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Irs For 1040x

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Irs For 1040x

Irs for 1040x Publication 510 - Introductory Material Table of Contents What's New Reminders Introduction Useful Items - You may want to see: Excise Taxes Not Covered What's New Medical device excise tax. Irs for 1040x  The Affordable Care Act (the “Act”) (Public Law 111-148, amended by Public Law 111-152) imposes a 2. Irs for 1040x 3% (. Irs for 1040x 023) excise tax on the sale of certain medical devices by the manufacturer, producer, or importer of the device. Irs for 1040x The tax applies to sales of taxable medical devices after December 31, 2012. Irs for 1040x See Taxable Medical Devices in chapter 5, later. Irs for 1040x Tax on seasonal flu vaccines. Irs for 1040x  Sales of all vaccines against seasonal influenza are now subject to the section 4131 excise tax at the existing rate of $. Irs for 1040x 75 per dose of taxable vaccine. Irs for 1040x Previously, only trivalent influenza vaccines were subject to this tax. Irs for 1040x See Vaccines in chapter 5, later. Irs for 1040x Patient-centered outcomes research fee. Irs for 1040x  The Act imposes a fee on issuers of specified health insurance policies (section 4375) and plan sponsors of applicable self-insured health plans (section 4576) to help fund the Patient-Centered Outcomes Research Institute. Irs for 1040x The fee, required to be reported annually on the 2nd quarter Form 720 and paid by its due date, July 31st, is based on the average number of lives covered under the policy or plan. Irs for 1040x The fee applies to policy or plan years ending on or after October 1, 2012. Irs for 1040x See chapter 11, later. Irs for 1040x Extension of fuel tax credits. Irs for 1040x  The following section 6426 credits, previously expired on December 31, 2011, are retroactively extended. Irs for 1040x Biodiesel or renewable diesel mixture credit. Irs for 1040x Alternative fuel credit. Irs for 1040x Alternative fuel mixture credit. Irs for 1040x See Notice 2013–26 (fuel tax credits) on page 984 of I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 2013–18 at www. Irs for 1040x irs. Irs for 1040x gov/pub/irs-irbs/irb13-18. Irs for 1040x pdf; also see chapter 2, later. Irs for 1040x Alternative fuel mixture credit can be claimed on Schedule C (Form 720) only. Irs for 1040x  For alternative fuel mixtures produced after December 31, 2011, the section 6426 alternative fuel mixture credit can be claimed on Schedule C (Form 720) only, not on Form 4136, Credit for Federal Tax Paid on Fuels, or Schedule 3 (Form 8849), Claim for Refund of Excise Taxes, and only to the extent of your section 4081 taxable fuel liability for gasoline, diesel, and kerosene. Irs for 1040x See Biodiesel or Renewable Diesel Mixture Credit, Alternative Fuel Credit, and Alternative Fuel Mixture Credit in chapter 2, later. Irs for 1040x Expiration of alcohol fuel mixture credit. Irs for 1040x  The section 6426 alcohol fuel mixture credit expired after December 31, 2011. Irs for 1040x Expiration of alcohol fuels credits. Irs for 1040x  The section 40 alcohol, alcohol mixture, and small ethanol producer credits expired after December 31, 2011. Irs for 1040x Second generation biofuel producer credit and excise tax. Irs for 1040x  The section 40 cellulosic biofuel producer credit was retroactively extended to include fuel sold or used through January 2, 2013. Irs for 1040x After January 2, 2013, cellulosic biofuel is renamed second generation biofuel, which adds algae-based fuel. Irs for 1040x The second generation biofuel producer credit is for fuel sold or used after January 2, 2013, and before January 1, 2014. Irs for 1040x You are liable for an excise tax on each gallon of cellulosic or second generation biofuel at the rate you used to figure the credit if you do not use the fuel for the purposes described under Qualified Cellulosic Biofuel Production or Qualified Second Generation Biofuel Production, later. Irs for 1040x Report the tax on Form 720. Irs for 1040x See Cellulosic or Second Generation Biofuel Not Used as Fuel, later; also see Form 6478, Biofuel Producer Credit, for more information. Irs for 1040x Extension of section 40A biodiesel fuels credit. Irs for 1040x  The biodiesel fuels credit, previously expired on December 31, 2011, is retroactively extended. Irs for 1040x Future developments. Irs for 1040x  The IRS has created a page on IRS. Irs for 1040x gov that includes information about Publication 510 at www. Irs for 1040x irs. Irs for 1040x gov/pub510. Irs for 1040x Information about any future developments will be posted on that page. Irs for 1040x Reminders Publication 510 updates. Irs for 1040x  Publication 510 is not updated annually. Irs for 1040x Instead, it will be updated only when there are major changes in the tax law. Irs for 1040x Use of international air travel facilities. Irs for 1040x  Generally, the tax on the use of international air travel facilities increases annually. Irs for 1040x See the Instructions for Form 720 for the tax rate. Irs for 1040x For more information, see Air Transportation Taxes in chapter 4. Irs for 1040x Aviation fuels for use in foreign trade. Irs for 1040x  Aviation gasoline and kerosene for use in aviation are exempt from the leaking underground storage tank (LUST) tax. Irs for 1040x Arrow shafts, tax rate. Irs for 1040x  Generally, the tax on arrow shafts increases annually. Irs for 1040x See Form 720 for the tax rate. Irs for 1040x Disregarded entities and qualified subchapter S subsidiaries. Irs for 1040x  Qualified subchapter S subsidiaries (QSubs) and eligible single-owner disregarded entities are treated as separate entities for excise tax and reporting purposes. Irs for 1040x QSubs and eligible single-owner disregarded entities must pay and report excise taxes (other than IRS Nos. Irs for 1040x 31, 51, and 117), register for most excise tax activities, and claim any refunds, credits, and payments under the entity's employer identification number (EIN). Irs for 1040x These actions cannot take place under the owner's taxpayer identification number (TIN). Irs for 1040x Some QSubs and disregarded entities may already have an EIN. Irs for 1040x However, if you are unsure, please call the IRS Business and Specialty Tax line at 1-800-829-4933. Irs for 1040x Generally, QSubs and eligible single-owner disregarded entities will continue to be treated as disregarded entities for other federal tax purposes (other than employment taxes). Irs for 1040x For more information on these regulations, see Treasury Decision (T. Irs for 1040x D. Irs for 1040x ) 9356, T. Irs for 1040x D. Irs for 1040x 9462, and T. Irs for 1040x D. Irs for 1040x 9596. Irs for 1040x You can find T. Irs for 1040x D. Irs for 1040x 9356 on page 675 of Internal Revenue Bulletin (I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x ) 2007-39 at  www. Irs for 1040x irs. Irs for 1040x gov/pub/irs-irbs/irb07-39. Irs for 1040x pdf;  T. Irs for 1040x D. Irs for 1040x 9462 on page 504 of I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 2009-42 at  www. Irs for 1040x irs. Irs for 1040x gov/pub/irs-irbs/irb09-42. Irs for 1040x pdf;  and T. Irs for 1040x D. Irs for 1040x 9596 on page 84 of I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 2012-30 at  www. Irs for 1040x irs. Irs for 1040x gov/pub/irs-irbs/irb12-30. Irs for 1040x pdf. Irs for 1040x Registration for certain activities. Irs for 1040x  You are required to be registered for certain excise tax activities, such as blending of gasoline, diesel fuel, or kerosene outside the bulk transfer/terminal system. Irs for 1040x See the instructions for Form 637 for the list of activities for which you must register. Irs for 1040x Also see Registration Requirements under Fuel Taxes in chapter 1 for information on registration for activities related to fuel. Irs for 1040x Each business unit that has, or is required to have, a separate employer identification number must be registered. Irs for 1040x To apply for registration, complete Form 637 and provide the information requested in its instructions. Irs for 1040x If your application is approved, you will receive a Letter of Registration showing the activities for which you are registered, the effective date of the registration, and your registration number. Irs for 1040x A copy of Form 637 is not a Letter of Registration. Irs for 1040x Photographs of missing children. Irs for 1040x  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Irs for 1040x Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Irs for 1040x You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Irs for 1040x Introduction This publication covers the excise taxes for which you may be liable and which are reported on Form 720 and other forms. Irs for 1040x It also covers fuel tax credits and refunds. Irs for 1040x For information on fuel credits against income tax (the section 40 credits for the production of cellulosic biofuel and second generation biofuel, and the section 40A credit for biodiesel and renewable diesel used as fuel) see the instructions for Form 6478 and Form 8864, Biodiesel and Renewable Diesel Fuels Credit. Irs for 1040x Comments and suggestions. Irs for 1040x   We welcome your comments about this publication and your suggestions for future editions. Irs for 1040x   You can write to us at the following address: Internal Revenue Service Individual and Specialty Forms and Publications Branch SE:W:CAR:MP:T:I 1111 Constitution Ave. Irs for 1040x NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Irs for 1040x Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Irs for 1040x   You can email us at taxforms@irs. Irs for 1040x gov. Irs for 1040x Please put “Publications Comment” on the subject line. Irs for 1040x You can also send us comments from www. Irs for 1040x irs. Irs for 1040x gov/Forms-&-Pubs/More-Information/ and select “Comment on Tax Forms and Publications”. Irs for 1040x   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Irs for 1040x Useful Items - You may want to see: Publication 509 Tax Calendars Form (and Instructions) 11-C Occupational Tax and Registration Return for Wagering 637 Application for Registration (For Certain Excise Tax Activities) 720 Quarterly Federal Excise Tax Return 720X Amended Quarterly Federal Excise Tax Return 730 Monthly Tax Return for Wagers 1363 Export Exemption Certificate 2290 Heavy Highway Vehicle Use Tax Return 2290(SP) Declaración del Impuesto sobre el Uso de Vehículos Pesados en las Carreteras 4136 Credit for Federal Tax Paid on Fuels 6197 Gas Guzzler Tax 6478 Biofuel Producer Credit 6627 Environmental Taxes 8849 Claim for Refund of Excise Taxes, and Schedules 1–3, 5, 6, and 8 8864 Biodiesel and Renewable Diesel Fuels Credit Information Returns    Form 720-TO, Terminal Operator Report Form 720-CS, Carrier Summary Report   See How To Get Tax Help in chapter 17 for information about ordering forms and publications. Irs for 1040x Guidance    You can find Notice 2005-4 (fuel tax guidance) on page 289 of I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 2005-2 at www. Irs for 1040x irs. Irs for 1040x gov/pub/irs-irbs/irb05-02. Irs for 1040x pdf. Irs for 1040x Notice 2005-62 (biodiesel and aviation-grade kerosene) on page 443 of I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 2005-35 at www. Irs for 1040x irs. Irs for 1040x gov/pub/irs-irbs/irb05-35. Irs for 1040x pdf. Irs for 1040x Notice 2005-80 (LUST, kerosene, claims by credit card issuers, and mechanical dye injection) on page 953 of I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 2005-46 at www. Irs for 1040x irs. Irs for 1040x gov/pub/irs-irbs/irb05-46. Irs for 1040x pdf. Irs for 1040x Notice 2006-92 (alternative fuels and alternative fuel mixtures) on page 774 of I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 2006-43 at www. Irs for 1040x irs. Irs for 1040x gov/pub/irs-irbs/irb06-43. Irs for 1040x pdf. Irs for 1040x Notice 2008-110 (biodiesel and cellulosic biofuel) on page 1298 of I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 2008-51 at www. Irs for 1040x irs. Irs for 1040x gov/pub/irs-irbs/irb08-51. Irs for 1040x pdf. Irs for 1040x Notice 2010-68 (Alaska dyed diesel exemption) on page 576 of I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 2010-44 at www. Irs for 1040x irs. Irs for 1040x gov/pub/irs-irbs/irb10-44. Irs for 1040x pdf. Irs for 1040x Notice 2012-27 (fractional aircraft ownership programs fuel surtax) on page 849 of I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 2012-17 at www. Irs for 1040x irs. Irs for 1040x gov/pub/irs-irbs/irb12-17. Irs for 1040x pdf. Irs for 1040x Notice 2013-26 (fuel tax credits) on page 984 of I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 2013-18 at www. Irs for 1040x irs. Irs for 1040x gov/pub/irs-irbs/irb13-18. Irs for 1040x pdf. Irs for 1040x T. Irs for 1040x D. Irs for 1040x 9604 and Notice 2012–77 (medical device tax) on pages 730 and 781, respectively, of I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 2012-52 at www. Irs for 1040x irs. Irs for 1040x gov/pub/irs-irbs/irb12-52. Irs for 1040x pdf. Irs for 1040x T. Irs for 1040x D. Irs for 1040x 9602 (patient-centered outcomes research fee) on page 746 of I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 2012-52 at www. Irs for 1040x irs. Irs for 1040x gov/pub/irs-irbs/irb12-52. Irs for 1040x pdf. Irs for 1040x Revenue Procedure 2012-41 (inflation adjustments) on page 539 of I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 2012-45 at www. Irs for 1040x irs. Irs for 1040x gov/pub/irs-irbs/irb12-45. Irs for 1040x pdf. Irs for 1040x T. Irs for 1040x D. Irs for 1040x 9621 (indoor tanning services tax) on page 49 of I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 2013-28 at www. Irs for 1040x irs. Irs for 1040x gov/pub/irs-irbs/irb13-28. Irs for 1040x pdf. Irs for 1040x Excise Taxes Not Covered In addition to the taxes discussed in this publication, you may have to report certain other excise taxes. Irs for 1040x For tax forms relating to alcohol, firearms, and tobacco, visit the Alcohol and Tobacco Tax and Trade Bureau website at www. Irs for 1040x ttb. Irs for 1040x gov. Irs for 1040x Heavy highway vehicle use tax. Irs for 1040x   You report the federal excise tax on the use of certain trucks, truck tractors, and buses used on public highways on Form 2290, Heavy Highway Vehicle Use Tax Return. Irs for 1040x The tax applies to highway motor vehicles with a taxable gross weight of 55,000 pounds or more. Irs for 1040x Vans, pickup trucks, panel trucks, and similar trucks generally are not subject to this tax. Irs for 1040x Note. Irs for 1040x A Spanish version (Formulario 2290(SP)) is also available. Irs for 1040x See How To Get Tax Help in chapter 17. Irs for 1040x Registration of vehicles. Irs for 1040x   Generally, you must prove that you paid your heavy highway vehicle use tax to register your taxable vehicle with your state motor vehicle department or to enter the United States in a Canadian or Mexican registered taxable vehicle. Irs for 1040x Generally, a copy of Schedule 1 (Form 2290) is stamped by the IRS and returned to you as proof of payment. Irs for 1040x    If you have questions on Form 2290, see its separate instructions, or you can call the Form 2290 call site at 1-866-699-4096 (toll free) from the United States, and 1-859-669-5733 (not toll free) from Canada and Mexico. Irs for 1040x The hours of service are 8:00 a. Irs for 1040x m. Irs for 1040x to 6:00 p. Irs for 1040x m. Irs for 1040x Eastern time. Irs for 1040x Wagering tax and occupational tax. Irs for 1040x   The information on wagering tax can be found in the instructions for Form 730, Tax on Wagering, and Form 11-C, Occupational Tax and Registration Return for Wagering. 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The Irs For 1040x

Irs for 1040x 8. Irs for 1040x   Amortization Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: How To Deduct Amortization Starting a BusinessBusiness Start-Up Costs Costs of Organizing a Corporation Costs of Organizing a Partnership How To Amortize Getting a Lease Section 197 IntangiblesSection 197 Intangibles Defined Assets That Are Not Section 197 Intangibles Safe Harbor for Creative Property Costs Anti-Churning Rules Incorrect Amount of Amortization Deducted Disposition of Section 197 Intangibles Reforestation Costs Geological and Geophysical Costs Pollution Control FacilitiesNew identifiable treatment facility. Irs for 1040x Research and Experimental Costs Optional Write-off of Certain Tax Preferences Introduction Amortization is a method of recovering (deducting) certain capital costs over a fixed period of time. Irs for 1040x It is similar to the straight line method of depreciation. Irs for 1040x The various amortizable costs covered in this chapter are included in the list below. Irs for 1040x However, this chapter does not discuss amortization of bond premium. Irs for 1040x For information on that topic, see chapter 3 of Publication 550, Investment Income and Expenses. Irs for 1040x Topics - This chapter discusses: Deducting amortization Amortizing costs of starting a business Amortizing costs of getting a lease Amortizing costs of section 197 intangibles Amortizing reforestation costs Amortizing costs of geological and geophysical costs Amortizing costs of pollution control facilities Amortizing costs of research and experimentation Amortizing costs of certain tax preferences Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 946 How To Depreciate Property Form (and Instructions) 4562 Depreciation and Amortization 4626 Alternative Minimum Tax—Corporations 6251 Alternative Minimum Tax—Individuals See chapter 12 for information about getting publications and forms. Irs for 1040x How To Deduct Amortization To deduct amortization that begins during the current tax year, complete Part VI of Form 4562 and attach it to your income tax return. Irs for 1040x To report amortization from previous years, in addition to amortization that begins in the current year, list on Form 4562 each item separately. Irs for 1040x For example, in 2012, you began to amortize a lease. Irs for 1040x In 2013, you began to amortize a second lease. Irs for 1040x Report amortization from the new lease on line 42 of your 2013 Form 4562. Irs for 1040x Report amortization from the 2012 lease on line 43 of your 2013 Form 4562. Irs for 1040x If you do not have any new amortizable expenses for the current year, you are not required to complete Form 4562 (unless you are claiming depreciation). Irs for 1040x Report the current year's deduction for amortization that began in a prior year directly on the “Other deduction” or “Other expense line” of your return. Irs for 1040x Starting a Business When you start a business, treat all eligible costs you incur before you begin operating the business as capital expenditures which are part of your basis in the business. Irs for 1040x Generally, you recover costs for particular assets through depreciation deductions. Irs for 1040x However, you generally cannot recover other costs until you sell the business or otherwise go out of business. Irs for 1040x For a discussion on how to treat these costs, see If your attempt to go into business is unsuccessful under Capital Expenses in chapter 1. Irs for 1040x For costs paid or incurred after September 8, 2008, you can deduct a limited amount of start-up and organizational costs. Irs for 1040x The costs that are not deducted currently can be amortized ratably over a 180-month period. Irs for 1040x The amortization period starts with the month you begin operating your active trade or business. Irs for 1040x You are not required to attach a statement to make this election. Irs for 1040x You can choose to forgo this election by affirmatively electing to capitalize your start-up costs on your income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. Irs for 1040x Once made, the election to either amortize or capitalize start-up costs is irrevocable and applies to all start-up costs that are related to your trade or business. Irs for 1040x See Regulations sections 1. Irs for 1040x 195-1, 1. Irs for 1040x 248-1, and 1. Irs for 1040x 709-1. Irs for 1040x For costs paid or incurred after October 22, 2004, and before September 9, 2008, you can elect to deduct a limited amount of business start-up and organizational costs in the year your active trade or business begins. Irs for 1040x Any costs not deducted can be amortized ratably over a 180-month period, beginning with the month you begin business. Irs for 1040x If the election is made, you must attach any statement required by Regulations sections 1. Irs for 1040x 195-1(b), 1. Irs for 1040x 248-1(c), and 1. Irs for 1040x 709-1(c), as in effect before September 9, 2008. Irs for 1040x Note. Irs for 1040x You can apply the provisions of Regulations sections 1. Irs for 1040x 195-1, 1. Irs for 1040x 248-1, and 1. Irs for 1040x 709-1 to all business start-up and organizational costs paid or incurred after October 22, 2004, provided the period of limitations on assessment has not expired for the year of the election. Irs for 1040x Otherwise, the provisions under Regulations sections 1. Irs for 1040x 195-1(b), 1. Irs for 1040x 248-1(c), and 1. Irs for 1040x 709-1(c), as in effect before September 9, 2008, will apply. Irs for 1040x For costs paid or incurred before October 23, 2004, you can elect to amortize business start-up and organization costs over an amortization period of 60 months or more. Irs for 1040x See How To Make the Election , later. Irs for 1040x The cost must qualify as one of the following. Irs for 1040x A business start-up cost. Irs for 1040x An organizational cost for a corporation. Irs for 1040x An organizational cost for a partnership. Irs for 1040x Business Start-Up Costs Start-up costs are amounts paid or incurred for: (a) creating an active trade or business; or (b) investigating the creation or acquisition of an active trade or business. Irs for 1040x Start-up costs include amounts paid or incurred in connection with an existing activity engaged in for profit; and for the production of income in anticipation of the activity becoming an active trade or business. Irs for 1040x Qualifying costs. Irs for 1040x   A start-up cost is amortizable if it meets both of the following tests. Irs for 1040x It is a cost you could deduct if you paid or incurred it to operate an existing active trade or business (in the same field as the one you entered into). Irs for 1040x It is a cost you pay or incur before the day your active trade or business begins. Irs for 1040x   Start-up costs include amounts paid for the following: An analysis or survey of potential markets, products, labor supply, transportation facilities, etc. Irs for 1040x Advertisements for the opening of the business. Irs for 1040x Salaries and wages for employees who are being trained and their instructors. Irs for 1040x Travel and other necessary costs for securing prospective distributors, suppliers, or customers. Irs for 1040x Salaries and fees for executives and consultants, or for similar professional services. Irs for 1040x Nonqualifying costs. Irs for 1040x   Start-up costs do not include deductible interest, taxes, or research and experimental costs. Irs for 1040x See Research and Experimental Costs , later. Irs for 1040x Purchasing an active trade or business. Irs for 1040x   Amortizable start-up costs for purchasing an active trade or business include only investigative costs incurred in the course of a general search for or preliminary investigation of the business. Irs for 1040x These are costs that help you decide whether to purchase a business. Irs for 1040x Costs you incur in an attempt to purchase a specific business are capital expenses that you cannot amortize. Irs for 1040x Example. Irs for 1040x On June 1st, you hired an accounting firm and a law firm to assist you in the potential purchase of XYZ, Inc. Irs for 1040x They researched XYZ's industry and analyzed the financial projections of XYZ, Inc. Irs for 1040x In September, the law firm prepared and submitted a letter of intent to XYZ, Inc. Irs for 1040x The letter stated that a binding commitment would result only after a purchase agreement was signed. Irs for 1040x The law firm and accounting firm continued to provide services including a review of XYZ's books and records and the preparation of a purchase agreement. Irs for 1040x On October 22nd, you signed a purchase agreement with XYZ, Inc. Irs for 1040x All amounts paid or incurred to investigate the business before October 22nd are amortizable investigative costs. Irs for 1040x Amounts paid on or after that date relate to the attempt to purchase the business and therefore must be capitalized. Irs for 1040x Disposition of business. Irs for 1040x   If you completely dispose of your business before the end of the amortization period, you can deduct any remaining deferred start-up costs. Irs for 1040x However, you can deduct these deferred start-up costs only to the extent they qualify as a loss from a business. Irs for 1040x Costs of Organizing a Corporation Amounts paid to organize a corporation are the direct costs of creating the corporation. Irs for 1040x Qualifying costs. Irs for 1040x   To qualify as an organizational cost, it must be: For the creation of the corporation, Chargeable to a capital account (see chapter 1), Amortized over the life of the corporation if the corporation had a fixed life, and Incurred before the end of the first tax year in which the corporation is in business. Irs for 1040x   A corporation using the cash method of accounting can amortize organizational costs incurred within the first tax year, even if it does not pay them in that year. Irs for 1040x   Examples of organizational costs include: The cost of temporary directors. Irs for 1040x The cost of organizational meetings. Irs for 1040x State incorporation fees. Irs for 1040x The cost of legal services. Irs for 1040x Nonqualifying costs. Irs for 1040x   The following items are capital expenses that cannot be amortized: Costs for issuing and selling stock or securities, such as commissions, professional fees, and printing costs. Irs for 1040x Costs associated with the transfer of assets to the corporation. Irs for 1040x Costs of Organizing a Partnership The costs to organize a partnership are the direct costs of creating the partnership. Irs for 1040x Qualifying costs. Irs for 1040x   A partnership can amortize an organizational cost only if it meets all the following tests. Irs for 1040x It is for the creation of the partnership and not for starting or operating the partnership trade or business. Irs for 1040x It is chargeable to a capital account (see chapter 1). Irs for 1040x It could be amortized over the life of the partnership if the partnership had a fixed life. Irs for 1040x It is incurred by the due date of the partnership return (excluding extensions) for the first tax year in which the partnership is in business. Irs for 1040x However, if the partnership uses the cash method of accounting and pays the cost after the end of its first tax year, see Cash method partnership under How To Amortize, later. Irs for 1040x It is for a type of item normally expected to benefit the partnership throughout its entire life. Irs for 1040x   Organizational costs include the following fees. Irs for 1040x Legal fees for services incident to the organization of the partnership, such as negotiation and preparation of the partnership agreement. Irs for 1040x Accounting fees for services incident to the organization of the partnership. Irs for 1040x Filing fees. Irs for 1040x Nonqualifying costs. Irs for 1040x   The following costs cannot be amortized. Irs for 1040x The cost of acquiring assets for the partnership or transferring assets to the partnership. Irs for 1040x The cost of admitting or removing partners, other than at the time the partnership is first organized. Irs for 1040x The cost of making a contract concerning the operation of the partnership trade or business including a contract between a partner and the partnership. Irs for 1040x The costs for issuing and marketing interests in the partnership such as brokerage, registration, and legal fees and printing costs. Irs for 1040x These “syndication fees” are capital expenses that cannot be depreciated or amortized. Irs for 1040x Liquidation of partnership. Irs for 1040x   If a partnership is liquidated before the end of the amortization period, the unamortized amount of qualifying organizational costs can be deducted in the partnership's final tax year. Irs for 1040x However, these costs can be deducted only to the extent they qualify as a loss from a business. Irs for 1040x How To Amortize Deduct start-up and organizational costs in equal amounts over the applicable amortization period (discussed earlier). Irs for 1040x You can choose an amortization period for start-up costs that is different from the period you choose for organizational costs, as long as both are not less than the applicable amortization period. Irs for 1040x Once you choose an amortization period, you cannot change it. Irs for 1040x To figure your deduction, divide your total start-up or organizational costs by the months in the amortization period. Irs for 1040x The result is the amount you can deduct for each month. Irs for 1040x Cash method partnership. Irs for 1040x   A partnership using the cash method of accounting can deduct an organizational cost only if it has been paid by the end of the tax year. Irs for 1040x However, any cost the partnership could have deducted as an organizational cost in an earlier tax year (if it had been paid that year) can be deducted in the tax year of payment. Irs for 1040x How To Make the Election To elect to amortize start-up or organizational costs, you must complete and attach Form 4562 to your return for the first tax year you are in business. Irs for 1040x You may also be required to attach an accompanying statement (described later) to your return. Irs for 1040x For start-up or organizational costs paid or incurred after September 8, 2008, an accompanying statement is not required. Irs for 1040x Generally, for start-up or organizational costs paid or incurred before September 9, 2008, and after October 22, 2004, unless you choose to apply Regulations sections 1. Irs for 1040x 195-1, 1. Irs for 1040x 248-1, and 1. Irs for 1040x 709-1, you must also attach an accompanying statement to elect to amortize the costs. Irs for 1040x If you have both start-up and organizational costs, attach a separate statement (if required) to your return for each type of cost. Irs for 1040x See Starting a Business , earlier, for more information. Irs for 1040x Generally, you must file the return by the due date (including any extensions). Irs for 1040x However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Irs for 1040x For more information, see the instructions for Part VI of Form 4562. Irs for 1040x You can choose to forgo the election to amortize by affirmatively electing to capitalize your start-up or organizational costs on your income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. Irs for 1040x Note. Irs for 1040x The election to either amortize or capitalize start-up or organizational costs is irrevocable and applies to all start-up and organizational costs that are related to the trade or business. Irs for 1040x If your business is organized as a corporation or partnership, only the corporation or partnership can elect to amortize its start-up or organizational costs. Irs for 1040x A shareholder or partner cannot make this election. Irs for 1040x You, as a shareholder or partner, cannot amortize any costs you incur in setting up your corporation or partnership. Irs for 1040x Only the corporation or partnership can amortize these costs. Irs for 1040x However, you, as an individual, can elect to amortize costs you incur to investigate an interest in an existing partnership. Irs for 1040x These costs qualify as business start-up costs if you acquire the partnership interest. Irs for 1040x Start-up costs election statement. Irs for 1040x   If you elect to amortize your start-up costs, attach a separate statement (if required) that contains the following information. Irs for 1040x A description of the business to which the start-up costs relate. Irs for 1040x A description of each start-up cost incurred. Irs for 1040x The month your active business began (or was acquired). Irs for 1040x The number of months in your amortization period (which is generally 180 months). Irs for 1040x Filing the statement early. Irs for 1040x   You can elect to amortize your start-up costs by filing the statement with a return for any tax year before the year your active business begins. Irs for 1040x If you file the statement early, the election becomes effective in the month of the tax year your active business begins. Irs for 1040x Revised statement. Irs for 1040x   You can file a revised statement to include any start-up costs not included in your original statement. Irs for 1040x However, you cannot include on the revised statement any cost you previously treated on your return as a cost other than a start-up cost. Irs for 1040x You can file the revised statement with a return filed after the return on which you elected to amortize your start-up costs. Irs for 1040x Organizational costs election statement. Irs for 1040x   If you elect to amortize your corporation's or partnership's organizational costs, attach a separate statement (if required) that contains the following information. Irs for 1040x A description of each cost. Irs for 1040x The amount of each cost. Irs for 1040x The date each cost was incurred. Irs for 1040x The month your corporation or partnership began active business (or acquired the business). Irs for 1040x The number of months in your amortization period (which is generally 180 months). Irs for 1040x Partnerships. Irs for 1040x   The statement prepared for a cash basis partnership must also indicate the amount paid before the end of the year for each cost. Irs for 1040x   You do not need to separately list any partnership organizational cost that is less than $10. Irs for 1040x Instead, you can list the total amount of these costs with the dates the first and last costs were incurred. Irs for 1040x   After a partnership makes the election to amortize organizational costs, it can later file an amended return to include additional organizational costs not included in the partnership's original return and statement. Irs for 1040x Getting a Lease If you get a lease for business property, you may recover the cost of acquiring the lease by amortizing it over the term of the lease. Irs for 1040x The term of the lease for amortization purposes generally includes all renewal options (and any other period for which you and the lessor reasonably expect the lease to be renewed). Irs for 1040x However, renewal periods are not included if 75% or more of the cost of acquiring the lease is for the term of the lease remaining on the acquisition date (not including any period for which you may choose to renew, extend, or continue the lease). Irs for 1040x For more information on the costs of getting a lease, see Cost of Getting a Lease in  chapter 3. Irs for 1040x How to amortize. Irs for 1040x   Enter your deduction in Part VI of Form 4562 if you are deducting amortization that begins during the current year, or on the appropriate line of your tax return if you are not otherwise required to file Form 4562. Irs for 1040x Section 197 Intangibles Generally, you may amortize the capitalized costs of “section 197 intangibles” (defined later) ratably over a 15-year period. Irs for 1040x You must amortize these costs if you hold the section 197 intangibles in connection with your trade or business or in an activity engaged in for the production of income. Irs for 1040x You may not be able to amortize section 197 intangibles acquired in a transaction that did not result in a significant change in ownership or use. Irs for 1040x See Anti-Churning Rules, later. Irs for 1040x Your amortization deduction each year is the applicable part of the intangible's adjusted basis (for purposes of determining gain), figured by amortizing it ratably over 15 years (180 months). Irs for 1040x The 15-year period begins with the later of: The month the intangible is acquired, or The month the trade or business or activity engaged in for the production of income begins. Irs for 1040x You cannot deduct amortization for the month you dispose of the intangible. Irs for 1040x If you pay or incur an amount that increases the basis of an amortizable section 197 intangible after the 15-year period begins, amortize it over the remainder of the 15-year period beginning with the month the basis increase occurs. Irs for 1040x You are not allowed any other depreciation or amortization deduction for an amortizable section 197 intangible. Irs for 1040x Tax-exempt use property subject to a lease. Irs for 1040x   The amortization period for any section 197 intangible leased under a lease agreement entered into after March 12, 2004, to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership), shall not be less than 125 percent of the lease term. Irs for 1040x Cost attributable to other property. Irs for 1040x   The rules for section 197 intangibles do not apply to any amount that is included in determining the cost of property that is not a section 197 intangible. Irs for 1040x For example, if the cost of computer software is not separately stated from the cost of hardware or other tangible property and you consistently treat it as part of the cost of the hardware or other tangible property, these rules do not apply. Irs for 1040x Similarly, none of the cost of acquiring real property held for the production of rental income is considered the cost of goodwill, going concern value, or any other section 197 intangible. Irs for 1040x Section 197 Intangibles Defined The following assets are section 197 intangibles and must be amortized over 180 months: Goodwill; Going concern value; Workforce in place; Business books and records, operating systems, or any other information base, including lists or other information concerning current or prospective customers; A patent, copyright, formula, process, design, pattern, know-how, format, or similar item; A customer-based intangible; A supplier-based intangible; Any item similar to items (3) through (7); A license, permit, or other right granted by a governmental unit or agency (including issuances and renewals); A covenant not to compete entered into in connection with the acquisition of an interest in a trade or business; Any franchise, trademark, or trade name; and A contract for the use of, or a term interest in, any item in this list. Irs for 1040x You cannot amortize any of the intangibles listed in items (1) through (8) that you created rather than acquired unless you created them in acquiring assets that make up a trade or business or a substantial part of a trade or business. Irs for 1040x Goodwill. Irs for 1040x   This is the value of a trade or business based on expected continued customer patronage due to its name, reputation, or any other factor. Irs for 1040x Going concern value. Irs for 1040x   This is the additional value of a trade or business that attaches to property because the property is an integral part of an ongoing business activity. Irs for 1040x It includes value based on the ability of a business to continue to function and generate income even though there is a change in ownership (but does not include any other section 197 intangible). Irs for 1040x It also includes value based on the immediate use or availability of an acquired trade or business, such as the use of earnings during any period in which the business would not otherwise be available or operational. Irs for 1040x Workforce in place, etc. Irs for 1040x   This includes the composition of a workforce (for example, its experience, education, or training). Irs for 1040x It also includes the terms and conditions of employment, whether contractual or otherwise, and any other value placed on employees or any of their attributes. Irs for 1040x   For example, you must amortize the part of the purchase price of a business that is for the existence of a highly skilled workforce. Irs for 1040x Also, you must amortize the cost of acquiring an existing employment contract or relationship with employees or consultants. Irs for 1040x Business books and records, etc. Irs for 1040x   This includes the intangible value of technical manuals, training manuals or programs, data files, and accounting or inventory control systems. Irs for 1040x It also includes the cost of customer lists, subscription lists, insurance expirations, patient or client files, and lists of newspaper, magazine, radio, and television advertisers. Irs for 1040x Patents, copyrights, etc. Irs for 1040x   This includes package design, computer software, and any interest in a film, sound recording, videotape, book, or other similar property, except as discussed later under Assets That Are Not Section 197 Intangibles . Irs for 1040x Customer-based intangible. Irs for 1040x   This is the composition of market, market share, and any other value resulting from the future provision of goods or services because of relationships with customers in the ordinary course of business. Irs for 1040x For example, you must amortize the part of the purchase price of a business that is for the existence of the following intangibles. Irs for 1040x A customer base. Irs for 1040x A circulation base. Irs for 1040x An undeveloped market or market growth. Irs for 1040x Insurance in force. Irs for 1040x A mortgage servicing contract. Irs for 1040x An investment management contract. Irs for 1040x Any other relationship with customers involving the future provision of goods or services. Irs for 1040x   Accounts receivable or other similar rights to income for goods or services provided to customers before the acquisition of a trade or business are not section 197 intangibles. Irs for 1040x Supplier-based intangible. Irs for 1040x   A supplier-based intangible is the value resulting from the future acquisitions, (through contract or other relationships with suppliers in the ordinary course of business) of goods or services that you will sell or use. Irs for 1040x The amount you pay or incur for supplier-based intangibles includes, for example, any portion of the purchase price of an acquired trade or business that is attributable to the existence of a favorable relationship with persons providing distribution services (such as a favorable shelf or display space or a retail outlet), or the existence of favorable supply contracts. Irs for 1040x Do not include any amount required to be paid for the goods or services to honor the terms of the agreement or other relationship. Irs for 1040x Also, see Assets That Are Not Section 197 Intangibles below. Irs for 1040x Government-granted license, permit, etc. Irs for 1040x   This is any right granted by a governmental unit or an agency or instrumentality of a governmental unit. Irs for 1040x For example, you must amortize the capitalized costs of acquiring (including issuing or renewing) a liquor license, a taxicab medallion or license, or a television or radio broadcasting license. Irs for 1040x Covenant not to compete. Irs for 1040x   Section 197 intangibles include a covenant not to compete (or similar arrangement) entered into in connection with the acquisition of an interest in a trade or business, or a substantial portion of a trade or business. Irs for 1040x An interest in a trade or business includes an interest in a partnership or a corporation engaged in a trade or business. Irs for 1040x   An arrangement that requires the former owner to perform services (or to provide property or the use of property) is not similar to a covenant not to compete to the extent the amount paid under the arrangement represents reasonable compensation for those services or for that property or its use. Irs for 1040x Franchise, trademark, or trade name. Irs for 1040x   A franchise, trademark, or trade name is a section 197 intangible. Irs for 1040x You must amortize its purchase or renewal costs, other than certain contingent payments that you can deduct currently. Irs for 1040x For information on currently deductible contingent payments, see chapter 11. Irs for 1040x Professional sports franchise. Irs for 1040x   A franchise engaged in professional sports and any intangible assets acquired in connection with acquiring the franchise (including player contracts) is a section 197 intangible amortizable over a 15-year period. Irs for 1040x Contract for the use of, or a term interest in, a section 197 intangible. Irs for 1040x   Section 197 intangibles include any right under a license, contract, or other arrangement providing for the use of any section 197 intangible. Irs for 1040x It also includes any term interest in any section 197 intangible, whether the interest is outright or in trust. Irs for 1040x Assets That Are Not Section 197 Intangibles The following assets are not section 197 intangibles. Irs for 1040x Any interest in a corporation, partnership, trust, or estate. Irs for 1040x Any interest under an existing futures contract, foreign currency contract, notional principal contract, interest rate swap, or similar financial contract. Irs for 1040x Any interest in land. Irs for 1040x Most computer software. Irs for 1040x (See Computer software , later. Irs for 1040x ) Any of the following assets not acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. Irs for 1040x An interest in a film, sound recording, video tape, book, or similar property. Irs for 1040x A right to receive tangible property or services under a contract or from a governmental agency. Irs for 1040x An interest in a patent or copyright. Irs for 1040x Certain rights that have a fixed duration or amount. Irs for 1040x (See Rights of fixed duration or amount , later. Irs for 1040x ) An interest under either of the following. Irs for 1040x An existing lease or sublease of tangible property. Irs for 1040x A debt that was in existence when the interest was acquired. Irs for 1040x A right to service residential mortgages unless the right is acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. Irs for 1040x Certain transaction costs incurred by parties to a corporate organization or reorganization in which any part of a gain or loss is not recognized. Irs for 1040x Intangible property that is not amortizable under the rules for section 197 intangibles can be depreciated if it meets certain requirements. Irs for 1040x You generally must use the straight line method over its useful life. Irs for 1040x For certain intangibles, the depreciation period is specified in the law and regulations. Irs for 1040x For example, the depreciation period for computer software that is not a section 197 intangible is generally 36 months. Irs for 1040x For more information on depreciating intangible property, see Intangible Property under What Method Can You Use To Depreciate Your Property? in chapter 1 of Publication 946. Irs for 1040x Computer software. Irs for 1040x   Section 197 intangibles do not include the following types of computer software. Irs for 1040x Software that meets all the following requirements. Irs for 1040x It is, or has been, readily available for purchase by the general public. Irs for 1040x It is subject to a nonexclusive license. Irs for 1040x It has not been substantially modified. Irs for 1040x This requirement is considered met if the cost of all modifications is not more than the greater of 25% of the price of the publicly available unmodified software or $2,000. Irs for 1040x Software that is not acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. Irs for 1040x Computer software defined. Irs for 1040x   Computer software includes all programs designed to cause a computer to perform a desired function. Irs for 1040x It also includes any database or similar item that is in the public domain and is incidental to the operation of qualifying software. Irs for 1040x Rights of fixed duration or amount. Irs for 1040x   Section 197 intangibles do not include any right under a contract or from a governmental agency if the right is acquired in the ordinary course of a trade or business (or in an activity engaged in for the production of income) but not as part of a purchase of a trade or business and either: Has a fixed life of less than 15 years, or Is of a fixed amount that, except for the rules for section 197 intangibles, would be recovered under a method similar to the unit-of-production method of cost recovery. Irs for 1040x However, this does not apply to the following intangibles. Irs for 1040x Goodwill. Irs for 1040x Going concern value. Irs for 1040x A covenant not to compete. Irs for 1040x A franchise, trademark, or trade name. Irs for 1040x A customer-related information base, customer-based intangible, or similar item. Irs for 1040x Safe Harbor for Creative Property Costs If you are engaged in the trade or business of film production, you may be able to amortize the creative property costs for properties not set for production within 3 years of the first capitalized transaction. Irs for 1040x You may amortize these costs ratably over a 15-year period beginning on the first day of the second half of the tax year in which you properly write off the costs for financial accounting purposes. Irs for 1040x If, during the 15-year period, you dispose of the creative property rights, you must continue to amortize the costs over the remainder of the 15-year period. Irs for 1040x Creative property costs include costs paid or incurred to acquire and develop screenplays, scripts, story outlines, motion picture production rights to books and plays, and other similar properties for purposes of potential future film development, production, and exploitation. Irs for 1040x Amortize these costs using the rules of Revenue Procedure 2004-36. Irs for 1040x For more information, see Revenue Procedure 2004-36, 2004-24 I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 1063, available at  www. Irs for 1040x irs. Irs for 1040x gov/irb/2004-24_IRB/ar16. Irs for 1040x html. Irs for 1040x A change in the treatment of creative property costs is a change in method of accounting. Irs for 1040x Anti-Churning Rules Anti-churning rules prevent you from amortizing most section 197 intangibles if the transaction in which you acquired them did not result in a significant change in ownership or use. Irs for 1040x These rules apply to goodwill and going concern value, and to any other section 197 intangible that is not otherwise depreciable or amortizable. Irs for 1040x Under the anti-churning rules, you cannot use 15-year amortization for the intangible if any of the following conditions apply. Irs for 1040x You or a related person (defined later) held or used the intangible at any time from July 25, 1991, through August 10, 1993. Irs for 1040x You acquired the intangible from a person who held it at any time during the period in (1) and, as part of the transaction, the user did not change. Irs for 1040x You granted the right to use the intangible to a person (or a person related to that person) who held or used it at any time during the period in (1). Irs for 1040x This applies only if the transaction in which you granted the right and the transaction in which you acquired the intangible are part of a series of related transactions. Irs for 1040x See Related person , later, for more information. Irs for 1040x Exceptions. Irs for 1040x   The anti-churning rules do not apply in the following situations. Irs for 1040x You acquired the intangible from a decedent and its basis was stepped up to its fair market value. Irs for 1040x The intangible was amortizable as a section 197 intangible by the seller or transferor you acquired it from. Irs for 1040x This exception does not apply if the transaction in which you acquired the intangible and the transaction in which the seller or transferor acquired it are part of a series of related transactions. Irs for 1040x The gain-recognition exception, discussed later, applies. Irs for 1040x Related person. Irs for 1040x   For purposes of the anti-churning rules, the following are related persons. Irs for 1040x An individual and his or her brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. Irs for 1040x ), and lineal descendants (children, grandchildren, etc. Irs for 1040x ). Irs for 1040x A corporation and an individual who owns, directly or indirectly, more than 20% of the value of the corporation's outstanding stock. Irs for 1040x Two corporations that are members of the same controlled group as defined in section 1563(a) of the Internal Revenue Code, except that “more than 20%” is substituted for “at least 80%” in that definition and the determination is made without regard to subsections (a)(4) and (e)(3)(C) of section 1563. Irs for 1040x (For an exception, see section 1. Irs for 1040x 197-2(h)(6)(iv) of the regulations. Irs for 1040x ) A trust fiduciary and a corporation if more than 20% of the value of the corporation's outstanding stock is owned, directly or indirectly, by or for the trust or grantor of the trust. Irs for 1040x The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. Irs for 1040x The fiduciaries of two different trusts, and the fiduciaries and beneficiaries of two different trusts, if the same person is the grantor of both trusts. Irs for 1040x The executor and beneficiary of an estate. Irs for 1040x A tax-exempt educational or charitable organization and a person who directly or indirectly controls the organization (or whose family members control it). Irs for 1040x A corporation and a partnership if the same persons own more than 20% of the value of the outstanding stock of the corporation and more than 20% of the capital or profits interest in the partnership. Irs for 1040x Two S corporations, and an S corporation and a regular corporation, if the same persons own more than 20% of the value of the outstanding stock of each corporation. Irs for 1040x Two partnerships if the same persons own, directly or indirectly, more than 20% of the capital or profits interests in both partnerships. Irs for 1040x A partnership and a person who owns, directly or indirectly, more than 20% of the capital or profits interests in the partnership. Irs for 1040x Two persons who are engaged in trades or businesses under common control (as described in section 41(f)(1) of the Internal Revenue Code). Irs for 1040x When to determine relationship. Irs for 1040x   Persons are treated as related if the relationship existed at the following time. Irs for 1040x In the case of a single transaction, immediately before or immediately after the transaction in which the intangible was acquired. Irs for 1040x In the case of a series of related transactions (or a series of transactions that comprise a qualified stock purchase under section 338(d)(3) of the Internal Revenue Code), immediately before the earliest transaction or immediately after the last transaction. Irs for 1040x Ownership of stock. Irs for 1040x   In determining whether an individual directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. Irs for 1040x Rule 1. Irs for 1040x   Stock directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. Irs for 1040x Rule 2. Irs for 1040x   An individual is considered to own the stock directly or indirectly owned by or for his or her family. Irs for 1040x Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. Irs for 1040x Rule 3. Irs for 1040x   An individual owning (other than by applying Rule 2) any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. Irs for 1040x Rule 4. Irs for 1040x   For purposes of applying Rule 1, 2, or 3, treat stock constructively owned by a person under Rule 1 as actually owned by that person. Irs for 1040x Do not treat stock constructively owned by an individual under Rule 2 or 3 as owned by the individual for reapplying Rule 2 or 3 to make another person the constructive owner of the stock. Irs for 1040x Gain-recognition exception. Irs for 1040x   This exception to the anti-churning rules applies if the person you acquired the intangible from (the transferor) meets both of the following requirements. Irs for 1040x That person would not be related to you (as described under Related person , earlier) if the 20% test for ownership of stock and partnership interests were replaced by a 50% test. Irs for 1040x That person chose to recognize gain on the disposition of the intangible and pay income tax on the gain at the highest tax rate. Irs for 1040x See chapter 2 in Publication 544 for information on making this choice. Irs for 1040x   If this exception applies, the anti-churning rules apply only to the amount of your adjusted basis in the intangible that is more than the gain recognized by the transferor. Irs for 1040x Notification. Irs for 1040x   If the person you acquired the intangible from chooses to recognize gain under the rules for this exception, that person must notify you in writing by the due date of the return on which the choice is made. Irs for 1040x Anti-abuse rule. Irs for 1040x   You cannot amortize any section 197 intangible acquired in a transaction for which the principal purpose was either of the following. Irs for 1040x To avoid the requirement that the intangible be acquired after August 10, 1993. Irs for 1040x To avoid any of the anti-churning rules. Irs for 1040x More information. Irs for 1040x   For more information about the anti-churning rules, including additional rules for partnerships, see Regulations section 1. Irs for 1040x 197-2(h). Irs for 1040x Incorrect Amount of Amortization Deducted If you later discover that you deducted an incorrect amount for amortization for a section 197 intangible in any year, you may be able to make a correction for that year by filing an amended return. Irs for 1040x See Amended Return , next. Irs for 1040x If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amortization. Irs for 1040x See Changing Your Accounting Method , later. Irs for 1040x Amended Return If you deducted an incorrect amount for amortization, you can file an amended return to correct the following. Irs for 1040x A mathematical error made in any year. Irs for 1040x A posting error made in any year. Irs for 1040x An amortization deduction for a section 197 intangible for which you have not adopted a method of accounting. Irs for 1040x When to file. Irs for 1040x   If an amended return is allowed, you must file it by the later of the following dates. Irs for 1040x 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. Irs for 1040x (A return filed early is considered filed on the due date. Irs for 1040x ) 2 years from the time you paid your tax for that year. Irs for 1040x Changing Your Accounting Method Generally, you must get IRS approval to change your method of accounting. Irs for 1040x File Form 3115, Application for Change in Accounting Method, to request a change to a permissible method of accounting for amortization. Irs for 1040x The following are examples of a change in method of accounting for amortization. Irs for 1040x A change in the amortization method, period of recovery, or convention of an amortizable asset. Irs for 1040x A change in the accounting for amortizable assets from a single asset account to a multiple asset account (pooling), or vice versa. Irs for 1040x A change in the accounting for amortizable assets from one type of multiple asset account to a different type of multiple asset account. Irs for 1040x Changes in amortization that are not a change in method of accounting include the following: A change in computing amortization in the tax year in which your use of the asset changes. Irs for 1040x An adjustment in the useful life of an amortizable asset. Irs for 1040x Generally, the making of a late amortization election or the revocation of a timely valid amortization election. Irs for 1040x Any change in the placed-in-service date of an amortizable asset. Irs for 1040x See Regulations section 1. Irs for 1040x 446-1(e)(2)(ii)(a) for more information and examples. Irs for 1040x Automatic approval. Irs for 1040x   In some instances, you may be able to get automatic approval from the IRS to change your method of accounting for amortization. Irs for 1040x For a list of automatic accounting method changes, see the Instructions for Form 3115. Irs for 1040x Also see the Instructions for Form 3115 for more information on getting approval, automatic approval procedures, and a list of exceptions to the automatic approval process. Irs for 1040x For more information, see Revenue Procedure 2006-12, as modified by Revenue Procedure 2006-37, and Revenue Procedure 2008-52, as amplified, clarified, and modified by Revenue Procedure 2009-39, as clarified and modified by Revenue Procedure 2011-14, as modified and amplified by Revenue Procedure 2011-22, as modified by Revenue Procedure 2012-39, or any successor. Irs for 1040x See Revenue Procedure 2006-12, 2006-3 I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 310, available at  www. Irs for 1040x irs. Irs for 1040x gov/irb/2006-03_IRB/ar14. Irs for 1040x html. Irs for 1040x  See Revenue Procedure 2006-37, 2006-38 I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 499, available at  www. Irs for 1040x irs. Irs for 1040x gov/irb/2006-38_IRB/ar10. Irs for 1040x html. Irs for 1040x  See Revenue Procedure 2008-52, 2008-36 I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 587, available at www. Irs for 1040x irs. Irs for 1040x gov/irb/2008-36_IRB/ar09. Irs for 1040x html. Irs for 1040x  See Revenue Procedure 2009-39, 2009-38 I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 371, available at  www. Irs for 1040x irs. Irs for 1040x gov/irb/2009-38_IRB/ar08. Irs for 1040x html. Irs for 1040x  See Revenue Procedure 2011-14, 2011-4 I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 330, available at  www. Irs for 1040x irs. Irs for 1040x gov/irb/2011-04_IRB/ar08. Irs for 1040x html. Irs for 1040x  See Revenue Procedure 2011-22, 2011-18 I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 737, available at  www. Irs for 1040x irs. Irs for 1040x gov/irb/2011-18_IRB/ar08. Irs for 1040x html. Irs for 1040x Also, see Revenue Procedure 2012-39, 2012-41 I. Irs for 1040x R. Irs for 1040x B. Irs for 1040x 470 available at www. Irs for 1040x irs. Irs for 1040x gov/irb/2012-41_IRB/index. Irs for 1040x html. Irs for 1040x Disposition of Section 197 Intangibles A section 197 intangible is treated as depreciable property used in your trade or business. Irs for 1040x If you held the intangible for more than 1 year, any gain on its disposition, up to the amount of allowable amortization, is ordinary income (section 1245 gain). Irs for 1040x If multiple section 197 intangibles are disposed of in a single transaction or a series of related transactions, treat all of the section 197 intangibles as if they were a single asset for purposes of determining the amount of gain that is ordinary income. Irs for 1040x Any remaining gain, or any loss, is a section 1231 gain or loss. Irs for 1040x If you held the intangible 1 year or less, any gain or loss on its disposition is an ordinary gain or loss. Irs for 1040x For more information on ordinary or capital gain or loss on business property, see chapter 3 in Publication 544. Irs for 1040x Nondeductible loss. Irs for 1040x   You cannot deduct any loss on the disposition or worthlessness of a section 197 intangible that you acquired in the same transaction (or series of related transactions) as other section 197 intangibles you still have. Irs for 1040x Instead, increase the adjusted basis of each remaining amortizable section 197 intangible by a proportionate part of the nondeductible loss. Irs for 1040x Figure the increase by multiplying the nondeductible loss on the disposition of the intangible by the following fraction. Irs for 1040x The numerator is the adjusted basis of each remaining intangible on the date of the disposition. Irs for 1040x The denominator is the total adjusted bases of all remaining amortizable section 197 intangibles on the date of the disposition. Irs for 1040x Covenant not to compete. Irs for 1040x   A covenant not to compete, or similar arrangement, is not considered disposed of or worthless before you dispose of your entire interest in the trade or business for which you entered into the covenant. Irs for 1040x Nonrecognition transfers. Irs for 1040x   If you acquire a section 197 intangible in a nonrecognition transfer, you are treated as the transferor with respect to the part of your adjusted basis in the intangible that is not more than the transferor's adjusted basis. Irs for 1040x You amortize this part of the adjusted basis over the intangible's remaining amortization period in the hands of the transferor. Irs for 1040x Nonrecognition transfers include transfers to a corporation, partnership contributions and distributions, like-kind exchanges, and involuntary conversions. Irs for 1040x   In a like-kind exchange or involuntary conversion of a section 197 intangible, you must continue to amortize the part of your adjusted basis in the acquired intangible that is not more than your adjusted basis in the exchanged or converted intangible over the remaining amortization period of the exchanged or converted intangible. Irs for 1040x Amortize over a new 15-year period the part of your adjusted basis in the acquired intangible that is more than your adjusted basis in the exchanged or converted intangible. Irs for 1040x Example. Irs for 1040x You own a section 197 intangible you have amortized for 4 full years. Irs for 1040x It has a remaining unamortized basis of $30,000. Irs for 1040x You exchange the asset plus $10,000 for a like-kind section 197 intangible. Irs for 1040x The nonrecognition provisions of like-kind exchanges apply. Irs for 1040x You amortize $30,000 of the $40,000 adjusted basis of the acquired intangible over the 11 years remaining in the original 15-year amortization period for the transferred asset. Irs for 1040x You amortize the other $10,000 of adjusted basis over a new 15-year period. Irs for 1040x For more information, see Regulations section 1. Irs for 1040x 197-2(g). Irs for 1040x Reforestation Costs You can elect to deduct a limited amount of reforestation costs paid or incurred during the tax year. Irs for 1040x See Reforestation Costs in chapter 7. Irs for 1040x You can elect to amortize the qualifying costs that are not deducted currently over an 84-month period. Irs for 1040x There is no limit on the amount of your amortization deduction for reforestation costs paid or incurred during the tax year. Irs for 1040x The election to amortize reforestation costs incurred by a partnership, S corporation, or estate must be made by the partnership, corporation, or estate. Irs for 1040x A partner, shareholder, or beneficiary cannot make that election. Irs for 1040x A partner's or shareholder's share of amortizable costs is figured under the general rules for allocating items of income, loss, deduction, etc. Irs for 1040x , of a partnership or S corporation. Irs for 1040x The amortizable costs of an estate are divided between the estate and the income beneficiary based on the income of the estate allocable to each. Irs for 1040x Qualifying costs. Irs for 1040x   Reforestation costs are the direct costs of planting or seeding for forestation or reforestation. Irs for 1040x Qualifying costs include only those costs you must capitalize and include in the adjusted basis of the property. Irs for 1040x They include costs for the following items. Irs for 1040x Site preparation. Irs for 1040x Seeds or seedlings. Irs for 1040x Labor. Irs for 1040x Tools. Irs for 1040x Depreciation on equipment used in planting and seeding. Irs for 1040x Qualifying costs do not include costs for which the government reimburses you under a cost-sharing program, unless you include the reimbursement in your income. Irs for 1040x Qualified timber property. Irs for 1040x   Qualified timber property is property that contains trees in significant commercial quantities. Irs for 1040x It can be a woodlot or other site that you own or lease. Irs for 1040x The property qualifies only if it meets all of the following requirements. Irs for 1040x It is located in the United States. Irs for 1040x It is held for the growing and cutting of timber you will either use in, or sell for use in, the commercial production of timber products. Irs for 1040x It consists of at least one acre planted with tree seedlings in the manner normally used in forestation or reforestation. Irs for 1040x Qualified timber property does not include property on which you have planted shelter belts or ornamental trees, such as Christmas trees. Irs for 1040x Amortization period. Irs for 1040x   The 84-month amortization period starts on the first day of the first month of the second half of the tax year you incur the costs (July 1 for a calendar year taxpayer), regardless of the month you actually incur the costs. Irs for 1040x You can claim amortization deductions for no more than 6 months of the first and last (eighth) tax years of the period. Irs for 1040x Life tenant and remainderman. Irs for 1040x   If one person holds the property for life with the remainder going to another person, the life tenant is entitled to the full amortization for qualifying reforestation costs incurred by the life tenant. Irs for 1040x Any remainder interest in the property is ignored for amortization purposes. Irs for 1040x Recapture. Irs for 1040x   If you dispose of qualified timber property within 10 years after the tax year you incur qualifying reforestation expenses, report any gain as ordinary income up to the amortization you took. Irs for 1040x See chapter 3 of Publication 544 for more information. Irs for 1040x How to make the election. Irs for 1040x   To elect to amortize qualifying reforestation costs, complete Part VI of Form 4562 and attach a statement that contains the following information. Irs for 1040x A description of the costs and the dates you incurred them. Irs for 1040x A description of the type of timber being grown and the purpose for which it is grown. Irs for 1040x Attach a separate statement for each property for which you amortize reforestation costs. Irs for 1040x   Generally, you must make the election on a timely filed return (including extensions) for the tax year in which you incurred the costs. Irs for 1040x However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Irs for 1040x Attach Form 4562 and the statement to the amended return and write “Filed pursuant to section 301. Irs for 1040x 9100-2” on Form 4562. Irs for 1040x File the amended return at the same address you filed the original return. Irs for 1040x Revoking the election. Irs for 1040x   You must get IRS approval to revoke your election to amortize qualifying reforestation costs. Irs for 1040x Your application to revoke the election must include your name, address, the years for which your election was in effect, and your reason for revoking it. Irs for 1040x Please provide your daytime telephone number (optional), in case we need to contact you. Irs for 1040x You, or your duly authorized representative, must sign the application and file it at least 90 days before the due date (without extensions) for filing your income tax return for the first tax year for which your election is to end. Irs for 1040x    Send the application to: Internal Revenue Service Associate Chief Counsel Passthroughs and Special Industries CC:PSI:6 1111 Constitution Ave. Irs for 1040x NW, IR-5300 Washington, DC 20224 Geological and Geophysical Costs You can amortize the cost of geological and geophysical expenses paid or incurred in connection with oil and gas exploration or development within the United States. Irs for 1040x These costs can be amortized ratably over a 24-month period beginning on the mid-point of the tax year in which the expenses were paid or incurred. Irs for 1040x For major integrated oil companies (as defined in section 167(h)(5)), these costs must be amortized ratably over a 5-year period for costs paid or incurred after May 17, 2006 (a 7-year period for costs paid or incurred after December 19, 2007). Irs for 1040x If you retire or abandon the property during the amortization period, no amortization deduction is allowed in the year of retirement or abandonment. Irs for 1040x Pollution Control Facilities You can elect to amortize the cost of a certified pollution control facility over 60 months. Irs for 1040x However, see Atmospheric pollution control facilities for an exception. Irs for 1040x The cost of a pollution control facility that is not eligible for amortization can be depreciated under the regular rules for depreciation. Irs for 1040x Also, you can claim a special depreciation allowance on a certified pollution control facility that is qualified property even if you elect to amortize its cost. Irs for 1040x You must reduce its cost (amortizable basis) by the amount of any special allowance you claim. Irs for 1040x See chapter 3 of Publication 946. Irs for 1040x A certified pollution control facility is a new identifiable treatment facility used in connection with a plant or other property in operation before 1976, to reduce or control water or atmospheric pollution or contamination. Irs for 1040x The facility must do so by removing, changing, disposing, storing, or preventing the creation or emission of pollutants, contaminants, wastes, or heat. Irs for 1040x The facility must be certified by state and federal certifying authorities. Irs for 1040x The facility must not significantly increase the output or capacity, extend the useful life, or reduce the total operating costs of the plant or other property. Irs for 1040x Also, it must not significantly change the nature of the manufacturing or production process or facility. Irs for 1040x The federal certifying authority will not certify your property to the extent it appears you will recover (over the property's useful life) all or part of its cost from the profit based on its operation (such as through sales of recovered wastes). Irs for 1040x The federal certifying authority will describe the nature of the potential cost recovery. Irs for 1040x You must then reduce the amortizable basis of the facility by this potential recovery. Irs for 1040x New identifiable treatment facility. Irs for 1040x   A new identifiable treatment facility is tangible depreciable property that is identifiable as a treatment facility. Irs for 1040x It does not include a building and its structural components unless the building is exclusively a treatment facility. Irs for 1040x Atmospheric pollution control facilities. Irs for 1040x   Certain atmospheric pollution control facilities can be amortized over 84 months. Irs for 1040x To qualify, the following must apply. Irs for 1040x The facility must be acquired and placed in service after April 11, 2005. Irs for 1040x If acquired, the original use must begin with you after April 11, 2005. Irs for 1040x The facility must be used in connection with an electric generation plant or other property placed in operation after December 31, 1975, that is primarily coal fired. Irs for 1040x If you construct, reconstruct, or erect the facility, only the basis attributable to the construction, reconstruction, or erection completed after April 11, 2005, qualifies. Irs for 1040x Basis reduction for corporations. Irs for 1040x   A corporation must reduce the amortizable basis of a pollution control facility by 20% before figuring the amortization deduction. Irs for 1040x More information. Irs for 1040x   For more information on the amortization of pollution control facilities, see Code sections 169 and 291(c) and the related regulations. Irs for 1040x Research and Experimental Costs You can elect to amortize your research and experimental costs, deduct them as current business expenses, or write them off over a 10-year period (see Optional write-off method below). Irs for 1040x If you elect to amortize these costs, deduct them in equal amounts over 60 months or more. Irs for 1040x The amortization period begins the month you first receive an economic benefit from the costs. Irs for 1040x For a definition of “research and experimental costs” and information on deducting them as current business expenses, see chapter 7. Irs for 1040x Optional write-off method. Irs for 1040x   Rather than amortize these costs or deduct them as a current expense, you have the option of deducting (writing off) research and experimental costs ratably over a 10-year period beginning with the tax year in which you incurred the costs. Irs for 1040x For more information, see Optional Write-off of Certain Tax Preferences , later, and section 59(e) of the Internal Revenue Code. Irs for 1040x Costs you can amortize. Irs for 1040x   You can amortize costs chargeable to a capital account (see chapter 1) if you meet both of the following requirements. Irs for 1040x You paid or incurred the costs in your trade or business. Irs for 1040x You are not deducting the costs currently. Irs for 1040x How to make the election. Irs for 1040x   To elect to amortize research and experimental costs, complete Part VI of Form 4562 and attach it to your income tax return. Irs for 1040x Generally, you must file the return by the due date (including extensions). Irs for 1040x However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Irs for 1040x Attach Form 4562 to the amended return and write “Filed pursuant to section 301. Irs for 1040x 9100-2” on Form 4562. Irs for 1040x File the amended return at the same address you filed the original return. Irs for 1040x   Your election is binding for the year it is made and for all later years unless you obtain approval from the IRS to change to a different method. Irs for 1040x Optional Write-off of Certain Tax Preferences You can elect to amortize certain tax preference items over an optional period beginning in the tax year in which you incurred the costs. Irs for 1040x If you make this election, there is no AMT adjustment. Irs for 1040x The applicable costs and the optional recovery periods are as follows: Circulation costs — 3 years, Intangible drilling and development costs — 60 months, Mining exploration and development costs — 10 years, and Research and experimental costs — 10 years. Irs for 1040x How to make the election. Irs for 1040x   To elect to amortize qualifying costs over the optional recovery period, complete Part VI of Form 4562 and attach a statement containing the following information to your return for the tax year in which the election begins: Your name, address, and taxpayer identification number; and The type of cost and the specific amount of the cost for which you are making the election. Irs for 1040x   Generally, the election must be made on a timely filed return (including extensions) for the tax year in which you incurred the costs. Irs for 1040x However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Irs for 1040x Attach Form 4562 to the amended return and write “Filed pursuant to section 301. Irs for 1040x 9100-2” on Form 4562. Irs for 1040x File the amended return at the same address you filed the original return. Irs for 1040x Revoking the election. Irs for 1040x   You must obtain consent from the IRS to revoke your election. Irs for 1040x Your request to revoke the election must be submitted to the IRS in the form of a letter ruling before the end of the tax year in which the optional recovery period ends. Irs for 1040x The request must contain all of the information necessary to demonstrate the rare and unusual circumstances that would justify granting revocation. Irs for 1040x If the request for revocation is approved, any unamortized costs are deductible in the year the revocation is effective. Irs for 1040x Prev  Up  Next   Home   More Online Publications