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Irs Amended Tax Return

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Irs Amended Tax Return

Irs amended tax return 5. Irs amended tax return   Figuring Your Tax Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Tax Year Identification NumberF-1 and M-1 visa holders. Irs amended tax return J-1 visa holders. Irs amended tax return Filing StatusResident Aliens Nonresident Aliens Reporting Your Income DeductionsResident Aliens Nonresident Aliens ExemptionsResident Aliens Nonresident Aliens Itemized DeductionsResident Aliens Nonresident Aliens Tax Credits and PaymentsResident Aliens Nonresident Aliens Bona Fide Residents of American Samoa or Puerto Rico Introduction After you have determined your alien status, the source of your income, and if and how that income is taxed in the United States, your next step is to figure your tax. Irs amended tax return The information in this chapter is not as comprehensive for resident aliens as it is for nonresident aliens. Irs amended tax return Resident aliens should get publications, forms, and instructions for U. Irs amended tax return S. Irs amended tax return citizens, because the information for filing returns for resident aliens is generally the same as for U. Irs amended tax return S. Irs amended tax return citizens. Irs amended tax return If you are both a nonresident alien and a resident alien in the same tax year, see chapter 6 for a discussion of dual-status aliens. Irs amended tax return Topics - This chapter discusses: Identification numbers, Filing status, Deductions, Exemptions, Tax credits and payments, and Special rules for bona fide residents of American Samoa and Puerto Rico. Irs amended tax return Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 501 Exemptions, Standard Deduction, and Filing Information 521 Moving Expenses 526 Charitable Contributions 535 Business Expenses 597 Information on the United States–Canada Income Tax Treaty Form (and Instructions) W-7 Application for IRS Individual Taxpayer Identification Number 1040 U. Irs amended tax return S. Irs amended tax return Individual Income Tax Return 1040NR U. Irs amended tax return S. Irs amended tax return Nonresident Alien Income Tax Return 1040NR-EZ U. Irs amended tax return S. Irs amended tax return Income Tax Return for Certain Nonresident Aliens With No Dependents 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 3903 Moving Expenses 4563 Exclusion of Income for Bona Fide Residents of American Samoa 8959 Additional Medicare Tax See chapter 12 for information about getting these publications and forms. Irs amended tax return Tax Year You must figure your income and file a tax return on the basis of an annual accounting period called a tax year. Irs amended tax return If you have not previously established a fiscal tax year, your tax year is the calendar year. Irs amended tax return A calendar year is 12 consecutive months ending on December 31. Irs amended tax return If you have previously established a regular fiscal year (12 consecutive months ending on the last day of a month other than December or a 52–53 week year) and are considered to be a U. Irs amended tax return S. Irs amended tax return resident for any calendar year, you will be treated as a U. Irs amended tax return S. Irs amended tax return resident for any part of your fiscal year that falls within that calendar year. Irs amended tax return Identification Number A taxpayer identification number must be furnished on returns, statements, and other tax-related documents. Irs amended tax return For an individual, this is a social security number (SSN). Irs amended tax return If you do not have and are not eligible to get an SSN, you must apply for an individual taxpayer identification number (ITIN). Irs amended tax return An employer identification number (EIN) is required if you are engaged in a trade or business as a sole proprietor and have employees or a qualified retirement plan. Irs amended tax return You must furnish a taxpayer identification number if you are: An alien who has income effectively connected with the conduct of a U. Irs amended tax return S. Irs amended tax return trade or business at any time during the year, An alien who has a U. Irs amended tax return S. Irs amended tax return office or place of business at any time during the year, A nonresident alien spouse treated as a resident, as discussed in chapter 1, or Any other alien who files a tax return, an amended return, or a refund claim (but not information returns). Irs amended tax return Social security number (SSN). Irs amended tax return   Generally, you can get an SSN if you have been lawfully admitted to the United States for permanent residence or under other immigration categories that authorize U. Irs amended tax return S. Irs amended tax return employment. Irs amended tax return   To apply for this number, get Form SS-5, Application for a Social Security Card, from your local Social Security Administration (SSA) office or call the SSA at 1-800-772-1213. Irs amended tax return You can also download Form SS-5 from the SSA's website at www. Irs amended tax return socialsecurity. Irs amended tax return gov/ssnumber/ss5. Irs amended tax return htm. Irs amended tax return You must visit an SSA office in person and submit your Form SS-5 along with original documentation showing your age, identity, immigration status, and authority to work in the United States. Irs amended tax return Generally, you will receive your card about 2 weeks after the SSA has all of the necessary information. Irs amended tax return F-1 and M-1 visa holders. Irs amended tax return    If you are an F-1 or M-1 student, you must also show your Form I-20. Irs amended tax return For more information, see SSA Publication 05-10181, International Students and Social Security Numbers, available online at www. Irs amended tax return socialsecurity. Irs amended tax return gov/pubs/10181. Irs amended tax return html. Irs amended tax return J-1 visa holders. Irs amended tax return   If you are a J-1 exchange visitor, you will also need to show your Form DS-2019. Irs amended tax return For more information, see SSA Publication 05-10107, Foreign Workers and Social Security Numbers, available online at www. Irs amended tax return socialsecurity. Irs amended tax return gov/pubs/10107. Irs amended tax return html. Irs amended tax return Individual taxpayer identification number (ITIN). Irs amended tax return   If you do not have and are not eligible to get an SSN, you must apply for an ITIN. Irs amended tax return For details on how to do so, see Form W-7 and its instructions. Irs amended tax return Allow 6 to 10 weeks for the IRS to notify you of your ITIN. Irs amended tax return If you already have an ITIN, enter it wherever an SSN is required on your tax return. Irs amended tax return   An ITIN is for tax use only. Irs amended tax return It does not entitle you to social security benefits or change your employment or immigration status under U. Irs amended tax return S. Irs amended tax return law. Irs amended tax return   In addition to those aliens who are required to furnish a taxpayer identification number and are not eligible for an SSN, a Form W-7 must be filed for: Alien individuals who are claimed as dependents and are not eligible for an SSN, and Alien spouses who are claimed as exemptions and are not eligible for an SSN. Irs amended tax return Employer identification number (EIN). Irs amended tax return   An individual may use an SSN (or ITIN) for individual taxes and an EIN for business taxes. Irs amended tax return To apply for an EIN, file Form SS-4, Application for Employer Identification Number, with the IRS. Irs amended tax return Filing Status The amount of your tax depends on your filing status. Irs amended tax return Your filing status is important in determining whether you can take certain deductions and credits. Irs amended tax return The rules for determining your filing status are different for resident aliens and nonresident aliens. Irs amended tax return Resident Aliens Resident aliens can use the same filing statuses available to U. Irs amended tax return S. Irs amended tax return citizens. Irs amended tax return See your form instructions or Publication 501 for more information on filing status. Irs amended tax return Married filing jointly. Irs amended tax return   Generally, you can file as married filing jointly only if both you and your spouse were resident aliens for the entire tax year, or if you make one of the choices discussed in chapter 1 to treat your spouse as a resident alien for the entire tax year. Irs amended tax return Qualifying widow(er). Irs amended tax return   If your spouse died in 2011 or 2012, you did not remarry before the end of 2013, and you have a dependent child living with you, you may qualify to file as a qualifying widow(er) and use the joint return tax rates. Irs amended tax return This applies only if you could have filed a joint return with your spouse for the year your spouse died. Irs amended tax return Head of household. Irs amended tax return   You can qualify as head of household if you are unmarried or considered unmarried on the last day of the year and you pay more than half the cost of keeping up a home for you and a qualifying person. Irs amended tax return You must be a resident alien for the entire tax year. Irs amended tax return   You are considered unmarried for this purpose if your spouse was a nonresident alien at any time during the year and you do not make one of the choices discussed in chapter 1 to treat your spouse as a resident alien for the entire tax year. Irs amended tax return Note. Irs amended tax return   Even if you are considered unmarried for head of household purposes because you are married to a nonresident alien, you may still be considered married for purposes of the earned income credit. Irs amended tax return In that case, you will not be entitled to the credit. Irs amended tax return See Publication 596 for more information. Irs amended tax return Nonresident Aliens If you are a nonresident alien filing Form 1040NR, you may be able to use one of the filing statuses discussed later. Irs amended tax return If you are filing Form 1040NR-EZ, you can only claim “Single nonresident alien” or “Married nonresident alien” as your filing status. Irs amended tax return Married nonresident alien. Irs amended tax return   Married nonresident aliens who are not married to U. Irs amended tax return S. Irs amended tax return citizens or residents generally must use the Tax Table column or the Tax Computation Worksheet for married filing separate returns when determining the tax on income effectively connected with a U. Irs amended tax return S. Irs amended tax return trade or business. Irs amended tax return Exceptions. Irs amended tax return   Married nonresident aliens normally cannot use the Tax Table column or the Tax Computation Worksheet for single individuals. Irs amended tax return However, you may be able to file as single if you lived apart from your spouse during the last 6 months of the year and you are a married resident of Canada, Mexico, South Korea, or are a married U. Irs amended tax return S. Irs amended tax return national. Irs amended tax return See the instructions for Form 1040NR or Form 1040NR-EZ to see if you qualify. Irs amended tax return U. Irs amended tax return S. Irs amended tax return national is defined later in this section under Qualifying widow(er) . Irs amended tax return   A nonresident alien generally cannot file as married filing jointly. Irs amended tax return However, a nonresident alien who is married to a U. Irs amended tax return S. Irs amended tax return citizen or resident can choose to be treated as a resident and file a joint return on Form 1040, Form 1040A, or Form 1040EZ. Irs amended tax return For information on these choices, see chapter 1. Irs amended tax return If you do not make the choice to file jointly, file Form 1040NR or Form 1040NR-EZ and use the Tax Table column or the Tax Computation Worksheet for married individuals filing separately. Irs amended tax return Qualifying widow(er). Irs amended tax return   You may be eligible to file as a qualifying widow(er) and use the joint return tax rates if all of the following conditions apply. Irs amended tax return You were a resident of Canada, Mexico, or South Korea, or a U. Irs amended tax return S. Irs amended tax return national (defined later). Irs amended tax return Your spouse died in 2011 or 2012 and you did not remarry before the end of 2013. Irs amended tax return You have a dependent child living with you. Irs amended tax return See the instructions for Form 1040NR for the rules for filing as a qualifying widow(er) with a dependent child. Irs amended tax return   A U. Irs amended tax return S. Irs amended tax return national is an individual who, although not a U. Irs amended tax return S. Irs amended tax return citizen, owes his or her allegiance to the United States. Irs amended tax return U. Irs amended tax return S. Irs amended tax return nationals include American Samoans and Northern Mariana Islanders who chose to become U. Irs amended tax return S. Irs amended tax return nationals instead of U. Irs amended tax return S. Irs amended tax return citizens. Irs amended tax return Head of household. Irs amended tax return   You cannot file as head of household if you are a nonresident alien at any time during the tax year. Irs amended tax return However, if you are married, your spouse can qualify as a head of household if: Your spouse is a resident alien or U. Irs amended tax return S. Irs amended tax return citizen for the entire tax year, You do not choose to be treated as a resident alien, and Your spouse meets the other requirements for this filing status, as discussed earlier under Resident Aliens . Irs amended tax return Note. Irs amended tax return   Even if your spouse is considered unmarried for head of household purposes because you are a nonresident alien, your spouse may still be considered married for purposes of the earned income credit. Irs amended tax return In that case, your spouse will not be entitled to the credit. Irs amended tax return See Publication 596 for more information. Irs amended tax return Estates and trusts. Irs amended tax return   A nonresident alien estate or trust using Form 1040NR must use Tax Rate Schedule W in the Form 1040NR instructions when determining the tax on income effectively connected with a U. Irs amended tax return S. Irs amended tax return trade or business. Irs amended tax return Special rules for aliens from certain U. Irs amended tax return S. Irs amended tax return possessions. Irs amended tax return   A nonresident alien who is a bona fide resident of American Samoa or Puerto Rico for the entire tax year and who is temporarily working in the United States should read Bona Fide Residents of American Samoa or Puerto Rico, at the end of this chapter, for information about special rules. Irs amended tax return Reporting Your Income You must report each item of income that is taxable according to the rules in chapters 2, 3, and 4. Irs amended tax return For resident aliens, this includes income from sources both within and outside the United States. Irs amended tax return For nonresident aliens, this includes both income that is effectively connected with a trade or business in the United States (subject to graduated tax rates) and income from U. Irs amended tax return S. Irs amended tax return sources that is not effectively connected (subject to a flat 30% tax rate or lower tax treaty rate). Irs amended tax return Deductions Resident and nonresident aliens can claim similar deductions on their U. Irs amended tax return S. Irs amended tax return tax returns. Irs amended tax return However, nonresident aliens generally can claim only deductions related to income that is effectively connected with their U. Irs amended tax return S. Irs amended tax return trade or business. Irs amended tax return Resident Aliens You can claim the same deductions allowed to U. Irs amended tax return S. Irs amended tax return citizens if you are a resident alien for the entire tax year. Irs amended tax return While the discussion that follows contains some of the same general rules and guidelines that apply to you, it is specifically directed toward nonresident aliens. Irs amended tax return You should get Form 1040 and instructions for more information on how to claim your allowable deductions. Irs amended tax return Nonresident Aliens You can claim deductions to figure your effectively connected taxable income. Irs amended tax return You generally cannot claim deductions related to income that is not connected with your U. Irs amended tax return S. Irs amended tax return business activities. Irs amended tax return Except for personal exemptions, and certain itemized deductions, discussed later, you can claim deductions only to the extent they are connected with your effectively connected income. Irs amended tax return Ordinary and necessary business expenses. Irs amended tax return   You can deduct all ordinary and necessary expenses in the operation of your U. Irs amended tax return S. Irs amended tax return trade or business to the extent they relate to income effectively connected with that trade or business. Irs amended tax return The deduction for travel expenses while in the United States is discussed under Itemized Deductions, later. Irs amended tax return For information about other business expenses, see Publication 535. Irs amended tax return Losses. Irs amended tax return   You can deduct losses resulting from transactions that you entered into for profit and that you were not reimbursed for by insurance, etc. Irs amended tax return to the extent that they relate to income that is effectively connected with a trade or business in the United States. Irs amended tax return Educator expenses. Irs amended tax return   If you were an eligible educator in 2013, you can deduct as an adjustment to income up to $250 in unreimbursed qualified expenses you paid or incurred during 2013 for books, supplies (other than nonathletic supplies for courses of instruction in health or physical education), computer equipment, and other equipment and materials used in the classroom. Irs amended tax return For more information, see your tax form instructions. Irs amended tax return Individual retirement arrangement (IRA). Irs amended tax return   If you made contributions to a traditional IRA for 2013, you may be able to take an IRA deduction. Irs amended tax return But you must have taxable compensation effectively connected with a U. Irs amended tax return S. Irs amended tax return trade or business to do so. Irs amended tax return A Form 5498 should be sent to you by May 31, 2014, that shows all contributions to your traditional IRA for 2013. Irs amended tax return If you were covered by a retirement plan (qualified pension, profit-sharing (including 401(k)), annuity, SEP, SIMPLE, etc. Irs amended tax return ) at work or through self-employment, your IRA deduction may be reduced or eliminated. Irs amended tax return But you can still make contributions to a traditional IRA even if you cannot deduct them. Irs amended tax return If you made nondeductible contributions to a traditional IRA for 2013, you must report them on Form 8606, Nondeductible IRAs. Irs amended tax return   For more information, see Publication 590, Individual Retirement Arrangements (IRAs). Irs amended tax return Moving expenses. Irs amended tax return   If you are a nonresident alien temporarily in the United States earning taxable income for performing personal services, you can deduct moving expenses to the United States if you meet both of the following tests. Irs amended tax return You are a full-time employee for at least 39 weeks during the 12 months right after you move, or if you are self-employed, you work full time for at least 39 weeks during the first 12 months and 78 weeks during the first 24 months right after you move. Irs amended tax return Your new job location is at least 50 miles farther (by the shortest commonly traveled route) from your former home than your former job location was. Irs amended tax return If you had no former job location, the new job location must be at least 50 miles from your former home. Irs amended tax return   You cannot deduct the moving expense you have when returning to your home abroad or moving to a foreign job site. Irs amended tax return   Figure your deductible moving expenses to the United States on Form 3903, and deduct them on line 26 of Form 1040NR. Irs amended tax return   For more information on the moving expense deduction, see Publication 521. Irs amended tax return Reimbursements. Irs amended tax return   If your employer reimbursed you for allowable moving expenses under an accountable plan, your employer should have excluded these reimbursements from your income. Irs amended tax return You can only deduct allowable moving expenses that were not reimbursed by your employer or that were reimbursed but the reimbursement was included in your income. Irs amended tax return For more information, see Publication 521. Irs amended tax return Moving expense or travel expense. Irs amended tax return   If you deduct moving expenses to the United States, you cannot also deduct travel expenses (discussed later under Itemized Deductions) while temporarily away from your tax home in a foreign country. Irs amended tax return Moving expenses are based on a change in your principal place of business while travel expenses are based on your temporary absence from your principal place of business. Irs amended tax return Self-employed SEP, SIMPLE, and qualified retirement plans. Irs amended tax return   If you are self-employed, you may be able to deduct contributions to a SEP, SIMPLE, or qualified retirement plan that provides retirement benefits for yourself and your common-law employees, if any. Irs amended tax return To make deductible contributions for yourself, you must have net earnings from self-employment that are effectively connected with your U. Irs amended tax return S. Irs amended tax return trade or business. Irs amended tax return   Get Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans), for further information. Irs amended tax return Penalty on early withdrawal of savings. Irs amended tax return   You must include in income all effectively connected interest income you receive or that is credited to your account during the year. Irs amended tax return Do not reduce it by any penalty you must pay on an early withdrawal from a time savings account. Irs amended tax return However, if the interest income is effectively connected with your U. Irs amended tax return S. Irs amended tax return trade or business during the year, you can deduct on line 30 of Form 1040NR the amount of the early withdrawal penalty that the banking institution charged. Irs amended tax return Student loan interest expense. Irs amended tax return   If you paid interest on a student loan in 2013, you may be able to deduct up to $2,500 of the interest you paid. Irs amended tax return Generally, you can claim the deduction if all the following requirements are met. Irs amended tax return Your filing status is any filing status except married filing separately. Irs amended tax return Your modified adjusted gross income is less than $75,000. Irs amended tax return No one else is claiming an exemption for you on his or her 2013 tax return. Irs amended tax return You paid interest on a loan taken out only to pay tuition and other qualified higher education expenses for yourself, your spouse, someone who was your dependent when the loan was taken out, or someone you could have claimed as a dependent for the year the loan was taken out except that: The person filed a joint return, The person had gross income that was equal to or more than the exemption amount for that year ($3,900 for 2013), or You could be claimed as a dependent on someone else's return. Irs amended tax return The loan is not from a related person or a person who borrowed the proceeds under a qualified employer plan or a contract purchased under such a plan. Irs amended tax return The education expenses were paid or incurred within a reasonable period of time before or after the loan was taken out. Irs amended tax return The person for whom the expenses were paid or incurred was an eligible student. Irs amended tax return Use the worksheet in the Form 1040NR or Form 1040NR-EZ instructions to figure the deduction. Irs amended tax return For more information, see Publication 970, Tax Benefits for Education. Irs amended tax return Exemptions Resident aliens can claim personal exemptions and exemptions for dependents in the same way as U. Irs amended tax return S. Irs amended tax return citizens. Irs amended tax return However, nonresident aliens generally can claim only a personal exemption for themselves on their U. Irs amended tax return S. Irs amended tax return tax return. Irs amended tax return Resident Aliens You can claim personal exemptions and exemptions for dependents according to the dependency rules for U. Irs amended tax return S. Irs amended tax return citizens. Irs amended tax return You can claim an exemption for your spouse on a separate return if your spouse had no gross income for U. Irs amended tax return S. Irs amended tax return tax purposes and was not the dependent of another taxpayer. Irs amended tax return You can claim this exemption even if your spouse has not been a resident alien for a full tax year or is an alien who has not come to the United States. Irs amended tax return You can claim an exemption for each person who qualifies as a dependent according to the rules for U. Irs amended tax return S. Irs amended tax return citizens. Irs amended tax return The dependent must be a citizen or national (defined earlier) of the United States or be a resident of the United States, Canada, or Mexico for some part of the calendar year in which your tax year begins. Irs amended tax return Get Publication 501 for more information. Irs amended tax return Your spouse and each dependent for whom you claim an exemption must have either an SSN or an ITIN. Irs amended tax return See Identification Number, earlier. Irs amended tax return Nonresident Aliens Generally, if you are a nonresident alien engaged in a trade or business in the United States, you can claim only one personal exemption ($3,900 for 2013). Irs amended tax return You may be able to claim an exemption for a spouse and a dependent if you are described in any of the following discussions. Irs amended tax return Your spouse and each dependent for whom you claim an exemption must have either an SSN or an ITIN. Irs amended tax return See Identification Number, earlier. Irs amended tax return Residents of Mexico or Canada or U. Irs amended tax return S. Irs amended tax return nationals. Irs amended tax return   If you are a resident of Mexico or Canada or a national of the United States (defined earlier), you can also claim a personal exemption for your spouse if your spouse had no gross income for U. Irs amended tax return S. Irs amended tax return tax purposes and cannot be claimed as the dependent on another U. Irs amended tax return S. Irs amended tax return taxpayer's return. Irs amended tax return In addition, you can claim exemptions for your dependents who meet certain tests. Irs amended tax return Residents of Mexico, Canada, or nationals of the United States must use the same rules as U. Irs amended tax return S. Irs amended tax return citizens to determine who is a dependent and for which dependents exemptions can be claimed. Irs amended tax return See Publication 501 for these rules. Irs amended tax return For purposes of these rules, dependents who are U. Irs amended tax return S. Irs amended tax return nationals meet the citizenship test discussed in Publication 501. Irs amended tax return Residents of South Korea. Irs amended tax return   Nonresident aliens who are residents of South Korea may be able to claim exemptions for a spouse and children. Irs amended tax return The income tax treaty with South Korea imposes two additional requirements on South Korean residents: The spouse and all children claimed must live with the alien in the United States at some time during the tax year, and The additional deduction for the exemptions must be prorated based on the ratio of the alien's U. Irs amended tax return S. Irs amended tax return source gross income effectively connected with a U. Irs amended tax return S. Irs amended tax return trade or business for the tax year to the alien's entire income from all sources during the tax year. Irs amended tax return Example. Irs amended tax return Mr. Irs amended tax return Park, a nonresident alien who is a resident of South Korea, lives temporarily in the United States with his wife and two children. Irs amended tax return During the tax year he receives U. Irs amended tax return S. Irs amended tax return compensation of $18,000. Irs amended tax return He also receives $6,000 of income from sources outside the United States that is not effectively connected with his U. Irs amended tax return S. Irs amended tax return trade or business. Irs amended tax return Thus, his total income for the year is $24,000. Irs amended tax return Mr. Irs amended tax return Park meets all requirements for claiming exemptions for his spouse and two children. Irs amended tax return The additional deduction for 2013 is $8,775 figured as follows: $18,000 $24,000 × $11,700* = $8,775               *3 × $3,900 = $11,700   Students and business apprentices from India. Irs amended tax return   Students and business apprentices who are eligible for the benefits of Article 21(2) of the United States–India Income Tax Treaty may be able to claim exemptions for their spouse and dependents. Irs amended tax return   You can claim an exemption for your spouse if he or she had no gross income during the year and cannot be claimed as a dependent on another U. Irs amended tax return S. Irs amended tax return taxpayer's return. Irs amended tax return   You can claim exemptions for each of your dependents not admitted to the United States on “F-2,” “J-2,” or “M-2” visas if they meet the same rules that apply to U. Irs amended tax return S. Irs amended tax return citizens. Irs amended tax return See Publication 501 for these rules. Irs amended tax return   List your spouse and dependents on line 7c of Form 1040NR. Irs amended tax return Enter the total on the appropriate line to the right of line 7c. Irs amended tax return Itemized Deductions Nonresident aliens can claim some of the same itemized deductions that resident aliens can claim. Irs amended tax return However, nonresident aliens can claim itemized deductions only if they have income effectively connected with their U. Irs amended tax return S. Irs amended tax return trade or business. Irs amended tax return Resident Aliens You can claim the same itemized deductions as U. Irs amended tax return S. Irs amended tax return citizens, using Schedule A of Form 1040. Irs amended tax return These deductions include certain medical and dental expenses, state and local income taxes, real estate taxes, interest you paid on a home mortgage, charitable contributions, casualty and theft losses, and miscellaneous deductions. Irs amended tax return If you do not itemize your deductions, you can claim the standard deduction for your particular filing status. Irs amended tax return For further information, see Form 1040 and instructions. Irs amended tax return Nonresident Aliens You can deduct certain itemized deductions if you receive income effectively connected with your U. Irs amended tax return S. Irs amended tax return trade or business. Irs amended tax return These deductions include state and local income taxes, charitable contributions to U. Irs amended tax return S. Irs amended tax return organizations, casualty and theft losses, and miscellaneous deductions. Irs amended tax return Use Schedule A of Form 1040NR to claim itemized deductions. Irs amended tax return If you are filing Form 1040NR-EZ, you can only claim a deduction for state or local income taxes. Irs amended tax return If you are claiming any other itemized deduction, you must file Form 1040NR. Irs amended tax return Standard deduction. Irs amended tax return   Nonresident aliens cannot claim the standard deduction. Irs amended tax return However, see Students and business apprentices from India , next. Irs amended tax return Students and business apprentices from India. Irs amended tax return   A special rule applies to students and business apprentices who are eligible for the benefits of Article 21(2) of the United States–India Income Tax Treaty. Irs amended tax return You can claim the standard deduction provided you do not claim itemized deductions. Irs amended tax return   Use Worksheet 5-1 to figure your standard deduction. Irs amended tax return If you are married and your spouse files a return and itemizes deductions, you cannot take the standard deduction. Irs amended tax return State and local income taxes. Irs amended tax return   You can deduct state and local income taxes you paid on income that is effectively connected with a trade or business in the United States. Irs amended tax return If you received a refund or rebate in 2013 of taxes you paid in an earlier year, do not reduce your deduction by that amount. Irs amended tax return Instead, you must include the refund or rebate in income if you deducted the taxes in the earlier year and the deduction reduced your tax. Irs amended tax return See Recoveries in Publication 525 for details on how to figure the amount to include in income. Irs amended tax return Charitable contributions. Irs amended tax return   You can deduct your charitable contributions or gifts to qualified organizations subject to certain limits. Irs amended tax return Qualified organizations include organizations that are religious, charitable, educational, scientific, or literary in nature, or that work to prevent cruelty to children or animals. Irs amended tax return Certain organizations that promote national or international amateur sports competition are also qualified organizations. Irs amended tax return Foreign organizations. Irs amended tax return   Contributions made directly to a foreign organization are not deductible. Irs amended tax return However, you can deduct contributions to a U. Irs amended tax return S. Irs amended tax return organization that transfers funds to a charitable foreign organization if the U. Irs amended tax return S. Irs amended tax return organization controls the use of the funds or if the foreign organization is only an administrative arm of the U. Irs amended tax return S. Irs amended tax return organization. Irs amended tax return   For more information about organizations that qualify to receive charitable contributions, see Publication 526, Charitable Contributions. Irs amended tax return Worksheet 5-1. Irs amended tax return 2013 Standard Deduction Worksheet for Students and Business Apprentices From India Caution. Irs amended tax return If you are married filing a separate return and your spouse itemizes deductions, do not complete this worksheet. Irs amended tax return You cannot take the standard deduction even if you were born before January 2, 1949, or are blind. Irs amended tax return 1 Enter the amount shown below for your filing status. Irs amended tax return           Single or married filing separately—$6,100 Qualifying widow(er)—$12,200 1. Irs amended tax return           2 Can you be claimed as a dependent on someone else's U. Irs amended tax return S. Irs amended tax return income tax return?  No. Irs amended tax return Enter the amount from line 1 on line 4. Irs amended tax return Skip line 3 and go to line 5. Irs amended tax return   Yes. Irs amended tax return Go to line 3. Irs amended tax return         3 Is your earned income* more than $650?           Yes. Irs amended tax return Add $350 to your earned income. Irs amended tax return Enter the total. Irs amended tax return           No. Irs amended tax return Enter $1,000 3. Irs amended tax return       4 Enter the smaller of line 1 or line 3 4. Irs amended tax return   5 If born before January 2, 1949, OR blind, enter $1,200 ($1,500 if single). Irs amended tax return If born before January 2, 1949, AND blind, enter $2,400 ($3,000 if single). Irs amended tax return Otherwise, enter -0- 5. Irs amended tax return   6 Add lines 4 and 5. Irs amended tax return Enter the total here and on Form 1040NR, line 38 (or Form 1040NR-EZ, line 11). Irs amended tax return Print “Standard Deduction Allowed Under U. Irs amended tax return S. Irs amended tax return –India Income Tax Treaty” in the space to the left of these lines. Irs amended tax return This is your standard deduction for 2013. Irs amended tax return 6. Irs amended tax return   *Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. Irs amended tax return It also includes any amount received as a scholarship that you must include in your income. Irs amended tax return Generally, your earned income is the total of the amount(s) you reported on Form 1040NR, lines 8,12,13, and 19, minus amounts on lines 27 and 31 (or Form 1040NR-EZ, lines 3 and 5, minus any amount on line 8). Irs amended tax return Contributions from which you benefit. Irs amended tax return   If you receive a benefit as a result of making a contribution to a qualified organization, you can deduct only the amount of your contribution that is more than the value of the benefit you receive. Irs amended tax return   If you pay more than the fair market value to a qualified organization for merchandise, goods, or services, the amount you pay that is more than the value of the item can be a charitable contribution. Irs amended tax return For the excess amount to qualify, you must pay it with the intent to make a charitable contribution. Irs amended tax return Cash contributions. Irs amended tax return   You cannot deduct a cash contribution, regardless of the amount, unless you keep as a record of the contribution a bank record (such as a canceled check, a bank copy of a canceled check, or a bank statement containing the name of the charity, the date, and the amount) or a written record from the charity. Irs amended tax return The written record must include the name of the charity, date of the contribution, and the amount of the contribution. Irs amended tax return   You may deduct a cash contribution of $250 or more only if you have a written statement from the charitable organization showing: The amount of any money contributed, Whether the organization gave you any goods or services in return for your contribution, and A description and estimate of the value of any goods or services described in (2). Irs amended tax return If you received only intangible religious benefits, the organization must state this, but it does not have to describe or value the benefit. Irs amended tax return Noncash contributions. Irs amended tax return   For contributions not made in cash, the records you must keep depend on the amount of your deduction. Irs amended tax return See Publication 526 for details. Irs amended tax return For example, if you make a noncash contribution and the amount of your deduction is more than $500, you must complete and attach to your tax return Form 8283, Noncash Charitable Contributions. Irs amended tax return If you deduct more than $500 for a contribution of a motor vehicle, boat, or airplane, you must also attach a statement from the charitable organization to your return. Irs amended tax return If your total deduction is over $5,000, you also may have to get appraisals of the values of the property. Irs amended tax return If the donated property is valued at more than $5,000, you must obtain a qualified appraisal. Irs amended tax return You generally must attach to your tax return an appraisal of any property if your deduction for the property is more than $500,000. Irs amended tax return See Form 8283 and its instructions for details. Irs amended tax return Contributions of appreciated property. Irs amended tax return   If you contribute property to a qualified organization, the amount of your charitable contribution is generally the fair market value of the property at the time of the contribution. Irs amended tax return However, if you contribute property with a fair market value that is more than your basis in it, you may have to reduce the fair market value by the amount of appreciation (increase in value) when you figure your deduction. Irs amended tax return Your basis in the property is generally what you paid for it. Irs amended tax return If you need more information about basis, get Publication 551, Basis of Assets. Irs amended tax return   Different rules apply to figuring your deduction, depending on whether the property is: Ordinary income property, or Capital gain property. Irs amended tax return For information about these rules, see Publication 526. Irs amended tax return Limit. Irs amended tax return   The amount you can deduct in a tax year is limited in the same way it is for a citizen or resident of the United States. Irs amended tax return For a discussion of limits on charitable contributions and other information, get Publication 526. Irs amended tax return Casualty and theft losses. Irs amended tax return   You can deduct your loss from fire, storm, shipwreck, or other casualty, or theft of property even though your property is not connected with a U. Irs amended tax return S. Irs amended tax return trade or business. Irs amended tax return The property can be personal use property or income-producing property not connected with a U. Irs amended tax return S. Irs amended tax return trade or business. Irs amended tax return The property must be located in the United States at the time of the casualty or theft. Irs amended tax return You can deduct theft losses only in the year in which you discover the loss. Irs amended tax return   The amount of the loss is the fair market value of the property immediately before the casualty or theft less its fair market value immediately after the casualty or theft (but not more than its cost or adjusted basis) less any insurance or other reimbursement. Irs amended tax return The fair market value of property immediately after a theft is considered zero, because you no longer have the property. Irs amended tax return   If your property is covered by insurance, you should file a timely insurance claim for reimbursement. Irs amended tax return If you do not, you cannot deduct this loss as a casualty or theft loss. Irs amended tax return   Figure your deductible casualty and theft losses on Form 4684, Casualties and Thefts. Irs amended tax return Losses from personal use property. Irs amended tax return    You cannot deduct the first $100 of each casualty or theft loss to property held for personal use. Irs amended tax return You can deduct only the total of these losses for the year (reduced by the $100 limit) that is more than 10% of your adjusted gross income (line 37, Form 1040NR) for the year. Irs amended tax return Losses from income-producing property. Irs amended tax return   These losses are not subject to the limitations that apply to personal use property. Irs amended tax return Use Section B of Form 4684 to figure your deduction for these losses. Irs amended tax return Job expenses and other miscellaneous deductions. Irs amended tax return   You can deduct job expenses, such as allowable unreimbursed travel expenses (discussed next), and other miscellaneous deductions. Irs amended tax return Generally, the allowable deductions must be related to effectively connected income. Irs amended tax return Deductible expenses include: Union dues, Safety equipment and small tools needed for your job, Dues to professional organizations, Subscriptions to professional journals, Tax return preparation fees, and Casualty and theft losses of property used in performing services as an employee (employee property). Irs amended tax return   Most miscellaneous itemized deductions are deductible only if they are more than 2% of your adjusted gross income (line 37, Form 1040NR). Irs amended tax return For more information on miscellaneous deductions, see the instructions for Form 1040NR. Irs amended tax return Travel expenses. Irs amended tax return   You may be able to deduct your ordinary and necessary travel expenses while you are temporarily performing personal services in the United States. Irs amended tax return Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for one year or less. Irs amended tax return You must be able to show you were present in the United States on an activity that required your temporary absence from your regular place of work. Irs amended tax return   For example, if you have established a “tax home” through regular employment in a foreign country, and intend to return to similar employment in the same country at the end of your temporary stay in the United States, you can deduct reasonable travel expenses you paid. Irs amended tax return You cannot deduct travel expenses for other members of your family or party. Irs amended tax return Deductible travel expenses. Irs amended tax return   If you qualify, you can deduct your expenses for: Transportation—airfare, local transportation, including train, bus, etc. Irs amended tax return , Lodging—rent paid, utilities (do not include telephone), hotel or motel room expenses, and Meal expenses—actual expenses allowed if you keep records of the amounts, or, if you do not wish to keep detailed records, you are generally allowed a standard meal allowance amount depending on the date and area of your travel. Irs amended tax return You generally can deduct only 50% of unreimbursed meal expenses. Irs amended tax return The standard meal allowance rates for high-cost areas are available at www. Irs amended tax return gsa. Irs amended tax return gov/perdiem. Irs amended tax return The rates for other areas are in Publication 463. Irs amended tax return   Use Form 2106 or 2106-EZ to figure your allowable expenses that you claim on line 7 of Schedule A (Form 1040NR). Irs amended tax return Expenses allocable to U. Irs amended tax return S. Irs amended tax return tax-exempt income. Irs amended tax return   You cannot deduct an expense, or part of an expense, that is allocable to U. Irs amended tax return S. Irs amended tax return tax-exempt income, including income exempt by tax treaty. Irs amended tax return Example. Irs amended tax return Irina Oak, a citizen of Poland, resided in the United States for part of the year to acquire business experience from a U. Irs amended tax return S. Irs amended tax return company. Irs amended tax return During her stay in the United States, she received a salary of $8,000 from her Polish employer. Irs amended tax return She received no other U. Irs amended tax return S. Irs amended tax return source income. Irs amended tax return She spent $3,000 on travel expenses, of which $1,000 were for meals. Irs amended tax return None of these expenses were reimbursed. Irs amended tax return Under the tax treaty with Poland, $5,000 of her salary is exempt from U. Irs amended tax return S. Irs amended tax return income tax. Irs amended tax return In filling out Form 2106-EZ, she must reduce her deductible meal expenses by half ($500). Irs amended tax return She must reduce the remaining $2,500 of travel expenses by 62. Irs amended tax return 5% ($1,563) because 62. Irs amended tax return 5% ($5,000 ÷ $8,000) of her salary is exempt from tax. Irs amended tax return She enters the remaining total of $937 on line 7 of Schedule A (Form 1040NR). Irs amended tax return She completes the remaining lines according to the instructions for Schedule A. Irs amended tax return More information. Irs amended tax return   For more information about deductible expenses, reimbursements, and recordkeeping, get Publication 463. Irs amended tax return Tax Credits and Payments This discussion covers tax credits and payments for resident aliens, followed by a discussion of the credits and payments for nonresident aliens. Irs amended tax return Resident Aliens Resident aliens generally claim tax credits and report tax payments, including withholding, using the same rules that apply to U. Irs amended tax return S. Irs amended tax return citizens. Irs amended tax return The following items are some of the credits you may be able to claim. Irs amended tax return Foreign tax credit. Irs amended tax return   You can claim a credit, subject to certain limits, for income tax you paid or accrued to a foreign country on foreign source income. Irs amended tax return You cannot claim a credit for taxes paid or accrued on excluded foreign earned income. Irs amended tax return To claim a credit for income taxes paid or accrued to a foreign country, you generally will file Form 1116, Foreign Tax Credit (Individual, Estate, or Trust), with your Form 1040. Irs amended tax return   For more information, get Publication 514, Foreign Tax Credit for Individuals. Irs amended tax return Child and dependent care credit. Irs amended tax return   You may be able to take this credit if you pay someone to care for your qualifying child who is under age 13, or your disabled dependent or disabled spouse, so that you can work or look for work. Irs amended tax return Generally, you must be able to claim an exemption for your dependent. Irs amended tax return   For more information, get Publication 503, Child and Dependent Care Expenses, and Form 2441, Child and Dependent Care Expenses. Irs amended tax return Credit for the elderly or the disabled. Irs amended tax return   You may qualify for this credit if you are 65 or older or if you retired on permanent and total disability. Irs amended tax return For more information on this credit, get Publication 524, Credit for the Elderly or the Disabled, and Schedule R (Form 1040A or 1040). Irs amended tax return Education credits. Irs amended tax return   You may qualify for these credits if you paid qualified education expenses for yourself, your spouse, or your dependent. Irs amended tax return There are two education credits: the American Opportunity Credit and the lifetime learning credit. Irs amended tax return You cannot claim these credits if you are married filing separately. Irs amended tax return Use Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits), to figure the credit. Irs amended tax return For more information, see Publication 970. Irs amended tax return Retirement savings contributions credit. Irs amended tax return   You may qualify for this credit (also known as the saver's credit) if you made eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement (IRA) in 2013. Irs amended tax return You cannot claim this credit if: You were born after January 1, 1996, You were a full-time student, Your exemption is claimed by someone else on his or her 2013 tax return, or Your adjusted gross income is more than: $59,000, if your filing status is married filing jointly, $44,250, if your filing status is head of household, or $29,500, if your filing status is single, married filing separately, or qualifying widow(er). Irs amended tax return Use Form 8880, Credit for Qualified Retirement Savings Contributions, to figure the credit. Irs amended tax return For more information, see Publication 590. Irs amended tax return Child tax credit. Irs amended tax return   You may be able to take this credit if you have a qualifying child. Irs amended tax return   A qualifying child for purposes of the child tax credit is a child who: Was under age 17 at the end of 2013. Irs amended tax return Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew). Irs amended tax return Is a U. Irs amended tax return S. Irs amended tax return citizen, a U. Irs amended tax return S. Irs amended tax return national, or a resident alien. Irs amended tax return Did not provide over half of his or her own support for 2013. Irs amended tax return Lived with you more than half of 2013. Irs amended tax return Temporary absences, such as for school, vacation, or medical care, count as time lived in the home. Irs amended tax return Is claimed as a dependent on your return. Irs amended tax return An adopted child is always treated as your own child. Irs amended tax return An adopted child includes a child lawfully placed with you for legal adoption. Irs amended tax return   See your form instructions for additional details. Irs amended tax return Adoption credit. Irs amended tax return   You may qualify to take a tax credit of up to $12,970 for qualifying expenses paid to adopt an eligible child. Irs amended tax return This amount may be allowed for the adoption of a child with special needs regardless of whether you have qualifying expenses. Irs amended tax return To claim the adoption credit, file Form 8839, Qualified Adoption Expenses, with your Form 1040. Irs amended tax return Earned income credit. Irs amended tax return   You may qualify for an earned income credit of up to $3,250 if a child lived with you in the United States and your earned income and adjusted gross income were each less than $37,870 ($43,210 if married filing jointly). Irs amended tax return If two children lived with you in the United States and your earned income and adjusted gross income were each less than $43,038 ($48,378 if married filing jointly), your credit could be as much as $5,372. Irs amended tax return If three or more children lived with you in the United States and your earned income and adjusted gross income were each less than $46,227 ($51,567 if married filing jointly), your credit could be as much as $6,044. Irs amended tax return If you do not have a qualifying child and your earned income and adjusted gross income were each less than $14,340 ($19,680 if married filing jointly), your credit could be as much as $487. Irs amended tax return You cannot claim the earned income credit if your filing status is married filing separately. Irs amended tax return    You and your spouse (if filing a joint return) and any qualifying child must have valid SSNs to claim this credit. Irs amended tax return You cannot claim the credit using an ITIN. Irs amended tax return If a social security card has a legend that says Not Valid for Employment and the number was issued so that you (or your spouse or your qualifying child) could receive a federally funded benefit, you cannot claim the earned income credit. Irs amended tax return An example of a federally funded benefit is Medicaid. Irs amended tax return If a card has this legend and the individual's immigration status has changed so that the individual is now a U. Irs amended tax return S. Irs amended tax return citizen or lawful permanent resident, ask the SSA to issue a new social security card without the legend. Irs amended tax return Other information. Irs amended tax return   There are other eligibility rules that are not discussed here. Irs amended tax return For more information, get Publication 596, Earned Income Credit. Irs amended tax return Nonresident Aliens You can claim some of the same credits that resident aliens can claim. Irs amended tax return You can also report certain taxes you paid, are considered to have paid, or that were withheld from your income. Irs amended tax return Credits Credits are allowed only if you receive effectively connected income. Irs amended tax return You may be able to claim some of the following credits. Irs amended tax return Foreign tax credit. Irs amended tax return   If you receive foreign source income that is effectively connected with a trade or business in the United States, you can claim a credit for any income taxes paid or accrued to any foreign country or U. Irs amended tax return S. Irs amended tax return possession on that income. Irs amended tax return   If you do not have foreign source income effectively connected with a U. Irs amended tax return S. Irs amended tax return trade or business, you cannot claim credits against your U. Irs amended tax return S. Irs amended tax return tax for taxes paid or accrued to a foreign country or U. Irs amended tax return S. Irs amended tax return possession. Irs amended tax return   You cannot take any credit for taxes imposed by a foreign country or U. Irs amended tax return S. Irs amended tax return possession on your U. Irs amended tax return S. Irs amended tax return source income if those taxes were imposed only because you are a citizen or resident of the foreign country or possession. Irs amended tax return   If you claim a foreign tax credit, you generally will have to attach to your return a Form 1116. Irs amended tax return See Publication 514 for more information. Irs amended tax return Child and dependent care credit. Irs amended tax return   You may qualify for this credit if you pay someone to care for your qualifying child who is under age 13, or your disabled dependent or disabled spouse, so that you can work or look for work. Irs amended tax return Generally, you must be able to claim an exemption for your dependent. Irs amended tax return   Married nonresident aliens can claim the credit only if they choose to file a joint return with a U. Irs amended tax return S. Irs amended tax return citizen or resident spouse as discussed in chapter 1, or if they qualify as certain married individuals living apart (see Joint Return Test in Publication 503). Irs amended tax return   The amount of your child and dependent care expense that qualifies for the credit in any tax year cannot be more than your earned income from the United States for that tax year. Irs amended tax return Earned income generally means wages, salaries, and professional fees for personal services performed. Irs amended tax return   For more information, get Publication 503. Irs amended tax return Education credits. Irs amended tax return   If you are a nonresident alien for any part of the year, you generally cannot claim the education credits. Irs amended tax return However, if you are married and choose to file a joint return with a U. Irs amended tax return S. Irs amended tax return citizen or resident spouse as discussed in chapter 1, you may be eligible for these credits. Irs amended tax return Retirement savings contributions credit. Irs amended tax return   You may qualify for this credit (also known as the saver's credit) if you made eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement (IRA) in 2013. Irs amended tax return You cannot claim this credit if: You were born after January 1, 1996, You were a full-time student, Your exemption is claimed by someone else on his or her 2013 tax return, or Your adjusted gross income is more than $29,500. Irs amended tax return Use Form 8880 to figure the credit. Irs amended tax return For more information, see Publication 590. Irs amended tax return Child tax credit. Irs amended tax return   You may be able to take this credit if you have a qualifying child. Irs amended tax return   A qualifying child for purposes of the child tax credit is a child who: Was under age 17 at the end of 2013. Irs amended tax return Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew). Irs amended tax return Is a U. Irs amended tax return S. Irs amended tax return citizen, a U. Irs amended tax return S. Irs amended tax return national, or a resident alien. Irs amended tax return Did not provide over half of his or her own support for 2013. Irs amended tax return Lived with you more than half of 2013. Irs amended tax return Temporary absences, such as for school, vacation, or medical care, count as time lived in the home. Irs amended tax return Is claimed as a dependent on your return. Irs amended tax return An adopted child is always treated as your own child. Irs amended tax return An adopted child includes a child lawfully placed with you for legal adoption. Irs amended tax return   See your form instructions for additional details. Irs amended tax return Adoption credit. Irs amended tax return   You may qualify to take a tax credit of up to $12,970 for qualifying expenses paid to adopt an eligible child. Irs amended tax return This amount may be allowed for the adoption of a child with special needs regardless of whether you have qualifying expenses. Irs amended tax return To claim the adoption credit, file Form 8839 with your Form 1040NR. Irs amended tax return   Married nonresident aliens can claim the credit only if they choose to file a joint return with a U. Irs amended tax return S. Irs amended tax return citizen or resident spouse as discussed in chapter 1, or if they qualify as certain married individuals living apart (see Married Persons Not Filing Jointly in the Form 8839 instructions). Irs amended tax return Credit for prior year minimum tax. Irs amended tax return   If you paid alternative minimum tax in a prior year, get Form 8801, Credit for Prior Year Minimum Tax—Individuals, Estates, and Trusts, to see if you qualify for this credit. Irs amended tax return Earned income credit. Irs amended tax return   If you are a nonresident alien for any part of the tax year, you generally cannot get the earned income credit. Irs amended tax return However, if you are married and choose to file a joint return with a U. Irs amended tax return S. Irs amended tax return citizen or resident spouse as discussed in chapter 1, you may be eligible for the credit. Irs amended tax return    You, your spouse, and any qualifying child must have valid SSNs to claim this credit. Irs amended tax return You cannot claim the credit using an ITIN. Irs amended tax return If a social security card has a legend that says Not Valid for Employment and the number was issued so that you (or your spouse or your qualifying child) could receive a federally funded benefit, you cannot claim the earned income credit. Irs amended tax return An example of a federally funded benefit is Medicaid. Irs amended tax return If a card has this legend and the individual's immigration status has changed so that the individual is now a U. Irs amended tax return S. Irs amended tax return citizen or lawful permanent resident, ask the SSA to issue a new social security card without the legend. Irs amended tax return   See Publication 596 for more information on the credit. Irs amended tax return Tax Withheld You can claim the tax withheld during the year as a payment against your U. Irs amended tax return S. Irs amended tax return tax. Irs amended tax return You claim it on line 61 of Form 1040NR or on line 18 of Form 1040NR-EZ. Irs amended tax return The tax withheld reduces any tax you owe with Form 1040NR or Form 1040NR-EZ. Irs amended tax return Withholding from wages. Irs amended tax return   Any federal income tax withheld from your wages during the tax year while you were a nonresident alien is allowed as a payment against your U. Irs amended tax return S. Irs amended tax return income tax liability for the same year. Irs amended tax return You can claim the income tax withheld whether or not you were engaged in a trade or business in the United States during the year, and whether or not the wages (or any other income) were connected with a trade or business in the United States. Irs amended tax return Excess social security tax withheld. Irs amended tax return   If you have two or more employers, you may be able to claim a credit against your U. Irs amended tax return S. Irs amended tax return income tax liability for social security tax withheld in excess of the maximum required. Irs amended tax return See Social Security and Medicare Taxes in chapter 8 for more information. Irs amended tax return Additional Medicare Tax. Irs amended tax return   Your employer is responsible for withholding the 0. Irs amended tax return 9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays to you in excess of $200,000 in 2013. Irs amended tax return If you do not owe Additional Medicare Tax, you can claim a credit for any withheld Additional Medicare Tax against the total tax liability shown on your tax return by filing Form 8959. Irs amended tax return Tax paid on undistributed long-term capital gains. Irs amended tax return   If you are a shareholder in a mutual fund (or other regulated investment company) or real estate investment trust, you can claim a credit for your share of any taxes paid by the company on its undistributed long-term capital gains. Irs amended tax return You will receive information on Form 2439, Notice to Shareholder of Undistributed Long-Term Capital Gains, which you must attach to your return. Irs amended tax return Tax withheld at the source. Irs amended tax return   You can claim as a payment any tax withheld at the source on investment and other fixed or determinable annual or periodic income paid to you. Irs amended tax return Fixed or determinable income includes interest, dividend, rental, and royalty income that you do not claim to be effectively connected income. Irs amended tax return Wage or salary payments can be fixed or determinable income to you, but usually are subject to withholding as discussed above. Irs amended tax return Taxes on fixed or determinable income are withheld at a 30% rate or at a lower treaty rate. Irs amended tax return Tax withheld on partnership income. Irs amended tax return   If you are a foreign partner in a partnership, the partnership will withhold tax on your share of effectively connected taxable income from the partnership. Irs amended tax return The partnership will give you a statement on Form 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax, showing the tax withheld. Irs amended tax return A partnership that is publicly traded may withhold on your actual distributions of effectively connected income. Irs amended tax return In this case, the partnership will give you a statement on Form 1042-S. Irs amended tax return Claim the tax withheld as a payment on line 61b or 61d of Form 1040NR, as appropriate. Irs amended tax return Claiming tax withheld on your return. Irs amended tax return   When you fill out your tax return, take extra care to enter the correct amount of any tax withheld shown on your information documents. Irs amended tax return The following table lists some of the more common information documents and shows where to find the amount of tax withheld. Irs amended tax return Form number Location  of tax  withheld RRB-1042S Box 12 SSA-1042S Box 9 W-2 Box 2 W-2c Box 2 1042-S Box 9 8805 Line 10 8288-A Box 2 Bona Fide Residents of American Samoa or Puerto Rico If you are a nonresident alien who is a bona fide resident of American Samoa or Puerto Rico for the entire tax year, you generally are taxed the same as resident aliens. Irs amended tax return You should file Form 1040 and report all income from sources both in and outside the United States. Irs amended tax return However, you can exclude the income discussed in the following paragraphs. Irs amended tax return For tax purposes other than reporting income, however, you will be treated as a nonresident alien. Irs amended tax return For example, you are not allowed the standard deduction, you cannot file a joint return, and you are not allowed a deduction for a dependent unless that person is a citizen or national of the United States. Irs amended tax return There are also limits on what deductions and credits are allowed. Irs amended tax return See Nonresident Aliens under Deductions , Itemized Deductions , and Tax Credits and Payments in this chapter. Irs amended tax return Residents of Puerto Rico. Irs amended tax return   If you are a bona fide resident of Puerto Rico for the entire year, you can exclude from gross income all income from sources in Puerto Rico (other than amounts for services performed as an employee of the United States or any of its agencies). Irs amended tax return   If you report income on a calendar year basis and you do not have wages subject to withholding, file your return and pay your tax by June 15. Irs amended tax return You must also make your first payment of estimated tax by June 15. Irs amended tax return You cannot file a joint income tax return or make joint payments of estimated tax. Irs amended tax return However, if you are married to a U. Irs amended tax return S. Irs amended tax return citizen or resident, see Nonresident Spouse Treated as a Resident in chapter 1. Irs amended tax return   If you earn wages subject to withholding, your U. Irs amended tax return S. Irs amended tax return income tax return is due by April 15. Irs amended tax return Your first payment of estimated tax is also due by April 15. Irs amended tax return For information on withholding and estimated tax, see chapter 8 . Irs amended tax return Residents of American Samoa. Irs amended tax return   If you are a bona fide resident of American Samoa for the entire year, you can exclude from gross income all income from sources in American Samoa (other than amounts for services performed as an employee of the U. Irs amended tax return S. Irs amended tax return government or any of its agencies). Irs amended tax return An employee of the American Samoan government is not considered an employee of the U. Irs amended tax return S. Irs amended tax return government or any of its agencies for purposes of the exclusion. Irs amended tax return For more information about this exclusion, get Form 4563 and Publication 570, Tax Guide for Individuals With Income From U. Irs amended tax return S. Irs amended tax return Possessions. Irs amended tax return Prev  Up  Next   Home   More Online Publications
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The Irs Amended Tax Return

Irs amended tax return 8. Irs amended tax return   Gains and Losses Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Sales and ExchangesDetermining Gain or Loss Like-Kind Exchanges Transfer to Spouse Ordinary or Capital Gain or LossCapital Assets Noncapital Assets Hedging (Commodity Futures) Livestock Converted Wetland and Highly Erodible Cropland Timber Sale of a Farm Foreclosure or Repossession Abandonment Introduction This chapter explains how to figure, and report on your tax return, your gain or loss on the disposition of your property or debt and whether such gain or loss is ordinary or capital. Irs amended tax return Ordinary gain is taxed at the same rates as wages and interest income while capital gain is generally taxed at lower rates. Irs amended tax return Dispositions discussed in this chapter include sales, exchanges, foreclosures, repossessions, canceled debts, hedging transactions, and elections to treat cutting of timber as a sale or exchange. Irs amended tax return Topics - This chapter discusses: Sales and exchanges Ordinary or capital gain or loss Useful Items - You may want to see: Publication 334 Tax Guide for Small Business 523 Selling Your Home 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 908 Bankruptcy Tax Guide Form (and Instructions) 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) Sch D (Form 1040) Capital Gains and Losses Sch F (Form 1040) Profit or Loss From Farming 1099-A Acquisition or Abandonment of Secured Property 1099-C Cancellation of Debt 4797 Sales of Business Property 8949 Sales and Other Dispositions of Capital Assets See chapter 16 for information about getting publications and forms. Irs amended tax return Sales and Exchanges If you sell, exchange, or otherwise dispose of your property, you usually have a gain or a loss. Irs amended tax return This section explains certain rules for determining whether any gain you have is taxable, and whether any loss you have is deductible. Irs amended tax return A sale is a transfer of property for money or a mortgage, note, or other promise to pay money. Irs amended tax return An exchange is a transfer of property for other property or services. Irs amended tax return Determining Gain or Loss You usually realize a gain or loss when you sell or exchange property. Irs amended tax return If the amount you realize from a sale or exchange of property is more than its adjusted basis, you will have a gain. Irs amended tax return If the adjusted basis of the property is more than the amount you realize, you will have a loss. Irs amended tax return Basis and adjusted basis. Irs amended tax return   The basis of property you buy is usually its cost. Irs amended tax return The adjusted basis of property is basis plus certain additions and minus certain deductions. Irs amended tax return See chapter 6 for more information about basis and adjusted basis. Irs amended tax return Amount realized. Irs amended tax return   The amount you realize from a sale or exchange is the total of all money you receive plus the fair market value (FMV) (defined in chapter 6) of all property or services you receive. Irs amended tax return The amount you realize also includes any of your liabilities assumed by the buyer and any liabilities to which the property you transferred is subject, such as real estate taxes or a mortgage. Irs amended tax return   If the liabilities relate to an exchange of multiple properties, see Multiple Property Exchanges in chapter 1 of Publication 544. Irs amended tax return Amount recognized. Irs amended tax return   Your gain or loss realized from a sale or exchange of certain property is usually a recognized gain or loss for tax purposes. Irs amended tax return A recognized gain is a gain you must include in gross income and report on your income tax return. Irs amended tax return A recognized loss is a loss you deduct from gross income. Irs amended tax return However, your gain or loss realized from the exchange of certain property may not be recognized for tax purposes. Irs amended tax return See Like-Kind Exchanges next. Irs amended tax return Also, a loss from the disposition of property held for personal use is not deductible. Irs amended tax return Like-Kind Exchanges Certain exchanges of property are not taxable. Irs amended tax return This means any gain from the exchange is not recognized, and any loss cannot be deducted. Irs amended tax return Your gain or loss will not be recognized until you sell or otherwise dispose of the property you receive. Irs amended tax return The exchange of property for the same kind of property is the most common type of nontaxable exchange. Irs amended tax return To qualify for treatment as a like-kind exchange, the property traded and the property received must be both of the following. Irs amended tax return Qualifying property. Irs amended tax return Like-kind property. Irs amended tax return These two requirements are discussed later. Irs amended tax return Multiple-party transactions. Irs amended tax return   The like-kind exchange rules also apply to property exchanges that involve three and four-party transactions. Irs amended tax return Any part of these multiple-party transactions can qualify as a like-kind exchange if it meets all the requirements described in this section. Irs amended tax return Receipt of title from third party. Irs amended tax return   If you receive property in a like-kind exchange and the other party who transfers the property to you does not give you the title, but a third party does, you can still treat this transaction as a like-kind exchange if it meets all the requirements. Irs amended tax return Basis of property received. Irs amended tax return   If you receive property in a like-kind exchange, the basis of the property will be the same as the basis of the property you gave up. Irs amended tax return See chapter 6 for more information. Irs amended tax return Money paid. Irs amended tax return   If, in addition to giving up like-kind property, you pay money in a like-kind exchange, you still have no recognized gain or loss. Irs amended tax return The basis of the property received is the basis of the property given up, increased by the money paid. Irs amended tax return Example. Irs amended tax return You traded an old tractor with an adjusted basis of $15,000 for a new one. Irs amended tax return The new tractor costs $300,000. Irs amended tax return You were allowed $80,000 for the old tractor and paid $220,000 cash. Irs amended tax return You have no recognized gain or loss on the transaction regardless of the adjusted basis of your old tractor and the basis of the new tractor is $235,000, the adjusted basis of the old tractor plus the cash paid ($15,000 + $220,000). Irs amended tax return If you had sold the old tractor to a third party for $80,000 and bought a new one, you would have a recognized gain or loss on the sale of your old tractor equal to the difference between the amount realized and the adjusted basis of the old tractor. Irs amended tax return In this case, the taxable gain would be $65,000 ($80,000 − $15,000) and the basis of the new tractor would be $300,000. Irs amended tax return Reporting the exchange. Irs amended tax return   Report the exchange of like-kind property, even though no gain or loss is recognized, on Form 8824, Like-Kind Exchanges. Irs amended tax return The Instructions for Form 8824 explain how to report the details of the exchange. Irs amended tax return   If you have any recognized gain because you received money or unlike property, report it on Schedule D (Form 1040) or Form 4797, whichever applies. Irs amended tax return You may also have to report the recognized gain as ordinary income because of depreciation recapture on Form 4797. Irs amended tax return See chapter 9 for more information. Irs amended tax return Qualifying property. Irs amended tax return   In a like-kind exchange, both the property you give up and the property you receive must be held by you for investment or for productive use in your trade or business. Irs amended tax return Machinery, buildings, land, trucks, breeding livestock, rental houses, and certain mutual ditch, reservoir, or irrigation company stock are examples of property that may qualify. Irs amended tax return Nonqualifying property. Irs amended tax return   The rules for like-kind exchanges do not apply to exchanges of the following property. Irs amended tax return Property you use for personal purposes, such as your home and family car. Irs amended tax return Stock in trade or other property held primarily for sale, such as crops and produce. Irs amended tax return Stocks, bonds, or notes. Irs amended tax return However, see Qualifying property above. Irs amended tax return Other securities or evidences of indebtedness, such as accounts receivable. Irs amended tax return Partnership interests. Irs amended tax return However, you may have a nontaxable exchange under other rules. Irs amended tax return See Other Nontaxable Exchanges in chapter 1 of Publication 544. Irs amended tax return Like-kind property. Irs amended tax return   To qualify as a nontaxable exchange, the properties exchanged must be of like kind. Irs amended tax return Like-kind properties are properties of the same nature or character, even if they differ in grade or quality. Irs amended tax return Generally, real property exchanged for real property qualifies as an exchange of like-kind property. Irs amended tax return For example, an exchange of city property for farm property or improved property for unimproved property is a like-kind exchange. Irs amended tax return   An exchange of a tractor for a new tractor is an exchange of like-kind property, and so is an exchange of timber land for crop acreage. Irs amended tax return An exchange of a tractor for acreage, however, is not an exchange of like-kind property. Irs amended tax return The exchange of livestock of one sex for livestock of the other sex is not a like-kind exchange. Irs amended tax return For example, the exchange of a bull for a cow is not a like-kind exchange. Irs amended tax return An exchange of the assets of a business for the assets of a similar business cannot be treated as an exchange of one property for another property. Irs amended tax return    Note. Irs amended tax return Whether you engaged in a like-kind exchange depends on an analysis of each asset involved in the exchange. Irs amended tax return Personal property. Irs amended tax return   Depreciable tangible personal property can be either like kind or like class to qualify for nontaxable exchange treatment. Irs amended tax return Like-class properties are depreciable tangible personal properties within the same General Asset Class or Product Class. Irs amended tax return Property classified in any General Asset Class may not be classified within a Product Class. Irs amended tax return Assets that are not in the same class will qualify as like-kind property if they are of the same nature or character. Irs amended tax return General Asset Classes. Irs amended tax return   General Asset Classes describe the types of property frequently used in many businesses. Irs amended tax return They include, but are not limited to, the following property. Irs amended tax return Office furniture, fixtures, and equipment (asset class 00. Irs amended tax return 11). Irs amended tax return Information systems, such as computers and peripheral equipment (asset class 00. Irs amended tax return 12). Irs amended tax return Data handling equipment except computers (asset class 00. Irs amended tax return 13). Irs amended tax return Automobiles and taxis (asset class 00. Irs amended tax return 22). Irs amended tax return Light general purpose trucks (asset class 00. Irs amended tax return 241). Irs amended tax return Heavy general purpose trucks (asset class 00. Irs amended tax return 242). Irs amended tax return Tractor units for use over-the-road (asset class 00. Irs amended tax return 26). Irs amended tax return Trailers and trailer-mounted containers (asset class 00. Irs amended tax return 27). Irs amended tax return Industrial steam and electric generation and/or distribution systems (asset class 00. Irs amended tax return 4). Irs amended tax return Product Classes. Irs amended tax return   Product Classes include property listed in a 6-digit product class in sectors 31 through 33 of the North American Industry Classification System (NAICS) of the Executive Office of the President, Office of Management and Budget, United States, (NAICS Manual). Irs amended tax return The latest version of the manual can be accessed at www. Irs amended tax return census. Irs amended tax return gov/eos/www/naics/. Irs amended tax return Copies of the printed manual may be purchased from the National Technical Information Service (NTIS) at  www. Irs amended tax return ntis. Irs amended tax return gov/products/naics. Irs amended tax return aspx or by calling 1-800-553-NTIS (1-800-553-6847) or (703) 605-6000. Irs amended tax return A CD-ROM version with search and retrieval software is also available from NTIS. Irs amended tax return    NAICS class 333111, Farm Machinery and Equipment Manufacturing, includes most machinery and equipment used in a farming business. Irs amended tax return Partially nontaxable exchange. Irs amended tax return   If, in addition to like-kind property, you receive money or unlike property in an exchange on which you realize gain, you have a partially nontaxable exchange. Irs amended tax return You are taxed on the gain you realize, but only to the extent of the money and the FMV of the unlike property you receive. Irs amended tax return A loss is not deductible. Irs amended tax return Example 1. Irs amended tax return You trade farmland that cost $30,000 for $10,000 cash and other land to be used in farming with a FMV of $50,000. Irs amended tax return You have a realized gain of $30,000 ($50,000 FMV of new land + $10,000 cash − $30,000 basis of old farmland = $30,000 realized gain). Irs amended tax return However, only $10,000, the cash received, is recognized (included in income). Irs amended tax return Example 2. Irs amended tax return Assume the same facts as in Example 1, except that, instead of money, you received a tractor with a FMV of $10,000. Irs amended tax return Your recognized gain is still limited to $10,000, the value of the tractor (the unlike property). Irs amended tax return Example 3. Irs amended tax return Assume in Example 1 that the FMV of the land you received was only $15,000. Irs amended tax return Your $5,000 loss is not recognized. Irs amended tax return Unlike property given up. Irs amended tax return   If, in addition to like-kind property, you give up unlike property, you must recognize gain or loss on the unlike property you give up. Irs amended tax return The gain or loss is the difference between the FMV of the unlike property and the adjusted basis of the unlike property. Irs amended tax return Like-kind exchanges between related persons. Irs amended tax return   Special rules apply to like-kind exchanges between related persons. Irs amended tax return These rules affect both direct and indirect exchanges. Irs amended tax return Under these rules, if either person disposes of the property within 2 years after the exchange, the exchange is disqualified from nonrecognition treatment. Irs amended tax return The gain or loss on the original exchange must be recognized as of the date of the later disposition. Irs amended tax return The 2-year holding period begins on the date of the last transfer of property that was part of the like-kind exchange. Irs amended tax return Related persons. Irs amended tax return   Under these rules, related persons include, for example, you and a member of your family (spouse, brother, sister, parent, child, etc. Irs amended tax return ), you and a corporation in which you have more than 50% ownership, you and a partnership in which you directly or indirectly own more than a 50% interest of the capital or profits, and two partnerships in which you directly or indirectly own more than 50% of the capital interests or profits. Irs amended tax return   For the complete list of related persons, see Related persons in chapter 2 of Publication 544. Irs amended tax return Example. Irs amended tax return You used a grey pickup truck in your farming business. Irs amended tax return Your sister used a red pickup truck in her landscaping business. Irs amended tax return In December 2012, you exchanged your grey pickup truck, plus $200, for your sister's red pickup truck. Irs amended tax return At that time, the FMV of the grey pickup truck was $7,000 and its adjusted basis was $6,000. Irs amended tax return The FMV of the red pickup truck was $7,200 and its adjusted basis was $1,000. Irs amended tax return You realized a gain of $1,000 (the $7,200 FMV of the red pickup truck, minus the grey pickup truck's $6,000 adjusted basis, minus the $200 you paid). Irs amended tax return Your sister realized a gain of $6,200 (the $7,000 FMV of the grey pickup truck plus the $200 you paid, minus the $1,000 adjusted basis of the red pickup truck). Irs amended tax return However, because this was a like-kind exchange, you recognized no gain. Irs amended tax return Your basis in the red pickup truck was $6,200 (the $6,000 adjusted basis of the grey pickup truck plus the $200 you paid). Irs amended tax return She recognized gain only to the extent of the money she received, $200. Irs amended tax return Her basis in the grey pickup truck was $1,000 (the $1,000 adjusted basis of the red pickup truck minus the $200 received, plus the $200 gain recognized). Irs amended tax return In 2013, you sold the red pickup truck to a third party for $7,000. Irs amended tax return Because you sold it within 2 years after the exchange, the exchange is disqualified from nonrecognition treatment. Irs amended tax return On your tax return for 2013, you must report your $1,000 gain on the 2012 exchange. Irs amended tax return You also report a loss on the sale as $200 (the adjusted basis of the red pickup truck, $7,200 (its $6,200 basis plus the $1,000 gain recognized), minus the $7,000 realized from the sale). Irs amended tax return In addition, your sister must report on her tax return for 2013 the $6,000 balance of her gain on the 2012 exchange. Irs amended tax return Her adjusted basis in the grey pickup truck is increased to $7,000 (its $1,000 basis plus the $6,000 gain recognized). Irs amended tax return Exceptions to the rules for related persons. Irs amended tax return   The following property dispositions are excluded from these rules. Irs amended tax return Dispositions due to the death of either related person. Irs amended tax return Involuntary conversions. Irs amended tax return Dispositions where it is established to the satisfaction of the IRS that neither the exchange nor the disposition has, as a main purpose, the avoidance of federal income tax. Irs amended tax return Multiple property exchanges. Irs amended tax return   Under the like-kind exchange rules, you must generally make a property-by-property comparison to figure your recognized gain and the basis of the property you receive in the exchange. Irs amended tax return However, for exchanges of multiple properties, you do not make a property-by-property comparison if you do either of the following. Irs amended tax return Transfer and receive properties in two or more exchange groups. Irs amended tax return Transfer or receive more than one property within a single exchange group. Irs amended tax return   For more information, see Multiple Property Exchanges in chapter 1 of Publication 544. Irs amended tax return Deferred exchange. Irs amended tax return   A deferred exchange for like-kind property may qualify for nonrecognition of gain or loss. Irs amended tax return A deferred exchange is an exchange in which you transfer property you use in business or hold for investment and later receive like-kind property you will use in business or hold for investment. Irs amended tax return The property you receive is replacement property. Irs amended tax return The transaction must be an exchange of property for property rather than a transfer of property for money used to buy replacement property. Irs amended tax return In addition, the replacement property will not be treated as like-kind property unless certain identification and receipt requirements are met. Irs amended tax return   For more information see Deferred Exchanges in chapter 1 of Publication 544. Irs amended tax return Transfer to Spouse No gain or loss is recognized on a transfer of property from an individual to (or in trust for the benefit of) a spouse, or a former spouse if incident to divorce. Irs amended tax return This rule does not apply if the recipient is a nonresident alien. Irs amended tax return Nor does this rule apply to a transfer in trust to the extent the liabilities assumed and the liabilities on the property are more than the property's adjusted basis. Irs amended tax return Any transfer of property to a spouse or former spouse on which gain or loss is not recognized is not considered a sale or exchange. Irs amended tax return The recipient's basis in the property will be the same as the adjusted basis of the giver immediately before the transfer. Irs amended tax return This carryover basis rule applies whether the adjusted basis of the transferred property is less than, equal to, or greater than either its FMV at the time of transfer or any consideration paid by the recipient. Irs amended tax return This rule applies for determining loss as well as gain. Irs amended tax return Any gain recognized on a transfer in trust increases the basis. Irs amended tax return For more information on transfers of property incident to divorce, see Property Settlements in Publication 504, Divorced or Separated Individuals. Irs amended tax return Ordinary or Capital Gain or Loss Generally, you will have a capital gain or loss if you sell or exchange a capital asset (defined below). Irs amended tax return You may also have a capital gain if your section 1231 transactions result in a net gain. Irs amended tax return See Section 1231 Gains and Losses in  chapter 9. Irs amended tax return To figure your net capital gain or loss, you must classify your gains and losses as either ordinary or capital (and your capital gains or losses as either short-term or long-term). Irs amended tax return Your net capital gains may be taxed at a lower tax rate than ordinary income. Irs amended tax return See Capital Gains Tax Rates , later. Irs amended tax return Your deduction for a net capital loss may be limited. Irs amended tax return See Treatment of Capital Losses , later. Irs amended tax return Capital Assets Almost everything you own and use for personal purposes or investment is a capital asset. Irs amended tax return The following items are examples of capital assets. Irs amended tax return A home owned and occupied by you and your family. Irs amended tax return Household furnishings. Irs amended tax return A car used for pleasure. Irs amended tax return If your car is used both for pleasure and for farm business, it is partly a capital asset and partly a noncapital asset, defined later. Irs amended tax return Stocks and bonds. Irs amended tax return However, there are special rules for gains on qualified small business stock. Irs amended tax return For more information on this subject, see Gains on Qualified Small Business Stock and Losses on Section 1244 (Small Business) Stock in chapter 4 of Publication 550. Irs amended tax return Personal-use property. Irs amended tax return   Gain from a sale or exchange of personal-use property is a capital gain and is taxable. Irs amended tax return Loss from the sale or exchange of personal-use property is not deductible. Irs amended tax return You can deduct a loss relating to personal-use property only if it results from a casualty or theft. Irs amended tax return For information on casualties and thefts, see chapter 11. Irs amended tax return Long and Short Term Where you report a capital gain or loss depends on how long you own the asset before you sell or exchange it. Irs amended tax return The time you own an asset before disposing of it is the holding period. Irs amended tax return If you hold a capital asset 1 year or less, the gain or loss resulting from its disposition is short term. Irs amended tax return Report it in Part I of Schedule D (Form 1040). Irs amended tax return If you hold a capital asset longer than 1 year, the gain or loss resulting from its disposition is long term. Irs amended tax return Report it in Part II of Schedule D (Form 1040). Irs amended tax return Holding period. Irs amended tax return   To figure if you held property longer than 1 year, start counting on the day after the day you acquired the property. Irs amended tax return The day you disposed of the property is part of your holding period. Irs amended tax return Example. Irs amended tax return If you bought an asset on June 19, 2012, you should start counting on June 20, 2012. Irs amended tax return If you sold the asset on June 19, 2013, your holding period is not longer than 1 year, but if you sold it on June 20, 2013, your holding period is longer than 1 year. Irs amended tax return Inherited property. Irs amended tax return   If you inherit property, you are considered to have held the property longer than 1 year, regardless of how long you actually held it. Irs amended tax return This rule does not apply to livestock used in a farm business. Irs amended tax return See Holding period under Livestock , later. Irs amended tax return Nonbusiness bad debt. Irs amended tax return   A nonbusiness bad debt is a short-term capital loss, deductible in the year the debt becomes worthless. Irs amended tax return See chapter 4 of Publication 550. Irs amended tax return Nontaxable exchange. Irs amended tax return   If you acquire an asset in exchange for another asset and your basis for the new asset is figured, in whole or in part, by using your basis in the old property, the holding period of the new property includes the holding period of the old property. Irs amended tax return That is, it begins on the same day as your holding period for the old property. Irs amended tax return Gift. Irs amended tax return   If you receive a gift of property and your basis in it is figured using the donor's basis, your holding period includes the donor's holding period. Irs amended tax return Real property. Irs amended tax return   To figure how long you held real property, start counting on the day after you received title to it or, if earlier, on the day after you took possession of it and assumed the burdens and privileges of ownership. Irs amended tax return   However, taking possession of real property under an option agreement is not enough to start the holding period. Irs amended tax return The holding period cannot start until there is an actual contract of sale. Irs amended tax return The holding period of the seller cannot end before that time. Irs amended tax return Figuring Net Gain or Loss The totals for short-term capital gains and losses and the totals for long-term capital gains and losses must be figured separately. Irs amended tax return Net short-term capital gain or loss. Irs amended tax return   Combine your short-term capital gains and losses. Irs amended tax return Do this by adding all of your short-term capital gains. Irs amended tax return Then add all of your short-term capital losses. Irs amended tax return Subtract the lesser total from the greater. Irs amended tax return The difference is your net short-term capital gain or loss. Irs amended tax return Net long-term capital gain or loss. Irs amended tax return   Follow the same steps to combine your long-term capital gains and losses. Irs amended tax return The result is your net long-term capital gain or loss. Irs amended tax return Net gain. Irs amended tax return   If the total of your capital gains is more than the total of your capital losses, the difference is taxable. Irs amended tax return However, part of your gain (but not more than your net capital gain) may be taxed at a lower rate than the rate of tax on your ordinary income. Irs amended tax return See Capital Gains Tax Rates , later. Irs amended tax return Net loss. Irs amended tax return   If the total of your capital losses is more than the total of your capital gains, the difference is deductible. Irs amended tax return But there are limits on how much loss you can deduct and when you can deduct it. Irs amended tax return See Treatment of Capital Losses next. Irs amended tax return Treatment of Capital Losses If your capital losses are more than your capital gains, you must claim the difference even if you do not have ordinary income to offset it. Irs amended tax return For taxpayers other than corporations, the yearly limit on the capital loss you can deduct is $3,000 ($1,500 if you are married and file a separate return). Irs amended tax return If your other income is low, you may not be able to use the full $3,000. Irs amended tax return The part of the $3,000 you cannot use becomes part of your capital loss carryover (discussed next). Irs amended tax return Capital loss carryover. Irs amended tax return   Generally, you have a capital loss carryover if either of the following situations applies to you. Irs amended tax return Your net loss on Schedule D (Form 1040), is more than the yearly limit. Irs amended tax return Your taxable income without your deduction for exemptions is less than zero. Irs amended tax return If either of these situations applies to you for 2013, see Capital Losses under Reporting Capital Gains and Losses in chapter 4 of Publication 550 to figure the amount you can carry over to 2014. Irs amended tax return    To figure your capital loss carryover from 2013 to 2014, you will need a copy of your 2013 Form 1040 and Schedule D (Form 1040). Irs amended tax return Capital Gains Tax Rates The tax rates that apply to a net capital gain are generally lower than the tax rates that apply to other income. Irs amended tax return These lower rates are called the maximum capital gains rates. Irs amended tax return The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss. Irs amended tax return See Schedule D (Form 1040) and the Instructions for Schedule D (Form 1040). Irs amended tax return Also see Publication 550. Irs amended tax return Noncapital Assets Noncapital assets include property such as inventory and depreciable property used in a trade or business. Irs amended tax return A list of properties that are not capital assets is provided in the Instructions for Schedule D (Form 1040). Irs amended tax return Property held for sale in the ordinary course of your farm business. Irs amended tax return   Property you hold mainly for sale to customers, such as livestock, poultry, livestock products, and crops, is a noncapital asset. Irs amended tax return Gain or loss from sales or other dispositions of this property is reported on Schedule F (Form 1040) (not on Schedule D (Form 1040) or Form 4797). Irs amended tax return The treatment of this property is discussed in chapter 3. Irs amended tax return Land and depreciable properties. Irs amended tax return   Land and depreciable property you use in farming are not capital assets. Irs amended tax return Noncapital assets also include livestock held for draft, breeding, dairy, or sporting purposes. Irs amended tax return However, your gains and losses from sales and exchanges of your farmland and depreciable properties must be considered together with certain other transactions to determine whether the gains and losses are treated as capital or ordinary gains and losses. Irs amended tax return The sales of these business assets are reported on Form 4797. Irs amended tax return See chapter 9 for more information. Irs amended tax return Hedging (Commodity Futures) Hedging transactions are transactions that you enter into in the normal course of business primarily to manage the risk of interest rate or price changes, or currency fluctuations, with respect to borrowings, ordinary property, or ordinary obligations. Irs amended tax return Ordinary property or obligations are those that cannot produce capital gain or loss if sold or exchanged. Irs amended tax return A commodity futures contract is a standardized, exchange-traded contract for the sale or purchase of a fixed amount of a commodity at a future date for a fixed price. Irs amended tax return The holder of an option on a futures contract has the right (but not the obligation) for a specified period of time to enter into a futures contract to buy or sell at a particular price. Irs amended tax return A forward contract is generally similar to a futures contract except that the terms are not standardized and the contract is not exchange traded. Irs amended tax return Businesses may enter into commodity futures contracts or forward contracts and may acquire options on commodity futures contracts as either of the following. Irs amended tax return Hedging transactions. Irs amended tax return Transactions that are not hedging transactions. Irs amended tax return Futures transactions with exchange-traded commodity futures contracts that are not hedging transactions, generally, result in capital gain or loss and are subject to the mark-to-market rules discussed in Publication 550. Irs amended tax return There is a limit on the amount of capital losses you can deduct each year. Irs amended tax return Hedging transactions are not subject to the mark-to-market rules. Irs amended tax return If, as a farmer-producer, to protect yourself from the risk of unfavorable price fluctuations, you enter into commodity forward contracts, futures contracts, or options on futures contracts and the contracts cover an amount of the commodity within your range of production, the transactions are generally considered hedging transactions. Irs amended tax return They can take place at any time you have the commodity under production, have it on hand for sale, or reasonably expect to have it on hand. Irs amended tax return The gain or loss on the termination of these hedges is generally ordinary gain or loss. Irs amended tax return Farmers who file their income tax returns on the cash method report any profit or loss on the hedging transaction on Schedule F, line 8. Irs amended tax return Gains or losses from hedging transactions that hedge supplies of a type regularly used or consumed in the ordinary course of your trade or business may be ordinary gains or losses. Irs amended tax return Examples include fuel and feed. Irs amended tax return If you have numerous transactions in the commodity futures market during the year, you must be able to show which transactions are hedging transactions. Irs amended tax return Clearly identify a hedging transaction on your books and records before the end of the day you entered into the transaction. Irs amended tax return It may be helpful to have separate brokerage accounts for your hedging and speculation transactions. Irs amended tax return Retain the identification of each hedging transaction with your books and records. Irs amended tax return Also, identify the item(s) or aggregate risk that is being hedged in your records. Irs amended tax return Although the identification of the hedging transaction must be made before the end of the day it was entered into, you have 35 days after entering into the transaction to identify the hedged item(s) or risk. Irs amended tax return For more information on the tax treatment of futures and options contracts, see Commodity Futures and Section 1256 Contracts Marked to Market in Publication 550. Irs amended tax return Accounting methods for hedging transactions. Irs amended tax return   The accounting method you use for a hedging transaction must clearly reflect income. Irs amended tax return This means that your accounting method must reasonably match the timing of income, deduction, gain, or loss from a hedging transaction with the timing of income, deduction, gain, or loss from the item or items being hedged. Irs amended tax return There are requirements and limits on the method you can use for certain hedging transactions. Irs amended tax return See Regulations section 1. Irs amended tax return 446-4(e) for those requirements and limits. Irs amended tax return   Hedging transactions must be accounted for under the rules stated above unless the transaction is subject to mark-to-market accounting under section 475 or you use an accounting method other than the following methods. Irs amended tax return Cash method. Irs amended tax return Farm-price method. Irs amended tax return Unit-livestock-price method. Irs amended tax return   Once you adopt a method, you must apply it consistently and must have IRS approval before changing it. Irs amended tax return   Your books and records must describe the accounting method used for each type of hedging transaction. Irs amended tax return They must also contain any additional identification necessary to verify the application of the accounting method you used for the transaction. Irs amended tax return You must make the additional identification no more than 35 days after entering into the hedging transaction. Irs amended tax return Example of a hedging transaction. Irs amended tax return   You file your income tax returns on the cash method. Irs amended tax return On July 2 you anticipate a yield of 50,000 bushels of corn this year. Irs amended tax return The December futures price is $5. Irs amended tax return 75 a bushel, but there are indications that by harvest time the price will drop. Irs amended tax return To protect yourself against a drop in the price, you enter into the following hedging transaction. Irs amended tax return You sell ten December futures contracts of 5,000 bushels each for a total of 50,000 bushels of corn at $5. Irs amended tax return 75 a bushel. Irs amended tax return   The price did not drop as anticipated but rose to $6 a bushel. Irs amended tax return In November, you sell your crop at a local elevator for $6 a bushel. Irs amended tax return You also close out your futures position by buying ten December contracts for $6 a bushel. Irs amended tax return You paid a broker's commission of $1,400 ($70 per contract) for the complete in and out position in the futures market. Irs amended tax return   The result is that the price of corn rose 25 cents a bushel and the actual selling price is $6 a bushel. Irs amended tax return Your loss on the hedge is 25 cents a bushel. Irs amended tax return In effect, the net selling price of your corn is $5. Irs amended tax return 75 a bushel. Irs amended tax return   Report the results of your futures transactions and your sale of corn separately on Schedule F. Irs amended tax return See the instructions for the 2013 Schedule F (Form 1040). Irs amended tax return   The loss on your futures transactions is $13,900, figured as follows. Irs amended tax return July 2 - Sold December corn futures (50,000 bu. Irs amended tax return @$5. Irs amended tax return 75) $287,500 November 6 - Bought December corn futures (50,000 bu. Irs amended tax return @$6 plus $1,400 broker's commission) 301,400 Futures loss ($13,900) This loss is reported as a negative figure on Schedule F, Part I, line 8, as other income. Irs amended tax return   The proceeds from your corn sale at the local elevator are $300,000 (50,000 bu. Irs amended tax return × $6). Irs amended tax return Report it on Schedule F, Part I, line 2, as income from sales of products you raised. Irs amended tax return   Assume you were right and the price went down 25 cents a bushel. Irs amended tax return In effect, you would still net $5. Irs amended tax return 75 a bushel, figured as follows. Irs amended tax return Sold cash corn, per bushel $5. Irs amended tax return 50 Gain on hedge, per bushel . Irs amended tax return 25 Net price, per bushel $5. Irs amended tax return 75       The gain on your futures transactions would have been $11,100, figured as follows. Irs amended tax return July 2 - Sold December corn futures (50,000 bu. Irs amended tax return @$5. Irs amended tax return 75) $287,500 November 6 - Bought December corn futures (50,000 bu. Irs amended tax return @$5. Irs amended tax return 50 plus $1,400 broker's commission) 276,400 Futures gain $11,100 The $11,100 is reported on Schedule F, Part I, line 8, as other income. Irs amended tax return   The proceeds from the sale of your corn at the local elevator, $275,000, are reported on Schedule F, Part I, line 2, as income from sales of products you raised. Irs amended tax return Livestock This part discusses the sale or exchange of livestock used in your farm business. Irs amended tax return Gain or loss from the sale or exchange of this livestock may qualify as a section 1231 gain or loss. Irs amended tax return However, any part of the gain that is ordinary income from the recapture of depreciation is not included as section 1231 gain. Irs amended tax return See chapter 9 for more information on section 1231 gains and losses and the recapture of depreciation under section 1245. Irs amended tax return The rules discussed here do not apply to the sale of livestock held primarily for sale to customers. Irs amended tax return The sale of this livestock is reported on Schedule F. Irs amended tax return See chapter 3. Irs amended tax return Also, special rules apply to sales or exchanges caused by weather-related conditions. Irs amended tax return See chapter 3. Irs amended tax return Holding period. Irs amended tax return   The sale or exchange of livestock used in your farm business (defined below) qualifies as a section 1231 transaction if you held the livestock for 12 months or more (24 months or more for horses and cattle). Irs amended tax return Livestock. Irs amended tax return   For section 1231 transactions, livestock includes cattle, hogs, horses, mules, donkeys, sheep, goats, fur-bearing animals, and other mammals. Irs amended tax return Also, for section 1231 transactions, livestock does not include chickens, turkeys, pigeons, geese, emus, ostriches, rheas, or other birds, fish, frogs, reptiles, etc. Irs amended tax return Livestock used in farm business. Irs amended tax return   If livestock is held primarily for draft, breeding, dairy, or sporting purposes, it is used in your farm business. Irs amended tax return The purpose for which an animal is held ordinarily is determined by a farmer's actual use of the animal. Irs amended tax return An animal is not held for draft, breeding, dairy, or sporting purposes merely because it is suitable for that purpose, or because it is held for sale to other persons for use by them for that purpose. Irs amended tax return However, a draft, breeding, or sporting purpose may be present if an animal is disposed of within a reasonable time after it is prevented from its intended use or made undesirable as a result of an accident, disease, drought, or unfitness of the animal. Irs amended tax return Example 1. Irs amended tax return You discover an animal that you intend to use for breeding purposes is sterile. Irs amended tax return You dispose of it within a reasonable time. Irs amended tax return This animal was held for breeding purposes. Irs amended tax return Example 2. Irs amended tax return You retire and sell your entire herd, including young animals that you would have used for breeding or dairy purposes had you remained in business. Irs amended tax return These young animals were held for breeding or dairy purposes. Irs amended tax return Also, if you sell young animals to reduce your breeding or dairy herd because of drought, these animals are treated as having been held for breeding or dairy purposes. Irs amended tax return See Sales Caused by Weather-Related Conditions in chapter 3. Irs amended tax return Example 3. Irs amended tax return You are in the business of raising hogs for slaughter. Irs amended tax return Customarily, before selling your sows, you obtain a single litter of pigs that you will raise for sale. Irs amended tax return You sell the brood sows after obtaining the litter. Irs amended tax return Even though you hold these brood sows for ultimate sale to customers in the ordinary course of your business, they are considered to be held for breeding purposes. Irs amended tax return Example 4. Irs amended tax return You are in the business of raising registered cattle for sale to others for use as breeding cattle. Irs amended tax return The business practice is to breed the cattle before sale to establish their fitness as registered breeding cattle. Irs amended tax return Your use of the young cattle for breeding purposes is ordinary and necessary for selling them as registered breeding cattle. Irs amended tax return Such use does not demonstrate that you are holding the cattle for breeding purposes. Irs amended tax return However, those cattle you held as additions or replacements to your own breeding herd to produce calves are considered to be held for breeding purposes, even though they may not actually have produced calves. Irs amended tax return The same applies to hog and sheep breeders. Irs amended tax return Example 5. Irs amended tax return You breed, raise, and train horses for racing purposes. Irs amended tax return Every year you cull horses from your racing stable. Irs amended tax return In 2013, you decided that to prevent your racing stable from getting too large to be effectively operated, you must cull six horses that had been raced at public tracks in 2012. Irs amended tax return These horses are all considered held for sporting purposes. Irs amended tax return Figuring gain or loss on the cash method. Irs amended tax return   Farmers or ranchers who use the cash method of accounting figure their gain or loss on the sale of livestock used in their farming business as follows. Irs amended tax return Raised livestock. Irs amended tax return   Gain on the sale of raised livestock is generally the gross sales price reduced by any expenses of the sale. Irs amended tax return Expenses of sale include sales commissions, freight or hauling from farm to commission company, and other similar expenses. Irs amended tax return The basis of the animal sold is zero if the costs of raising it were deducted during the years the animal was being raised. Irs amended tax return However, see Uniform Capitalization Rules in chapter 6. Irs amended tax return Purchased livestock. Irs amended tax return   The gross sales price minus your adjusted basis and any expenses of sale is the gain or loss. Irs amended tax return Example. Irs amended tax return A farmer sold a breeding cow on January 8, 2013, for $1,250. Irs amended tax return Expenses of the sale were $125. Irs amended tax return The cow was bought July 2, 2009, for $1,300. Irs amended tax return Depreciation (not less than the amount allowable) was $867. Irs amended tax return Gross sales price $1,250 Cost (basis) $1,300   Minus: Depreciation deduction 867   Unrecovered cost (adjusted basis) $ 433   Expense of sale 125 558 Gain realized $ 692 Converted Wetland and Highly Erodible Cropland Special rules apply to dispositions of land converted to farming use after March 1, 1986. Irs amended tax return Any gain realized on the disposition of converted wetland or highly erodible cropland is treated as ordinary income. Irs amended tax return Any loss on the disposition of such property is treated as a long-term capital loss. Irs amended tax return Converted wetland. Irs amended tax return   This is generally land that was drained or filled to make the production of agricultural commodities possible. Irs amended tax return It includes converted wetland held by the person who originally converted it or held by any other person who used the converted wetland at any time after conversion for farming. Irs amended tax return   A wetland (before conversion) is land that meets all the following conditions. Irs amended tax return It is mostly soil that, in its undrained condition, is saturated, flooded, or ponded long enough during a growing season to develop an oxygen-deficient state that supports the growth and regeneration of plants growing in water. Irs amended tax return It is saturated by surface or groundwater at a frequency and duration sufficient to support mostly plants that are adapted for life in saturated soil. Irs amended tax return It supports, under normal circumstances, mostly plants that grow in saturated soil. Irs amended tax return Highly erodible cropland. Irs amended tax return   This is cropland subject to erosion that you used at any time for farming purposes other than grazing animals. Irs amended tax return Generally, highly erodible cropland is land currently classified by the Department of Agriculture as Class IV, VI, VII, or VIII under its classification system. Irs amended tax return Highly erodible cropland also includes land that would have an excessive average annual erosion rate in relation to the soil loss tolerance level, as determined by the Department of Agriculture. Irs amended tax return Successor. Irs amended tax return   Converted wetland or highly erodible cropland is also land held by any person whose basis in the land is figured by reference to the adjusted basis of a person in whose hands the property was converted wetland or highly erodible cropland. Irs amended tax return Timber Standing timber you held as investment property is a capital asset. Irs amended tax return Gain or loss from its sale is capital gain or loss reported on Form 8949 and Schedule D (Form 1040), as applicable. Irs amended tax return If you held the timber primarily for sale to customers, it is not a capital asset. Irs amended tax return Gain or loss on its sale is ordinary business income or loss. Irs amended tax return It is reported on Schedule F, line 1 (purchased timber) or line 2 (raised timber). Irs amended tax return See the Instructions for Schedule F (Form 1040). Irs amended tax return Farmers who cut timber on their land and sell it as logs, firewood, or pulpwood usually have no cost or other basis for that timber. Irs amended tax return Amounts realized from these sales, and the expenses incurred in cutting, hauling, etc. Irs amended tax return , are ordinary farm income and expenses reported on Schedule F. Irs amended tax return Different rules apply if you owned the timber longer than 1 year and elect to treat timber cutting as a sale or exchange or you enter into a cutting contract, discussed below. Irs amended tax return Timber considered cut. Irs amended tax return   Timber is considered cut on the date when, in the ordinary course of business, the quantity of felled timber is first definitely determined. Irs amended tax return This is true whether the timber is cut under contract or whether you cut it yourself. Irs amended tax return Christmas trees. Irs amended tax return   Evergreen trees, such as Christmas trees, that are more than 6 years old when severed from their roots and sold for ornamental purposes are included in the term timber. Irs amended tax return They qualify for both rules discussed below. Irs amended tax return Election to treat cutting as a sale or exchange. Irs amended tax return   Under the general rule, the cutting of timber results in no gain or loss. Irs amended tax return It is not until a sale or exchange occurs that gain or loss is realized. Irs amended tax return But if you owned or had a contractual right to cut timber, you can elect to treat the cutting of timber as a section 1231 transaction in the year it is cut. Irs amended tax return Even though the cut timber is not actually sold or exchanged, you report your gain or loss on the cutting for the year the timber is cut. Irs amended tax return Any later sale results in ordinary business income or loss. Irs amended tax return See the example below. Irs amended tax return   To elect this treatment, you must: Own or hold a contractual right to cut the timber for a period of more than 1 year before it is cut, and Cut the timber for sale or use in your trade or business. Irs amended tax return Making the election. Irs amended tax return   You make the election on your return for the year the cutting takes place by including in income the gain or loss on the cutting and including a computation of your gain or loss. Irs amended tax return You do not have to make the election in the first year you cut the timber. Irs amended tax return You can make it in any year to which the election would apply. Irs amended tax return If the timber is partnership property, the election is made on the partnership return. Irs amended tax return This election cannot be made on an amended return. Irs amended tax return   Once you have made the election, it remains in effect for all later years unless you revoke it. Irs amended tax return Election under section 631(a) may be revoked. Irs amended tax return   If you previously elected for any tax year ending before October 23, 2004, to treat the cutting of timber as a sale or exchange under section 631(a), you may revoke this election without the consent of the IRS for any tax year ending after October 22, 2004. Irs amended tax return The prior election (and revocation) is disregarded for purposes of making a subsequent election. Irs amended tax return See Form T (Timber), Forest Activities Schedule, for more information. Irs amended tax return Gain or loss. Irs amended tax return   Your gain or loss on the cutting of standing timber is the difference between its adjusted basis for depletion and its FMV on the first day of your tax year in which it is cut. Irs amended tax return   Your adjusted basis for depletion of cut timber is based on the number of units (board feet, log scale, or other units) of timber cut during the tax year and considered to be sold or exchanged. Irs amended tax return Your adjusted basis for depletion is also based on the depletion unit of timber in the account used for the cut timber, and should be figured in the same manner as shown in section 611 and Regulations section 1. Irs amended tax return 611-3. Irs amended tax return   Depletion of timber is discussed in chapter 7. Irs amended tax return Example. Irs amended tax return   In April 2013, you owned 4,000 MBF (1,000 board feet) of standing timber longer than 1 year. Irs amended tax return It had an adjusted basis for depletion of $40 per MBF. Irs amended tax return You are a calendar year taxpayer. Irs amended tax return On January 1, 2013, the timber had a FMV of $350 per MBF. Irs amended tax return It was cut in April for sale. Irs amended tax return On your 2013 tax return, you elect to treat the cutting of the timber as a sale or exchange. Irs amended tax return You report the difference between the FMV and your adjusted basis for depletion as a gain. Irs amended tax return This amount is reported on Form 4797 along with your other section 1231 gains and losses to figure whether it is treated as a capital gain or as ordinary gain. Irs amended tax return You figure your gain as follows. Irs amended tax return FMV of timber January 1, 2013 $1,400,000 Minus: Adjusted basis for depletion 160,000 Section 1231 gain $1,240,000   The FMV becomes your basis in the cut timber, and a later sale of the cut timber, including any by-product or tree tops, will result in ordinary business income or loss. Irs amended tax return Outright sales of timber. Irs amended tax return   Outright sales of timber by landowners qualify for capital gains treatment using rules similar to the rules for certain disposal of timber under a contract with retained economic interest (defined later). Irs amended tax return However, for outright sales, the date of disposal is not deemed to be the date the timber is cut because the landowner can elect to treat the payment date as the date of disposal (see Date of disposal below). Irs amended tax return Cutting contract. Irs amended tax return   You must treat the disposal of standing timber under a cutting contract as a section 1231 transaction if all the following apply to you. Irs amended tax return You are the owner of the timber. Irs amended tax return You held the timber longer than 1 year before its disposal. Irs amended tax return You kept an economic interest in the timber. Irs amended tax return   You have kept an economic interest in standing timber if, under the cutting contract, the expected return on your investment is conditioned on the cutting of the timber. Irs amended tax return   The difference between the amount realized from the disposal of the timber and its adjusted basis for depletion is treated as gain or loss on its sale. Irs amended tax return Include this amount on Form 4797 along with your other section 1231 gains or losses. Irs amended tax return Date of disposal. Irs amended tax return   The date of disposal is the date the timber is cut. Irs amended tax return However, for outright sales by landowners or if you receive payment under the contract before the timber is cut, you can elect to treat the date of payment as the date of disposal. Irs amended tax return   This election applies only to figure the holding period of the timber. Irs amended tax return It has no effect on the time for reporting gain or loss (generally when the timber is sold or exchanged). Irs amended tax return   To make this election, attach a statement to the tax return filed by the due date (including extensions) for the year payment is received. Irs amended tax return The statement must identify the advance payments subject to the election and the contract under which they were made. Irs amended tax return   If you timely filed your return for the year you received payment without making the election, you can still make the election by filing an amended return within 6 months after the due date for that year's return (excluding extensions). Irs amended tax return Attach the statement to the amended return and write “Filed pursuant to section 301. Irs amended tax return 9100-2” at the top of the statement. Irs amended tax return File the amended return at the same address the original return was filed. Irs amended tax return Owner. Irs amended tax return   An owner is any person who owns an interest in the timber, including a sublessor and the holder of a contract to cut the timber. Irs amended tax return You own an interest in timber if you have the right to cut it for sale on your own account or for use in your business. Irs amended tax return Tree stumps. Irs amended tax return   Tree stumps are a capital asset if they are on land held by an investor who is not in the timber or stump business as a buyer, seller, or processor. Irs amended tax return Gain from the sale of stumps sold in one lot by such a holder is taxed as a capital gain. Irs amended tax return However, tree stumps held by timber operators after the saleable standing timber was cut and removed from the land are considered by-products. Irs amended tax return Gain from the sale of stumps in lots or tonnage by such operators is taxed as ordinary income. Irs amended tax return   See Form T (Timber) and its separate instructions for more information about dispositions of timber. Irs amended tax return Sale of a Farm The sale of your farm will usually involve the sale of both nonbusiness property (your home) and business property (the land and buildings used in the farm operation and perhaps machinery and livestock). Irs amended tax return If you have a gain from the sale, you may be allowed to exclude the gain on your home. Irs amended tax return For more information, see Publication 523, Selling Your Home. Irs amended tax return The gain on the sale of your business property is taxable. Irs amended tax return A loss on the sale of your business property to an unrelated person is deducted as an ordinary loss. Irs amended tax return Your taxable gain or loss on the sale of property used in your farm business is taxed under the rules for section 1231 transactions. Irs amended tax return See chapter 9. Irs amended tax return Losses from personal-use property, other than casualty or theft losses, are not deductible. Irs amended tax return If you receive payments for your farm in installments, your gain is taxed over the period of years the payments are received, unless you elect not to use the installment method of reporting the gain. Irs amended tax return See chapter 10 for information about installment sales. Irs amended tax return When you sell your farm, the gain or loss on each asset is figured separately. Irs amended tax return The tax treatment of gain or loss on the sale of each asset is determined by the classification of the asset. Irs amended tax return Each of the assets sold must be classified as one of the following. Irs amended tax return Capital asset held 1 year or less. Irs amended tax return Capital asset held longer than 1 year. Irs amended tax return Property (including real estate) used in your business and held 1 year or less (including draft, breeding, dairy, and sporting animals held less than the holding periods discussed earlier under Livestock ). Irs amended tax return Property (including real estate) used in your business and held longer than 1 year (including only draft, breeding, dairy, and sporting animals held for the holding periods discussed earlier). Irs amended tax return Property held primarily for sale or which is of the kind that would be included in inventory if on hand at the end of your tax year. Irs amended tax return Allocation of consideration paid for a farm. Irs amended tax return   The sale of a farm for a lump sum is considered a sale of each individual asset rather than a single asset. Irs amended tax return The residual method is required only if the group of assets sold constitutes a trade or business. Irs amended tax return This method determines gain or loss from the transfer of each asset. Irs amended tax return It also determines the buyer's basis in the business assets. Irs amended tax return For more information, see Sale of a Business in chapter 2 of Publication 544. Irs amended tax return Property used in farm operation. Irs amended tax return   The rules for excluding the gain on the sale of your home, described later under Sale of your home , do not apply to the property used for your farming business. Irs amended tax return Recognized gains and losses on business property must be reported on your return for the year of the sale. Irs amended tax return If the property was held longer than 1 year, it may qualify for section 1231 treatment (see chapter 9). Irs amended tax return Example. Irs amended tax return You sell your farm, including your main home, which you have owned since December 2001. Irs amended tax return You realize gain on the sale as follows. Irs amended tax return   Farm   Farm   With Home Without   Home Only Home Selling price $382,000 $158,000 $224,000 Cost (or other basis) 240,000 110,000 130,000 Gain $142,000 $48,000 $94,000 You must report the $94,000 gain from the sale of the property used in your farm business. Irs amended tax return All or a part of that gain may have to be reported as ordinary income from the recapture of depreciation or soil and water conservation expenses. Irs amended tax return Treat the balance as section 1231 gain. Irs amended tax return The $48,000 gain from the sale of your home is not taxable as long as you meet the requirements explained later under Sale of your home . Irs amended tax return Partial sale. Irs amended tax return   If you sell only part of your farm, you must report any recognized gain or loss on the sale of that part on your tax return for the year of the sale. Irs amended tax return You cannot wait until you have sold enough of the farm to recover its entire cost before reporting gain or loss. Irs amended tax return For a detailed discussion on installment sales, see Publication 544. Irs amended tax return Adjusted basis of the part sold. Irs amended tax return   This is the properly allocated part of your original cost or other basis of the entire farm plus or minus necessary adjustments for improvements, depreciation, etc. Irs amended tax return , on the part sold. Irs amended tax return If your home is on the farm, you must properly adjust the basis to exclude those costs from your farm asset costs, as discussed below under Sale of your home . Irs amended tax return Example. Irs amended tax return You bought a 600-acre farm for $700,000. Irs amended tax return The farm included land and buildings. Irs amended tax return The purchase contract designated $600,000 of the purchase price to the land. Irs amended tax return You later sold 60 acres of land on which you had installed a fence. Irs amended tax return Your adjusted basis for the part of your farm sold is $60,000 (1/10 of $600,000), plus any unrecovered cost (cost not depreciated) of the fence on the 60 acres at the time of sale. Irs amended tax return Use this amount to determine your gain or loss on the sale of the 60 acres. Irs amended tax return Assessed values for local property taxes. Irs amended tax return   If you paid a flat sum for the entire farm and no other facts are available for properly allocating your original cost or other basis between the land and the buildings, you can use the assessed values for local property taxes for the year of purchase to allocate the costs. Irs amended tax return Example. Irs amended tax return Assume that in the preceding example there was no breakdown of the $700,000 purchase price between land and buildings. Irs amended tax return However, in the year of purchase, local taxes on the entire property were based on assessed valuations of $420,000 for land and $140,000 for improvements, or a total of $560,000. Irs amended tax return The assessed valuation of the land is 3/4 (75%) of the total assessed valuation. Irs amended tax return Multiply the $700,000 total purchase price by 75% to figure basis of $525,000 for the 600 acres of land. Irs amended tax return The unadjusted basis of the 60 acres you sold would then be $52,500 (1/10 of $525,000). Irs amended tax return Sale of your home. Irs amended tax return   Your home is a capital asset and not property used in the trade or business of farming. Irs amended tax return If you sell a farm that includes a house you and your family occupy, you must determine the part of the selling price and the part of the cost or other basis allocable to your home. Irs amended tax return Your home includes the immediate surroundings and outbuildings relating to it that are not used for business purposes. Irs amended tax return   If you use part of your home for business, you must make an appropriate adjustment to the basis for depreciation allowed or allowable. Irs amended tax return For more information on basis, see chapter 6. Irs amended tax return More information. Irs amended tax return   For more information on selling your home, see Publication 523. Irs amended tax return Gain from condemnation. Irs amended tax return   If you have a gain from a condemnation or sale under threat of condemnation, you may use the preceding rules for excluding the gain, rather than the rules discussed under Postponing Gain in chapter 11. Irs amended tax return However, any gain that cannot be excluded (because it is more than the limit) may be postponed under the rules discussed under Postponing Gain in chapter 11. Irs amended tax return Foreclosure or Repossession If you do not make payments you owe on a loan secured by property, the lender may foreclose on the loan or repossess the property. Irs amended tax return The foreclosure or repossession is treated as a sale or exchange from which you may realize gain or loss. Irs amended tax return This is true even if you voluntarily return the property to the lender. Irs amended tax return You may also realize ordinary income from cancellation of debt if the loan balance is more than the FMV of the property. Irs amended tax return Buyer's (borrower's) gain or loss. Irs amended tax return   You figure and report gain or loss from a foreclosure or repossession in the same way as gain or loss from a sale or exchange. Irs amended tax return The gain or loss is the difference between your adjusted basis in the transferred property and the amount realized. Irs amended tax return See Determining Gain or Loss , earlier. Irs amended tax return Worksheet 8-1. Irs amended tax return Worksheet for Foreclosures andRepossessions Part 1. Irs amended tax return Use Part 1 to figure your ordinary income from the cancellation of debt upon foreclosure or repossession. Irs amended tax return Complete this part only if you were personally liable for the debt. Irs amended tax return Otherwise, go to Part 2. Irs amended tax return   1. Irs amended tax return Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable after the transfer of property   2. Irs amended tax return Enter the Fair Market Value of the transferred property   3. Irs amended tax return Ordinary income from cancellation of debt upon foreclosure or repossession. Irs amended tax return * Subtract line 2 from line 1. Irs amended tax return If zero or less, enter -0-   Part 2. Irs amended tax return Figure your gain or loss from foreclosure or repossession. Irs amended tax return   4. Irs amended tax return If you completed Part 1, enter the smaller of line 1 or line 2. Irs amended tax return If you did not complete Part 1, enter the outstanding debt immediately before the transfer of property   5. Irs amended tax return Enter any proceeds you received from the foreclosure sale   6. Irs amended tax return Add lines 4 and 5   7. Irs amended tax return Enter the adjusted basis of the transferred property   8. Irs amended tax return Gain or loss from foreclosure or repossession. Irs amended tax return Subtract line 7  from line 6   * The income may not be taxable. Irs amended tax return See Cancellation of debt . Irs amended tax return    You can use Worksheet 8-1 to figure your gain or loss from a foreclosure or repossession. Irs amended tax return Amount realized on a nonrecourse debt. Irs amended tax return   If you are not personally liable for repaying the debt (nonrecourse debt) secured by the transferred property, the amount you realize includes the full amount of the debt canceled by the transfer. Irs amended tax return The full canceled debt is included in the amount realized even if the fair market value of the property is less than the canceled debt. Irs amended tax return Example 1. Irs amended tax return Ann paid $200,000 for land used in her farming business. Irs amended tax return She paid $15,000 down and borrowed the remaining $185,000 from a bank. Irs amended tax return Ann is not personally liable for the loan (nonrecourse debt), but pledges the land as security. Irs amended tax return The bank foreclosed on the loan 2 years after Ann stopped making payments. Irs amended tax return When the bank foreclosed, the balance due on the loan was $180,000 and the FMV of the land was $170,000. Irs amended tax return The amount Ann realized on the foreclosure was $180,000, the debt canceled by the foreclosure. Irs amended tax return She figures her gain or loss on Form 4797, Part I, by comparing the amount realized ($180,000) with her adjusted basis ($200,000). Irs amended tax return She has a $20,000 deductible loss. Irs amended tax return Example 2. Irs amended tax return Assume the same facts as in Example 1 except the FMV of the land was $210,000. Irs amended tax return The result is the same. Irs amended tax return The amount Ann realized on the foreclosure is $180,000, the debt canceled by the foreclosure. Irs amended tax return Because her adjusted basis is $200,000, she has a deductible loss of $20,000, which she reports on Form 4797, Part I. Irs amended tax return Amount realized on a recourse debt. Irs amended tax return   If you are personally liable for the debt (recourse debt), the amount realized on the foreclosure or repossession includes the lesser of: The outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, or The fair market value of the transferred property. Irs amended tax return   You are treated as receiving ordinary income from the canceled debt for the part of the debt that is more than the fair market value. Irs amended tax return The amount realized does not include the canceled debt that is your income from cancellation of debt. Irs amended tax return See Cancellation of debt , later. Irs amended tax return Example 3. Irs amended tax return Assume the same facts as in Example 1 above except Ann is personally liable for the loan (recourse debt). Irs amended tax return In this case, the amount she realizes is $170,000. Irs amended tax return This is the canceled debt ($180,000) up to the FMV of the land ($170,000). Irs amended tax return Ann figures her gain or loss on the foreclosure by comparing the amount realized ($170,000) with her adjusted basis ($200,000). Irs amended tax return She has a $30,000 deductible loss, which she figures on Form 4797, Part I. Irs amended tax return She is also treated as receiving ordinary income from cancellation of debt. Irs amended tax return That income is $10,000 ($180,000 − $170,000). Irs amended tax return This is the part of the canceled debt not included in the amount realized. Irs amended tax return She reports this as other income on Schedule F, line 8. Irs amended tax return Seller's (lender's) gain or loss on repossession. Irs amended tax return   If you finance a buyer's purchase of property and later acquire an interest in it through foreclosure or repossession, you may have a gain or loss on the acquisition. Irs amended tax return For more information, see Repossession in Publication 537, Installment Sales. Irs amended tax return Cancellation of debt. Irs amended tax return   If property that is repossessed or foreclosed upon secures a debt for which you are personally liable (recourse debt), you generally must report as ordinary income the amount by which the canceled debt is more than the FMV of the property. Irs amended tax return This income is separate from any gain or loss realized from the foreclosure or repossession. Irs amended tax return Report the income from cancellation of a business debt on Schedule F, line 8. Irs amended tax return Report the income from cancellation of a nonbusiness debt as miscellaneous income on Form 1040. Irs amended tax return    You can use Worksheet 8-1 to figure your income from cancellation of debt. Irs amended tax return   However, income from cancellation of debt is not taxed if any of the following apply. Irs amended tax return The cancellation is intended as a gift. Irs amended tax return The debt is qualified farm debt (see chapter 3). Irs amended tax return The debt is qualified real property business debt (see chapter 5 of Publication 334). Irs amended tax return You are insolvent or bankrupt (see  chapter 3). Irs amended tax return The debt is qualified principal residence indebtedness (see chapter 3). Irs amended tax return   Use Form 982 to report the income exclusion. Irs amended tax return Abandonment The abandonment of property is a disposition of property. Irs amended tax return You abandon property when you voluntarily and permanently give up possession and use of the property with the intention of ending your ownership, but without passing it on to anyone else. Irs amended tax return Business or investment property. Irs amended tax return   Loss from abandonment of business or investment property is deductible as a loss. Irs amended tax return Loss from abandonment of business or investment property that is not treated as a sale or exchange generally is an ordinary loss. Irs amended tax return If your adjusted basis is more than the amount you realize (if any), then you have a loss. Irs amended tax return If the amount you realize (if any) is more than your adjusted basis, then you have a gain. Irs amended tax return This rule also applies to leasehold improvements the lessor made for the lessee. Irs amended tax return However, if the property is foreclosed on or repossessed in lieu of abandonment, gain or loss is figured as discussed earlier under Foreclosure or Repossession . Irs amended tax return   If the abandoned property is secured by debt, special rules apply. Irs amended tax return The tax consequences of abandonment of property that secures a debt depend on whether you are personally liable for the debt (recourse debt) or were not personally liable for the debt (nonrecourse debt). Irs amended tax return For more information, see chapter 3 of Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals). Irs amended tax return The abandonment loss is deducted in the tax year in which the loss is sustained. Irs amended tax return Report the loss on Form 4797, Part II, line 10. Irs amended tax return Personal-use property. Irs amended tax return   You cannot deduct any loss from abandonment of your home or other property held for personal use. Irs amended tax return Canceled debt. Irs amended tax return   If the abandoned property secures a debt for which you are personally liable and the debt is canceled, you will realize ordinary income equal to the canceled debt. Irs amended tax return This income is separate from any loss realized from abandonment of the property. Irs amended tax return Report income from cancellation of a debt related to a business or rental activity as business or rental income. Irs amended tax return Report income from cancellation of a nonbusiness debt as miscellaneous income on Form 1040. Irs amended tax return   However, income from cancellation of debt is not taxed in certain circumstances. Irs amended tax return See Cancellation of debt earlier under Foreclosure or Repossession . Irs amended tax return Forms 1099-A and 1099-C. Irs amended tax return   A lender who acquires an interest in your property in a foreclosure, repossession, or abandonment should send you Form 1099-A showing the information you need to figure your loss from the foreclosure, repossession, or abandonment. Irs amended tax return However, if the lender cancels part of your debt and the lender must file Form 1099-C, the lender may include the information about the foreclosure, repossession, or abandonment on that form instead of Form 1099-A. Irs amended tax return The lender must file Form 1099-C and send you a copy if the canceled debt is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. Irs amended tax return For foreclosures, repossessions, abandonments of property, and debt cancellations occurring in 2013, these forms should be sent to you by January 31, 2014. Irs amended tax return Prev  Up  Next   Home   More Online Publications