to the foreign partnership, when added to other contributions of property made to the partnership during the preceding 12-month period, is greater than $100,000. Irs 1040ez form 2012   The partnership may also have to file Form 8865, even if no contributions are made during the tax year, if it owns a 10% or more interest in a foreign partnership at any time during the year. Irs 1040ez form 2012 See the form instructions for more information. Irs 1040ez form 2012 Basis of contributed property. Irs 1040ez form 2012   If a partner contributes property to a partnership, the partnership's basis for determining depreciation, depletion, gain, or loss for the property is the same as the partner's adjusted basis for the property when it was contributed, increased by any gain recognized by the partner at the time of contribution. Irs 1040ez form 2012 Allocations to account for built-in gain or loss. Irs 1040ez form 2012   The fair market value of property at the time it is contributed may be different from the partner's adjusted basis. Irs 1040ez form 2012 The partnership must allocate among the partners any income, deduction, gain, or loss on the property in a manner that will account for the difference. Irs 1040ez form 2012 This rule also applies to contributions of accounts payable and other accrued but unpaid items of a cash basis partner. Irs 1040ez form 2012   The partnership can use different allocation methods for different items of contributed property. Irs 1040ez form 2012 A single reasonable method must be consistently applied to each item, and the overall method or combination of methods must be reasonable. Irs 1040ez form 2012 See section 1. Irs 1040ez form 2012 704-3 of the regulations for allocation methods generally considered reasonable. Irs 1040ez form 2012   If the partnership sells contributed property and recognizes gain or loss, built-in gain or loss is allocated to the contributing partner. Irs 1040ez form 2012 If contributed property is subject to depreciation or other cost recovery, the allocation of deductions for these items takes into account built-in gain or loss on the property. Irs 1040ez form 2012 However, the total depreciation, depletion, gain, or loss allocated to partners cannot be more than the depreciation or depletion allowable to the partnership or the gain or loss realized by the partnership. Irs 1040ez form 2012 Example. Irs 1040ez form 2012 Areta and Sofia formed an equal partnership. Irs 1040ez form 2012 Areta contributed $10,000 in cash to the partnership and Sofia contributed depreciable property with a fair market value of $10,000 and an adjusted basis of $4,000. Irs 1040ez form 2012 The partnership's basis for depreciation is limited to the adjusted basis of the property in Sofia's hands, $4,000. Irs 1040ez form 2012 In effect, Areta purchased an undivided one-half interest in the depreciable property with her contribution of $10,000. Irs 1040ez form 2012 Assuming that the depreciation rate is 10% a year under the General Depreciation System (GDS), she would have been entitled to a depreciation deduction of $500 per year, based on her interest in the partnership, if the adjusted basis of the property equaled its fair market value when contributed. Irs 1040ez form 2012 To simplify this example, the depreciation deductions are determined without regard to any first-year depreciation conventions. Irs 1040ez form 2012 However, since the partnership is allowed only $400 per year of depreciation (10% of $4,000), no more than $400 can be allocated between the partners. Irs 1040ez form 2012 The entire $400 must be allocated to Areta. Irs 1040ez form 2012 Distribution of contributed property to another partner. Irs 1040ez form 2012   If a partner contributes property to a partnership and the partnership distributes the property to another partner within 7 years of the contribution, the contributing partner must recognize gain or loss on the distribution. Irs 1040ez form 2012   The recognized gain or loss is the amount the contributing partner would have recognized if the property had been sold for its fair market value when it was distributed. Irs 1040ez form 2012 This amount is the difference between the property's basis and its fair market value at the time of contribution. Irs 1040ez form 2012 The character of the gain or loss will be the same as the character of the gain or loss that would have resulted if the partnership had sold the property to the distributee partner. Irs 1040ez form 2012 Appropriate adjustments must be made to the adjusted basis of the contributing partner's partnership interest and to the adjusted basis of the property distributed to reflect the recognized gain or loss. Irs 1040ez form 2012 Disposition of certain contributed property. Irs 1040ez form 2012   The following rules determine the character of the partnership's gain or loss on a disposition of certain types of contributed property. Irs 1040ez form 2012 Unrealized receivables. Irs 1040ez form 2012 If the property was an unrealized receivable in the hands of the contributing partner, any gain or loss on its disposition by the partnership is ordinary income or loss. Irs 1040ez form 2012 Unrealized receivables are defined later under Payments for Unrealized Receivables and Inventory Items. Irs 1040ez form 2012 When reading the definition, substitute “partner” for “partnership. Irs 1040ez form 2012 ” Inventory items. Irs 1040ez form 2012 If the property was an inventory item in the hands of the contributing partner, any gain or loss on its disposition by the partnership within 5 years after the contribution is ordinary income or loss. Irs 1040ez form 2012 Inventory items are defined later in Payments for Unrealized Receivables and Inventory Items. Irs 1040ez form 2012 Capital loss property. Irs 1040ez form 2012 If the property was a capital asset in the contributing partner's hands, any loss on its disposition by the partnership within 5 years after the contribution is a capital loss. Irs 1040ez form 2012 The capital loss is limited to the amount by which the partner's adjusted basis for the property exceeded the property's fair market value immediately before the contribution. Irs 1040ez form 2012 Substituted basis property. Irs 1040ez form 2012 If the disposition of any of the property listed in (1), (2), or (3) is a nonrecognition transaction, these rules apply when the recipient of the property disposes of any substituted basis property (other than certain corporate stock) resulting from the transaction. Irs 1040ez form 2012 Contribution of Services A partner can acquire an interest in partnership capital or profits as compensation for services performed or to be performed. Irs 1040ez form 2012 Capital interest. Irs 1040ez form 2012   A capital interest is an interest that would give the holder a share of the proceeds if the partnership's assets were sold at fair market value and the proceeds were distributed in a complete liquidation of the partnership. Irs 1040ez form 2012 This determination generally is made at the time of receipt of the partnership interest. Irs 1040ez form 2012 The fair market value of such an interest received by a partner as compensation for services must generally be included in the partner's gross income in the first tax year in which the partner can transfer the interest or the interest is not subject to a substantial risk of forfeiture. Irs 1040ez form 2012 The capital interest transferred as compensation for services is subject to the rules for restricted property discussed in Publication 525 under Employee Compensation. Irs 1040ez form 2012   The fair market value of an interest in partnership capital transferred to a partner as payment for services to the partnership is a guaranteed payment, discussed earlier. Irs 1040ez form 2012 Profits interest. Irs 1040ez form 2012   A profits interest is a partnership interest other than a capital interest. Irs 1040ez form 2012 If a person receives a profits interest for providing services to, or for the benefit of, a partnership in a partner capacity or in anticipation of being a partner, the receipt of such an interest is not a taxable event for the partner or the partnership. Irs 1040ez form 2012 However, this does not apply in the following situations. Irs 1040ez form 2012 The profits interest relates to a substantially certain and predictable stream of income from partnership assets, such as income from high-quality debt securities or a high-quality net lease. Irs 1040ez form 2012 Within 2 years of receipt, the partner disposes of the profits interest. Irs 1040ez form 2012 The profits interest is a limited partnership interest in a publicly traded partnership. Irs 1040ez form 2012   A profits interest transferred as compensation for services is not subject to the rules for restricted property that apply to capital interests. Irs 1040ez form 2012 Basis of Partner's Interest The basis of a partnership interest is the money plus the adjusted basis of any property the partner contributed. Irs 1040ez form 2012 If the partner must recognize gain as a result of the contribution, this gain is included in the basis of his or her interest. Irs 1040ez form 2012 Any increase in a partner's individual liabilities because of an assumption of partnership liabilities is considered a contribution of money to the partnership by the partner. Irs 1040ez form 2012 Interest acquired by gift, etc. Irs 1040ez form 2012   If a partner acquires an interest in a partnership by gift, inheritance, or under any circumstance other than by a contribution of money or property to the partnership, the partner's basis must be determined using the basis rules described in Publication 551. Irs 1040ez form 2012 Adjusted Basis There is a worksheet for adjusting the basis of a partner's interest in the partnership in the Partner's Instructions for Schedule K-1 (Form 1065). Irs 1040ez form 2012 The basis of an interest in a partnership is increased or decreased by certain items. Irs 1040ez form 2012 Increases. Irs 1040ez form 2012   A partner's basis is increased by the following items. Irs 1040ez form 2012 The partner's additional contributions to the partnership, including an increased share of, or assumption of, partnership liabilities. Irs 1040ez form 2012 The partner's distributive share of taxable and nontaxable partnership income. Irs 1040ez form 2012 The partner's distributive share of the excess of the deductions for depletion over the basis of the depletable property, unless the property is oil or gas wells whose basis has been allocated to partners. Irs 1040ez form 2012 Decreases. Irs 1040ez form 2012   The partner's basis is decreased (but never below zero) by the following items. Irs 1040ez form 2012 The money (including a decreased share of partnership liabilities or an assumption of the partner's individual liabilities by the partnership) and adjusted basis of property distributed to the partner by the partnership. Irs 1040ez form 2012 The partner's distributive share of the partnership losses (including capital losses). Irs 1040ez form 2012 The partner's distributive share of nondeductible partnership expenses that are not capital expenditures. Irs 1040ez form 2012 This includes the partner's share of any section 179 expenses, even if the partner cannot deduct the entire amount on his or her individual income tax return. Irs 1040ez form 2012 The partner's deduction for depletion for any partnership oil and gas wells, up to the proportionate share of the adjusted basis of the wells allocated to the partner. Irs 1040ez form 2012 Partner's liabilities assumed by partnership. Irs 1040ez form 2012   If contributed property is subject to a debt or if a partner's liabilities are assumed by the partnership, the basis of that partner's interest is reduced (but not below zero) by the liability assumed by the other partners. Irs 1040ez form 2012 This partner must reduce his or her basis because the assumption of the liability is treated as a distribution of money to that partner. Irs 1040ez form 2012 The other partners' assumption of the liability is treated as a contribution by them of money to the partnership. Irs 1040ez form 2012 See Effect of Partnership Liabilities , later. Irs 1040ez form 2012 Example 1. Irs 1040ez form 2012 Ivan acquired a 20% interest in a partnership by contributing property that had an adjusted basis to him of $8,000 and a $4,000 mortgage. Irs 1040ez form 2012 The partnership assumed payment of the mortgage. Irs 1040ez form 2012 The basis of Ivan's interest is: Adjusted basis of contributed property $8,000 Minus: Part of mortgage assumed by other partners (80% × $4,000) 3,200 Basis of Ivan's partnership interest $4,800 Example 2. Irs 1040ez form 2012 If, in Example 1, the contributed property had a $12,000 mortgage, the basis of Ivan's partnership interest would be zero. Irs 1040ez form 2012 The $1,600 difference between the mortgage assumed by the other partners, $9,600 (80% × $12,000), and his basis of $8,000 would be treated as capital gain from the sale or exchange of a partnership interest. Irs 1040ez form 2012 However, this gain would not increase the basis of his partnership interest. Irs 1040ez form 2012 Book value of partner's interest. Irs 1040ez form 2012   The adjusted basis of a partner's interest is determined without considering any amount shown in the partnership books as a capital, equity, or similar account. Irs 1040ez form 2012 Example. Irs 1040ez form 2012 Enzo contributes to his partnership property that has an adjusted basis of $400 and a fair market value of $1,000. Irs 1040ez form 2012 His partner contributes $1,000 cash. Irs 1040ez form 2012 While each partner has increased his capital account by $1,000, which will be re