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Irs Tax Form 1040 Ez

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Irs Tax Form 1040 Ez

Irs tax form 1040 ez 1. Irs tax form 1040 ez   Gain or Loss Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Sales and ExchangesGain or Loss From Sales and Exchanges Abandonments Foreclosures and RepossessionsAmount realized on a nonrecourse debt. Irs tax form 1040 ez Amount realized on a recourse debt. Irs tax form 1040 ez Involuntary ConversionsCondemnations Nontaxable ExchangesLike-Kind Exchanges Other Nontaxable Exchanges Transfers to Spouse Rollover of Gain From Publicly Traded Securities Gains on Sales of Qualified Small Business Stock Exclusion of Gain From Sale of DC Zone Assets Topics - This chapter discusses: Sales and exchanges Abandonments Foreclosures and repossessions Involuntary conversions Nontaxable exchanges Transfers to spouse Rollovers and exclusions for certain capital gains Useful Items - You may want to see: Publication 523 Selling Your Home 537 Installment Sales 547 Casualties, Disasters, and Thefts 550 Investment Income and Expenses 551 Basis of Assets 908 Bankruptcy Tax Guide 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 1040 U. Irs tax form 1040 ez S. Irs tax form 1040 ez Individual Income Tax Return 1040X Amended U. Irs tax form 1040 ez S. Irs tax form 1040 ez Individual Income Tax Return 1099-A Acquisition or Abandonment of Secured Property 1099-C Cancellation of Debt 4797 Sales of Business Property 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets Although the discussions in this chapter may at times refer mainly to individuals, many of the rules discussed also apply to taxpayers other than individuals. Irs tax form 1040 ez However, the rules for property held for personal use usually will not apply to taxpayers other than individuals. Irs tax form 1040 ez See chapter 5 for information about getting publications and forms. Irs tax form 1040 ez Sales and Exchanges A sale is a transfer of property for money or a mortgage, note, or other promise to pay money. Irs tax form 1040 ez An exchange is a transfer of property for other property or services. Irs tax form 1040 ez The following discussions describe the kinds of transactions that are treated as sales or exchanges and explain how to figure gain or loss. Irs tax form 1040 ez Sale or lease. Irs tax form 1040 ez    Some agreements that seem to be leases may really be conditional sales contracts. Irs tax form 1040 ez The intention of the parties to the agreement can help you distinguish between a sale and a lease. Irs tax form 1040 ez   There is no test or group of tests to prove what the parties intended when they made the agreement. Irs tax form 1040 ez You should consider each agreement based on its own facts and circumstances. Irs tax form 1040 ez For more information, see chapter 3 in Publication 535, Business Expenses. Irs tax form 1040 ez Cancellation of a lease. Irs tax form 1040 ez    Payments received by a tenant for the cancellation of a lease are treated as an amount realized from the sale of property. Irs tax form 1040 ez Payments received by a landlord (lessor) for the cancellation of a lease are essentially a substitute for rental payments and are taxed as ordinary income in the year in which they are received. Irs tax form 1040 ez Copyright. Irs tax form 1040 ez    Payments you receive for granting the exclusive use of (or right to exploit) a copyright throughout its life in a particular medium are treated as received from the sale of property. Irs tax form 1040 ez It does not matter if the payments are a fixed amount or a percentage of receipts from the sale, performance, exhibition, or publication of the copyrighted work, or an amount based on the number of copies sold, performances given, or exhibitions made. Irs tax form 1040 ez Nor does it matter if the payments are made over the same period as that covering the grantee's use of the copyrighted work. Irs tax form 1040 ez   If the copyright was used in your trade or business and you held it longer than a year, the gain or loss may be a section 1231 gain or loss. Irs tax form 1040 ez For more information, see Section 1231 Gains and Losses in chapter 3. Irs tax form 1040 ez Easement. Irs tax form 1040 ez   The amount received for granting an easement is subtracted from the basis of the property. Irs tax form 1040 ez If only a specific part of the entire tract of property is affected by the easement, only the basis of that part is reduced by the amount received. Irs tax form 1040 ez If it is impossible or impractical to separate the basis of the part of the property on which the easement is granted, the basis of the whole property is reduced by the amount received. Irs tax form 1040 ez   Any amount received that is more than the basis to be reduced is a taxable gain. Irs tax form 1040 ez The transaction is reported as a sale of property. Irs tax form 1040 ez   If you transfer a perpetual easement for consideration and do not keep any beneficial interest in the part of the property affected by the easement, the transaction will be treated as a sale of property. Irs tax form 1040 ez However, if you make a qualified conservation contribution of a restriction or easement granted in perpetuity, it is treated as a charitable contribution and not a sale or exchange, even though you keep a beneficial interest in the property affected by the easement. Irs tax form 1040 ez   If you grant an easement on your property (for example, a right-of-way over it) under condemnation or threat of condemnation, you are considered to have made a forced sale, even though you keep the legal title. Irs tax form 1040 ez Although you figure gain or loss on the easement in the same way as a sale of property, the gain or loss is treated as a gain or loss from a condemnation. Irs tax form 1040 ez See Gain or Loss From Condemnations, later. Irs tax form 1040 ez Property transferred to satisfy debt. Irs tax form 1040 ez   A transfer of property to satisfy a debt is an exchange. Irs tax form 1040 ez Note's maturity date extended. Irs tax form 1040 ez   The extension of a note's maturity date is not treated as an exchange of an outstanding note for a new and different note. Irs tax form 1040 ez Also, it is not considered a closed and completed transaction that would result in a gain or loss. Irs tax form 1040 ez However, an extension will be treated as a taxable exchange of the outstanding note for a new and materially different note if the changes in the terms of the note are significant. Irs tax form 1040 ez Each case must be determined by its own facts. Irs tax form 1040 ez For more information, see Regulations section 1. Irs tax form 1040 ez 1001-3. Irs tax form 1040 ez Transfer on death. Irs tax form 1040 ez   The transfer of property of a decedent to an executor or administrator of the estate, or to the heirs or beneficiaries, is not a sale or exchange or other disposition. Irs tax form 1040 ez No taxable gain or deductible loss results from the transfer. Irs tax form 1040 ez Bankruptcy. Irs tax form 1040 ez   Generally, a transfer (other than by sale or exchange) of property from a debtor to a bankruptcy estate is not treated as a disposition. Irs tax form 1040 ez Consequently, the transfer generally does not result in gain or loss. Irs tax form 1040 ez For more information, see Publication 908, Bankruptcy Tax Guide. Irs tax form 1040 ez Gain or Loss From Sales and Exchanges You usually realize gain or loss when property is sold or exchanged. Irs tax form 1040 ez A gain is the amount you realize from a sale or exchange of property that is more than its adjusted basis. Irs tax form 1040 ez A loss is the adjusted basis of the property that is more than the amount you realize. Irs tax form 1040 ez   Table 1-1. Irs tax form 1040 ez How To Figure Whether You Have a Gain or Loss IF your. Irs tax form 1040 ez . Irs tax form 1040 ez . Irs tax form 1040 ez THEN you have a. Irs tax form 1040 ez . Irs tax form 1040 ez . Irs tax form 1040 ez Adjusted basis is more than the amount realized, Loss. Irs tax form 1040 ez Amount realized is more than the adjusted basis, Gain. Irs tax form 1040 ez Basis. Irs tax form 1040 ez   You must know the basis of your property to determine whether you have a gain or loss from its sale or other disposition. Irs tax form 1040 ez The basis of property you buy is usually its cost. Irs tax form 1040 ez However, if you acquired the property by gift, inheritance, or in some way other than buying it, you must use a basis other than its cost. Irs tax form 1040 ez See Basis Other Than Cost in Publication 551, Basis of Assets. Irs tax form 1040 ez Special rules apply to property acquired from a decedent who died in 2010 and the executor made the election to file Form 8939, Allocation of Increase in Basis for Property Received From a Decedent. Irs tax form 1040 ez See Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, for details. Irs tax form 1040 ez Adjusted basis. Irs tax form 1040 ez   The adjusted basis of property is your original cost or other basis plus (increased by) certain additions and minus (decreased by) certain deductions. Irs tax form 1040 ez Increases include costs of any improvements having a useful life of more than 1 year. Irs tax form 1040 ez Decreases include depreciation and casualty losses. Irs tax form 1040 ez For more details and additional examples, see Adjusted Basis in Publication 551. Irs tax form 1040 ez Amount realized. Irs tax form 1040 ez   The amount you realize from a sale or exchange is the total of all money you receive plus the fair market value (defined below) of all property or services you receive. Irs tax form 1040 ez The amount you realize also includes any of your liabilities that were assumed by the buyer and any liabilities to which the property you transferred is subject, such as real estate taxes or a mortgage. Irs tax form 1040 ez Fair market value. Irs tax form 1040 ez   Fair market value (FMV) is the price at which the property would change hands between a buyer and a seller when both have reasonable knowledge of all the necessary facts and neither is being forced to buy or sell. Irs tax form 1040 ez If parties with adverse interests place a value on property in an arm's-length transaction, that is strong evidence of FMV. Irs tax form 1040 ez If there is a stated price for services, this price is treated as the FMV unless there is evidence to the contrary. Irs tax form 1040 ez Example. Irs tax form 1040 ez You used a building in your business that cost you $70,000. Irs tax form 1040 ez You made certain permanent improvements at a cost of $20,000 and deducted depreciation totaling $10,000. Irs tax form 1040 ez You sold the building for $100,000 plus property having an FMV of $20,000. Irs tax form 1040 ez The buyer assumed your real estate taxes of $3,000 and a mortgage of $17,000 on the building. Irs tax form 1040 ez The selling expenses were $4,000. Irs tax form 1040 ez Your gain on the sale is figured as follows. Irs tax form 1040 ez Amount realized:     Cash $100,000   FMV of property received 20,000   Real estate taxes assumed by buyer 3,000   Mortgage assumed by  buyer 17,000   Total 140,000   Minus: Selling expenses 4,000 $136,000 Adjusted basis:     Cost of building $70,000   Improvements 20,000   Total $90,000   Minus: Depreciation 10,000   Adjusted basis   $80,000 Gain on sale $56,000 Amount recognized. Irs tax form 1040 ez   Your gain or loss realized from a sale or exchange of property is usually a recognized gain or loss for tax purposes. Irs tax form 1040 ez Recognized gains must be included in gross income. Irs tax form 1040 ez Recognized losses are deductible from gross income. Irs tax form 1040 ez However, your gain or loss realized from certain exchanges of property is not recognized for tax purposes. Irs tax form 1040 ez See Nontaxable Exchanges, later. Irs tax form 1040 ez Also, a loss from the sale or other disposition of property held for personal use is not deductible, except in the case of a casualty or theft. Irs tax form 1040 ez Interest in property. Irs tax form 1040 ez   The amount you realize from the disposition of a life interest in property, an interest in property for a set number of years, or an income interest in a trust is a recognized gain under certain circumstances. Irs tax form 1040 ez If you received the interest as a gift, inheritance, or in a transfer from a spouse or former spouse incident to a divorce, the amount realized is a recognized gain. Irs tax form 1040 ez Your basis in the property is disregarded. Irs tax form 1040 ez This rule does not apply if all interests in the property are disposed of at the same time. Irs tax form 1040 ez Example 1. Irs tax form 1040 ez Your father dies and leaves his farm to you for life with a remainder interest to your younger brother. Irs tax form 1040 ez You decide to sell your life interest in the farm. Irs tax form 1040 ez The entire amount you receive is a recognized gain. Irs tax form 1040 ez Your basis in the farm is disregarded. Irs tax form 1040 ez Example 2. Irs tax form 1040 ez The facts are the same as in Example 1, except that your brother joins you in selling the farm. Irs tax form 1040 ez The entire interest in the property is sold, so your basis in the farm is not disregarded. Irs tax form 1040 ez Your gain or loss is the difference between your share of the sales price and your adjusted basis in the farm. Irs tax form 1040 ez Canceling a sale of real property. Irs tax form 1040 ez   If you sell real property under a sales contract that allows the buyer to return the property for a full refund and the buyer does so, you may not have to recognize gain or loss on the sale. Irs tax form 1040 ez If the buyer returns the property in the year of sale, no gain or loss is recognized. Irs tax form 1040 ez This cancellation of the sale in the same year it occurred places both you and the buyer in the same positions you were in before the sale. Irs tax form 1040 ez If the buyer returns the property in a later tax year, you must recognize gain (or loss, if allowed) in the year of the sale. Irs tax form 1040 ez When the property is returned in a later year, you acquire a new basis in the property. Irs tax form 1040 ez That basis is equal to the amount you pay to the buyer. Irs tax form 1040 ez Bargain Sale If you sell or exchange property for less than fair market value with the intent of making a gift, the transaction is partly a sale or exchange and partly a gift. Irs tax form 1040 ez You have a gain if the amount realized is more than your adjusted basis in the property. Irs tax form 1040 ez However, you do not have a loss if the amount realized is less than the adjusted basis of the property. Irs tax form 1040 ez Bargain sales to charity. Irs tax form 1040 ez   A bargain sale of property to a charitable organization is partly a sale or exchange and partly a charitable contribution. Irs tax form 1040 ez If a charitable deduction for the contribution is allowable, you must allocate your adjusted basis in the property between the part sold and the part contributed based on the fair market value of each. Irs tax form 1040 ez The adjusted basis of the part sold is figured as follows. Irs tax form 1040 ez Adjusted basis of entire property × Amount realized (fair market value of part sold)   Fair market value of entire property   Based on this allocation rule, you will have a gain even if the amount realized is not more than your adjusted basis in the property. Irs tax form 1040 ez This allocation rule does not apply if a charitable contribution deduction is not allowable. Irs tax form 1040 ez   See Publication 526, Charitable Contributions, for information on figuring your charitable contribution. Irs tax form 1040 ez Example. Irs tax form 1040 ez You sold property with a fair market value of $10,000 to a charitable organization for $2,000 and are allowed a deduction for your contribution. Irs tax form 1040 ez Your adjusted basis in the property is $4,000. Irs tax form 1040 ez Your gain on the sale is $1,200, figured as follows. Irs tax form 1040 ez Sales price $2,000 Minus: Adjusted basis of part sold ($4,000 × ($2,000 ÷ $10,000)) 800 Gain on the sale $1,200 Property Used Partly for Business or Rental Generally, if you sell or exchange property you used partly for business or rental purposes and partly for personal purposes, you must figure the gain or loss on the sale or exchange as though you had sold two separate pieces of property. Irs tax form 1040 ez You must subtract depreciation you took or could have taken from the basis of the business or rental part. Irs tax form 1040 ez However, see the special rule below for a home used partly for business or rental. Irs tax form 1040 ez You must allocate the selling price, selling expenses, and the basis of the property between the business or rental part and the personal part. Irs tax form 1040 ez Gain or loss on the business or rental part of the property may be a capital gain or loss or an ordinary gain or loss, as discussed in chapter 3 under Section 1231 Gains and Losses. Irs tax form 1040 ez Any gain on the personal part of the property is a capital gain. Irs tax form 1040 ez You cannot deduct a loss on the personal part. Irs tax form 1040 ez Home used partly for business or rental. Irs tax form 1040 ez    If you use property partly as a home and partly for business or to produce rental income, the computation and treatment of any gain on the sale depends partly on whether the business or rental part of the property is part of your home or separate from it. Irs tax form 1040 ez See Property Used Partly for Business or Rental, in Publication 523. Irs tax form 1040 ez Property Changed to Business or Rental Use You cannot deduct a loss on the sale of property you purchased or constructed for use as your home and used as your home until the time of sale. Irs tax form 1040 ez You can deduct a loss on the sale of property you acquired for use as your home but changed to business or rental property and used as business or rental property at the time of sale. Irs tax form 1040 ez However, if the adjusted basis of the property at the time of the change was more than its fair market value, the loss you can deduct is limited. Irs tax form 1040 ez Figure the loss you can deduct as follows. Irs tax form 1040 ez Use the lesser of the property's adjusted basis or fair market value at the time of the change. Irs tax form 1040 ez Add to (1) the cost of any improvements and other increases to basis since the change. Irs tax form 1040 ez Subtract from (2) depreciation and any other decreases to basis since the change. Irs tax form 1040 ez Subtract the amount you realized on the sale from the result in (3). Irs tax form 1040 ez If the amount you realized is more than the result in (3), treat this result as zero. Irs tax form 1040 ez The result in (4) is the loss you can deduct. Irs tax form 1040 ez Example. Irs tax form 1040 ez You changed your main home to rental property 5 years ago. Irs tax form 1040 ez At the time of the change, the adjusted basis of your home was $75,000 and the fair market value was $70,000. Irs tax form 1040 ez This year, you sold the property for $55,000. Irs tax form 1040 ez You made no improvements to the property but you have depreciation expense of $12,620 over the 5 prior years. Irs tax form 1040 ez Although your loss on the sale is $7,380 [($75,000 − $12,620) − $55,000], the amount you can deduct as a loss is limited to $2,380, figured as follows. Irs tax form 1040 ez Lesser of adjusted basis or fair market value at time of the change $70,000 Plus: Cost of any improvements and any other additions to basis after the change -0-   70,000 Minus: Depreciation and any other decreases to basis after the change 12,620   57,380 Minus: Amount you realized from the sale 55,000 Deductible loss $2,380 Gain. Irs tax form 1040 ez   If you have a gain on the sale, you generally must recognize the full amount of the gain. Irs tax form 1040 ez You figure the gain by subtracting your adjusted basis from your amount realized, as described earlier. Irs tax form 1040 ez   You may be able to exclude all or part of the gain if you owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. Irs tax form 1040 ez However, you may not be able to exclude the part of the gain allocated to any period of nonqualified use. Irs tax form 1040 ez   For more information, see Business Use or Rental of Home in Publication 523. Irs tax form 1040 ez In addition, special rules apply if the home sold was acquired in a like-kind exchange. Irs tax form 1040 ez See Special Situations in Publication 523. Irs tax form 1040 ez Also see Like-Kind Exchanges, later. Irs tax form 1040 ez Abandonments The abandonment of property is a disposition of property. Irs tax form 1040 ez 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 tax form 1040 ez Generally, abandonment is not treated as a sale or exchange of the property. Irs tax form 1040 ez If the amount you realize (if any) is more than your adjusted basis, then you have a gain. Irs tax form 1040 ez If your adjusted basis is more than the amount you realize (if any), then you have a loss. Irs tax form 1040 ez Loss from abandonment of business or investment property is deductible as a loss. Irs tax form 1040 ez A loss from an abandonment of business or investment property that is not treated as a sale or exchange generally is an ordinary loss. Irs tax form 1040 ez This rule also applies to leasehold improvements the lessor made for the lessee that were abandoned. Irs tax form 1040 ez If the property is foreclosed on or repossessed in lieu of abandonment, gain or loss is figured as discussed later under Foreclosure and Repossessions. Irs tax form 1040 ez The abandonment loss is deducted in the tax year in which the loss is sustained. Irs tax form 1040 ez If the abandoned property is secured by debt, special rules apply. Irs tax form 1040 ez The tax consequences of abandonment of property that is secured by debt depend on whether you are personally liable for the debt (recourse debt) or you are not personally liable for the debt (nonrecourse debt). Irs tax form 1040 ez For more information, including examples, see chapter 3 of Publication 4681. Irs tax form 1040 ez You cannot deduct any loss from abandonment of your home or other property held for personal use only. Irs tax form 1040 ez Cancellation of debt. Irs tax form 1040 ez   If the abandoned property secures a debt for which you are personally liable and the debt is canceled, you may realize ordinary income equal to the canceled debt. Irs tax form 1040 ez This income is separate from any loss realized from abandonment of the property. Irs tax form 1040 ez   You must report this income on your tax return unless one of the following applies. Irs tax form 1040 ez The cancellation is intended as a gift. Irs tax form 1040 ez The debt is qualified farm debt. Irs tax form 1040 ez The debt is qualified real property business debt. Irs tax form 1040 ez You are insolvent or bankrupt. Irs tax form 1040 ez The debt is qualified principal residence indebtedness. Irs tax form 1040 ez File Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), to report the income exclusion. Irs tax form 1040 ez For more information, including other exceptions and exclusion, see Publication 4681. Irs tax form 1040 ez Forms 1099-A and 1099-C. Irs tax form 1040 ez   If you abandon property that secures a loan and the lender knows the property has been abandoned, the lender should send you Form 1099-A showing information you need to figure your loss from the abandonment. Irs tax form 1040 ez However, if your debt is canceled and the lender must file Form 1099-C, the lender may include the information about the abandonment on that form instead of on Form 1099-A, and send you Form 1099-C only. Irs tax form 1040 ez The lender must file Form 1099-C and send you a copy if the amount of debt canceled 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 tax form 1040 ez For abandonments of property and debt cancellations occurring in 2013, these forms should be sent to you by January 31, 2014. Irs tax form 1040 ez Foreclosures and Repossessions 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 tax form 1040 ez The foreclosure or repossession is treated as a sale or exchange from which you may realize gain or loss. Irs tax form 1040 ez This is true even if you voluntarily return the property to the lender. Irs tax form 1040 ez You also may realize ordinary income from cancellation of debt if the loan balance is more than the fair market value of the property. Irs tax form 1040 ez Buyer's (borrower's) gain or loss. Irs tax form 1040 ez   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 tax form 1040 ez The gain or loss is the difference between your adjusted basis in the transferred property and the amount realized. Irs tax form 1040 ez See Gain or Loss From Sales and Exchanges, earlier. Irs tax form 1040 ez You can use Table 1-2 to figure your gain or loss from a foreclosure or repossession. Irs tax form 1040 ez Amount realized on a nonrecourse debt. Irs tax form 1040 ez   If you are not personally liable for repaying the debt (nonrecourse debt) secured by the transferred property, the amount you realize includes the full debt canceled by the transfer. Irs tax form 1040 ez The full canceled debt is included even if the fair market value of the property is less than the canceled debt. Irs tax form 1040 ez Example 1. Irs tax form 1040 ez Chris bought a new car for $15,000. Irs tax form 1040 ez He paid $2,000 down and borrowed the remaining $13,000 from the dealer's credit company. Irs tax form 1040 ez Chris is not personally liable for the loan (nonrecourse debt), but pledges the new car as security. Irs tax form 1040 ez The credit company repossessed the car because he stopped making loan payments. Irs tax form 1040 ez The balance due after taking into account the payments Chris made was $10,000. Irs tax form 1040 ez The fair market value of the car when repossessed was $9,000. Irs tax form 1040 ez The amount Chris realized on the repossession is $10,000. Irs tax form 1040 ez That is the outstanding amount of the debt canceled by the repossession, even though the car's fair market value is less than $10,000. Irs tax form 1040 ez Chris figures his gain or loss on the repossession by comparing the amount realized ($10,000) with his adjusted basis ($15,000). Irs tax form 1040 ez He has a $5,000 nondeductible loss. Irs tax form 1040 ez Example 2. Irs tax form 1040 ez Abena paid $200,000 for her home. Irs tax form 1040 ez She paid $15,000 down and borrowed the remaining $185,000 from a bank. Irs tax form 1040 ez Abena is not personally liable for the loan (nonrecourse debt), but pledges the house as security. Irs tax form 1040 ez The bank foreclosed on the loan because Abena stopped making payments. Irs tax form 1040 ez When the bank foreclosed on the loan, the balance due was $180,000, the fair market value of the house was $170,000, and Abena's adjusted basis was $175,000 due to a casualty loss she had deducted. Irs tax form 1040 ez The amount Abena realized on the foreclosure is $180,000, the balance due and debt canceled by the foreclosure. Irs tax form 1040 ez She figures her gain or loss by comparing the amount realized ($180,000) with her adjusted basis ($175,000). Irs tax form 1040 ez She has a $5,000 realized gain. Irs tax form 1040 ez Amount realized on a recourse debt. Irs tax form 1040 ez   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 tax form 1040 ez 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 tax form 1040 ez The amount realized does not include the canceled debt that is your income from cancellation of debt. Irs tax form 1040 ez See Cancellation of debt, below. Irs tax form 1040 ez Seller's (lender's) gain or loss on repossession. Irs tax form 1040 ez   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 tax form 1040 ez For more information, see Repossession in Publication 537. Irs tax form 1040 ez    Table 1-2. Irs tax form 1040 ez Worksheet for Foreclosures and Repossessions Part 1. Irs tax form 1040 ez Use Part 1 to figure your ordinary income from the cancellation of debt upon foreclosure or repossession. Irs tax form 1040 ez Complete this part only  if you were personally liable for the debt. Irs tax form 1040 ez Otherwise,  go to Part 2. Irs tax form 1040 ez   1. Irs tax form 1040 ez 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 tax form 1040 ez Enter the fair market value of the transferred property   3. Irs tax form 1040 ez Ordinary income from cancellation of debt upon foreclosure or    repossession. Irs tax form 1040 ez * Subtract line 2 from line 1. Irs tax form 1040 ez   If less than zero, enter zero   Part 2. Irs tax form 1040 ez Figure your gain or loss from foreclosure or repossession. Irs tax form 1040 ez   4. Irs tax form 1040 ez If you completed Part 1, enter the smaller of line 1 or line 2. Irs tax form 1040 ez   If you did not complete Part 1, enter the outstanding debt immediately before   the transfer of property   5. Irs tax form 1040 ez Enter any proceeds you received from the foreclosure sale   6. Irs tax form 1040 ez Add lines 4 and 5   7. Irs tax form 1040 ez Enter the adjusted basis of the transferred property   8. Irs tax form 1040 ez Gain or loss from foreclosure or repossession. Irs tax form 1040 ez Subtract line 7  from line 6   * The income may not be taxable. Irs tax form 1040 ez See Cancellation of debt. Irs tax form 1040 ez Cancellation of debt. Irs tax form 1040 ez   If property that is repossessed or foreclosed on 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 fair market value of the property. Irs tax form 1040 ez This income is separate from any gain or loss realized from the foreclosure or repossession. Irs tax form 1040 ez Report the income from cancellation of a debt related to a business or rental activity as business or rental income. Irs tax form 1040 ez    You can use Table 1-2 to figure your income from cancellation of debt. Irs tax form 1040 ez   You must report this income on your tax return unless one of the following applies. Irs tax form 1040 ez The cancellation is intended as a gift. Irs tax form 1040 ez The debt is qualified farm debt. Irs tax form 1040 ez The debt is qualified real property business debt. Irs tax form 1040 ez You are insolvent or bankrupt. Irs tax form 1040 ez The debt is qualified principal residence indebtedness. Irs tax form 1040 ez File Form 982 to report the income exclusion. Irs tax form 1040 ez Example 1. Irs tax form 1040 ez Assume the same facts as in Example 1 under Amount realized on a nonrecourse debt, earlier, except Chris is personally liable for the car loan (recourse debt). Irs tax form 1040 ez In this case, the amount he realizes is $9,000. Irs tax form 1040 ez This is the lesser of the canceled debt ($10,000) or the car's fair market value ($9,000). Irs tax form 1040 ez Chris figures his gain or loss on the repossession by comparing the amount realized ($9,000) with his adjusted basis ($15,000). Irs tax form 1040 ez He has a $6,000 nondeductible loss. Irs tax form 1040 ez He also is treated as receiving ordinary income from cancellation of debt. Irs tax form 1040 ez That income is $1,000 ($10,000 − $9,000). Irs tax form 1040 ez This is the part of the canceled debt not included in the amount realized. Irs tax form 1040 ez Example 2. Irs tax form 1040 ez Assume the same facts as in Example 2 under Amount realized on a nonrecourse debt, earlier, except Abena is personally liable for the loan (recourse debt). Irs tax form 1040 ez In this case, the amount she realizes is $170,000. Irs tax form 1040 ez This is the lesser of the canceled debt ($180,000) or the fair market value of the house ($170,000). Irs tax form 1040 ez Abena figures her gain or loss on the foreclosure by comparing the amount realized ($170,000) with her adjusted basis ($175,000). Irs tax form 1040 ez She has a $5,000 nondeductible loss. Irs tax form 1040 ez She also is treated as receiving ordinary income from cancellation of debt. Irs tax form 1040 ez (The debt is not exempt from tax as discussed under Cancellation of debt, above. Irs tax form 1040 ez ) That income is $10,000 ($180,000 − $170,000). Irs tax form 1040 ez This is the part of the canceled debt not included in the amount realized. Irs tax form 1040 ez Forms 1099-A and 1099-C. Irs tax form 1040 ez   A lender who acquires an interest in your property in a foreclosure or repossession should send you Form 1099-A showing the information you need to figure your gain or loss. Irs tax form 1040 ez However, if the lender also cancels part of your debt and must file Form 1099-C, the lender may include the information about the foreclosure or repossession on that form instead of on Form 1099-A and send you Form 1099-C only. Irs tax form 1040 ez The lender must file Form 1099-C and send you a copy if the amount of debt canceled 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 tax form 1040 ez For foreclosures or repossessions occurring in 2013, these forms should be sent to you by January 31, 2014. Irs tax form 1040 ez Involuntary Conversions An involuntary conversion occurs when your property is destroyed, stolen, condemned, or disposed of under the threat of condemnation and you receive other property or money in payment, such as insurance or a condemnation award. Irs tax form 1040 ez Involuntary conversions are also called involuntary exchanges. Irs tax form 1040 ez Gain or loss from an involuntary conversion of your property is usually recognized for tax purposes unless the property is your main home. Irs tax form 1040 ez You report the gain or deduct the loss on your tax return for the year you realize it. Irs tax form 1040 ez You cannot deduct a loss from an involuntary conversion of property you held for personal use unless the loss resulted from a casualty or theft. Irs tax form 1040 ez However, depending on the type of property you receive, you may not have to report a gain on an involuntary conversion. Irs tax form 1040 ez Generally, you do not report the gain if you receive property that is similar or related in service or use to the converted property. Irs tax form 1040 ez Your basis for the new property is the same as your basis for the converted property. Irs tax form 1040 ez This means that the gain is deferred until a taxable sale or exchange occurs. Irs tax form 1040 ez If you receive money or property that is not similar or related in service or use to the involuntarily converted property and you buy qualifying replacement property within a certain period of time, you can elect to postpone reporting the gain on the property purchased. Irs tax form 1040 ez This publication explains the treatment of a gain or loss from a condemnation or disposition under the threat of condemnation. Irs tax form 1040 ez If you have a gain or loss from the destruction or theft of property, see Publication 547. Irs tax form 1040 ez Condemnations A condemnation is the process by which private property is legally taken for public use without the owner's consent. Irs tax form 1040 ez The property may be taken by the federal government, a state government, a political subdivision, or a private organization that has the power to legally take it. Irs tax form 1040 ez The owner receives a condemnation award (money or property) in exchange for the property taken. Irs tax form 1040 ez A condemnation is like a forced sale, the owner being the seller and the condemning authority being the buyer. Irs tax form 1040 ez Example. Irs tax form 1040 ez A local government authorized to acquire land for public parks informed you that it wished to acquire your property. Irs tax form 1040 ez After the local government took action to condemn your property, you went to court to keep it. Irs tax form 1040 ez But, the court decided in favor of the local government, which took your property and paid you an amount fixed by the court. Irs tax form 1040 ez This is a condemnation of private property for public use. Irs tax form 1040 ez Threat of condemnation. Irs tax form 1040 ez   A threat of condemnation exists if a representative of a government body or a public official authorized to acquire property for public use informs you that the government body or official has decided to acquire your property. Irs tax form 1040 ez You must have reasonable grounds to believe that, if you do not sell voluntarily, your property will be condemned. Irs tax form 1040 ez   The sale of your property to someone other than the condemning authority will also qualify as an involuntary conversion, provided you have reasonable grounds to believe that your property will be condemned. Irs tax form 1040 ez If the buyer of this property knows at the time of purchase that it will be condemned and sells it to the condemning authority, this sale also qualifies as an involuntary conversion. Irs tax form 1040 ez Reports of condemnation. Irs tax form 1040 ez   A threat of condemnation exists if you learn of a decision to acquire your property for public use through a report in a newspaper or other news medium, and this report is confirmed by a representative of the government body or public official involved. Irs tax form 1040 ez You must have reasonable grounds to believe that they will take necessary steps to condemn your property if you do not sell voluntarily. Irs tax form 1040 ez If you relied on oral statements made by a government representative or public official, the Internal Revenue Service (IRS) may ask you to get written confirmation of the statements. Irs tax form 1040 ez Example. Irs tax form 1040 ez Your property lies along public utility lines. Irs tax form 1040 ez The utility company has the authority to condemn your property. Irs tax form 1040 ez The company informs you that it intends to acquire your property by negotiation or condemnation. Irs tax form 1040 ez A threat of condemnation exists when you receive the notice. Irs tax form 1040 ez Related property voluntarily sold. Irs tax form 1040 ez   A voluntary sale of your property may be treated as a forced sale that qualifies as an involuntary conversion if the property had a substantial economic relationship to property of yours that was condemned. Irs tax form 1040 ez A substantial economic relationship exists if together the properties were one economic unit. Irs tax form 1040 ez You also must show that the condemned property could not reasonably or adequately be replaced. Irs tax form 1040 ez You can elect to postpone reporting the gain by buying replacement property. Irs tax form 1040 ez See Postponement of Gain, later. Irs tax form 1040 ez Gain or Loss From Condemnations If your property was condemned or disposed of under the threat of condemnation, figure your gain or loss by comparing the adjusted basis of your condemned property with your net condemnation award. Irs tax form 1040 ez If your net condemnation award is more than the adjusted basis of the condemned property, you have a gain. Irs tax form 1040 ez You can postpone reporting gain from a condemnation if you buy replacement property. Irs tax form 1040 ez If only part of your property is condemned, you can treat the cost of restoring the remaining part to its former usefulness as the cost of replacement property. Irs tax form 1040 ez See Postponement of Gain, later. Irs tax form 1040 ez If your net condemnation award is less than your adjusted basis, you have a loss. Irs tax form 1040 ez If your loss is from property you held for personal use, you cannot deduct it. Irs tax form 1040 ez You must report any deductible loss in the tax year it happened. Irs tax form 1040 ez You can use Part 2 of Table 1-3 to figure your gain or loss from a condemnation award. Irs tax form 1040 ez Main home condemned. Irs tax form 1040 ez   If you have a gain because your main home is condemned, you generally can exclude the gain from your income as if you had sold or exchanged your home. Irs tax form 1040 ez You may be able to exclude up to $250,000 of the gain (up to $500,000 if married filing jointly). Irs tax form 1040 ez For information on this exclusion, see Publication 523. Irs tax form 1040 ez If your gain is more than you can exclude but you buy replacement property, you may be able to postpone reporting the rest of the gain. Irs tax form 1040 ez See Postponement of Gain, later. Irs tax form 1040 ez Table 1-3. Irs tax form 1040 ez Worksheet for Condemnations Part 1. Irs tax form 1040 ez Gain from severance damages. Irs tax form 1040 ez  If you did not receive severance damages, skip Part 1 and go to Part 2. Irs tax form 1040 ez   1. Irs tax form 1040 ez Enter gross severance damages received   2. Irs tax form 1040 ez Enter your expenses in getting severance damages   3. Irs tax form 1040 ez Subtract line 2 from line 1. Irs tax form 1040 ez If less than zero, enter -0-   4. Irs tax form 1040 ez Enter any special assessment on remaining property taken out of your award   5. Irs tax form 1040 ez Net severance damages. Irs tax form 1040 ez Subtract line 4 from line 3. Irs tax form 1040 ez If less than zero, enter -0-   6. Irs tax form 1040 ez Enter the adjusted basis of the remaining property   7. Irs tax form 1040 ez Gain from severance damages. Irs tax form 1040 ez Subtract line 6 from line 5. Irs tax form 1040 ez If less than zero, enter -0-   8. Irs tax form 1040 ez Refigured adjusted basis of the remaining property. Irs tax form 1040 ez Subtract line 5 from line 6. Irs tax form 1040 ez If less than zero, enter -0-   Part 2. Irs tax form 1040 ez Gain or loss from condemnation award. Irs tax form 1040 ez   9. Irs tax form 1040 ez Enter the gross condemnation award received   10. Irs tax form 1040 ez Enter your expenses in getting the condemnation award   11. Irs tax form 1040 ez If you completed Part 1, and line 4 is more than line 3, subtract line 3 from line 4. Irs tax form 1040 ez If you did not complete Part 1, but a special assessment was taken out of your award, enter that amount. Irs tax form 1040 ez Otherwise, enter -0-   12. Irs tax form 1040 ez Add lines 10 and 11   13. Irs tax form 1040 ez Net condemnation award. Irs tax form 1040 ez Subtract line 12 from line 9   14. Irs tax form 1040 ez Enter the adjusted basis of the condemned property   15. Irs tax form 1040 ez Gain from condemnation award. Irs tax form 1040 ez If line 14 is more than line 13, enter -0-. Irs tax form 1040 ez Otherwise, subtract line 14 from  line 13 and skip line 16   16. Irs tax form 1040 ez Loss from condemnation award. Irs tax form 1040 ez Subtract line 13 from line 14     (Note: You cannot deduct the amount on line 16 if the condemned property was held for personal use. Irs tax form 1040 ez )   Part 3. Irs tax form 1040 ez Postponed gain from condemnation. Irs tax form 1040 ez  (Complete only if line 7 or line 15 is more than zero and you bought qualifying replacement property or made expenditures to restore the usefulness of your remaining property. Irs tax form 1040 ez )   17. Irs tax form 1040 ez If you completed Part 1, and line 7 is more than zero, enter the amount from line 5. Irs tax form 1040 ez Otherwise, enter -0-   18. Irs tax form 1040 ez If line 15 is more than zero, enter the amount from line 13. Irs tax form 1040 ez Otherwise, enter -0-   19. Irs tax form 1040 ez Add lines 17 and 18. Irs tax form 1040 ez If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result   20. Irs tax form 1040 ez Enter the total cost of replacement property and any expenses to restore the usefulness of your remaining property   21. Irs tax form 1040 ez Subtract line 20 from line 19. Irs tax form 1040 ez If less than zero, enter -0-   22. Irs tax form 1040 ez If you completed Part 1, add lines 7 and 15. Irs tax form 1040 ez Otherwise, enter the amount from line 15. Irs tax form 1040 ez If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result   23. Irs tax form 1040 ez Recognized gain. Irs tax form 1040 ez Enter the smaller of line 21 or line 22. Irs tax form 1040 ez   24. Irs tax form 1040 ez Postponed gain. Irs tax form 1040 ez Subtract line 23 from line 22. Irs tax form 1040 ez If less than zero, enter -0-   Condemnation award. Irs tax form 1040 ez   A condemnation award is the money you are paid or the value of other property you receive for your condemned property. Irs tax form 1040 ez The award is also the amount you are paid for the sale of your property under threat of condemnation. Irs tax form 1040 ez Payment of your debts. Irs tax form 1040 ez   Amounts taken out of the award to pay your debts are considered paid to you. Irs tax form 1040 ez Amounts the government pays directly to the holder of a mortgage or lien against your property are part of your award, even if the debt attaches to the property and is not your personal liability. Irs tax form 1040 ez Example. Irs tax form 1040 ez The state condemned your property for public use. Irs tax form 1040 ez The award was set at $200,000. Irs tax form 1040 ez The state paid you only $148,000 because it paid $50,000 to your mortgage holder and $2,000 accrued real estate taxes. Irs tax form 1040 ez You are considered to have received the entire $200,000 as a condemnation award. Irs tax form 1040 ez Interest on award. Irs tax form 1040 ez   If the condemning authority pays you interest for its delay in paying your award, it is not part of the condemnation award. Irs tax form 1040 ez You must report the interest separately as ordinary income. Irs tax form 1040 ez Payments to relocate. Irs tax form 1040 ez   Payments you receive to relocate and replace housing because you have been displaced from your home, business, or farm as a result of federal or federally assisted programs are not part of the condemnation award. Irs tax form 1040 ez Do not include them in your income. Irs tax form 1040 ez Replacement housing payments used to buy new property are included in the property's basis as part of your cost. Irs tax form 1040 ez Net condemnation award. Irs tax form 1040 ez   A net condemnation award is the total award you received, or are considered to have received, for the condemned property minus your expenses of obtaining the award. Irs tax form 1040 ez If only a part of your property was condemned, you also must reduce the award by any special assessment levied against the part of the property you retain. Irs tax form 1040 ez This is discussed later under Special assessment taken out of award. Irs tax form 1040 ez Severance damages. Irs tax form 1040 ez    Severance damages are not part of the award paid for the property condemned. Irs tax form 1040 ez They are paid to you if part of your property is condemned and the value of the part you keep is decreased because of the condemnation. Irs tax form 1040 ez   For example, you may receive severance damages if your property is subject to flooding because you sell flowage easement rights (the condemned property) under threat of condemnation. Irs tax form 1040 ez Severance damages also may be given to you if, because part of your property is condemned for a highway, you must replace fences, dig new wells or ditches, or plant trees to restore your remaining property to the same usefulness it had before the condemnation. Irs tax form 1040 ez   The contracting parties should agree on the specific amount of severance damages in writing. Irs tax form 1040 ez If this is not done, all proceeds from the condemning authority are considered awarded for your condemned property. Irs tax form 1040 ez   You cannot make a completely new allocation of the total award after the transaction is completed. Irs tax form 1040 ez However, you can show how much of the award both parties intended for severance damages. Irs tax form 1040 ez The severance damages part of the award is determined from all the facts and circumstances. Irs tax form 1040 ez Example. Irs tax form 1040 ez You sold part of your property to the state under threat of condemnation. Irs tax form 1040 ez The contract you and the condemning authority signed showed only the total purchase price. Irs tax form 1040 ez It did not specify a fixed sum for severance damages. Irs tax form 1040 ez However, at settlement, the condemning authority gave you closing papers showing clearly the part of the purchase price that was for severance damages. Irs tax form 1040 ez You may treat this part as severance damages. Irs tax form 1040 ez Treatment of severance damages. Irs tax form 1040 ez   Your net severance damages are treated as the amount realized from an involuntary conversion of the remaining part of your property. Irs tax form 1040 ez Use them to reduce the basis of the remaining property. Irs tax form 1040 ez If the amount of severance damages is based on damage to a specific part of the property you kept, reduce the basis of only that part by the net severance damages. Irs tax form 1040 ez   If your net severance damages are more than the basis of your retained property, you have a gain. Irs tax form 1040 ez You may be able to postpone reporting the gain. Irs tax form 1040 ez See Postponement of Gain, later. Irs tax form 1040 ez    You can use Part 1 of Table 1-3 to figure any gain from severance damages and to refigure the adjusted basis of the remaining part of your property. Irs tax form 1040 ez Net severance damages. Irs tax form 1040 ez   To figure your net severance damages, you first must reduce your severance damages by your expenses in obtaining the damages. Irs tax form 1040 ez You then reduce them by any special assessment (described later) levied against the remaining part of the property and retained out of the award by the condemning authority. Irs tax form 1040 ez The balance is your net severance damages. Irs tax form 1040 ez Expenses of obtaining a condemnation award and severance damages. Irs tax form 1040 ez   Subtract the expenses of obtaining a condemnation award, such as legal, engineering, and appraisal fees, from the total award. Irs tax form 1040 ez Also, subtract the expenses of obtaining severance damages, which may include similar expenses, from the severance damages paid to you. Irs tax form 1040 ez If you cannot determine which part of your expenses is for each part of the condemnation proceeds, you must make a proportionate allocation. Irs tax form 1040 ez Example. Irs tax form 1040 ez You receive a condemnation award and severance damages. Irs tax form 1040 ez One-fourth of the total was designated as severance damages in your agreement with the condemning authority. Irs tax form 1040 ez You had legal expenses for the entire condemnation proceeding. Irs tax form 1040 ez You cannot determine how much of your legal expenses is for each part of the condemnation proceeds. Irs tax form 1040 ez You must allocate one-fourth of your legal expenses to the severance damages and the other three-fourths to the condemnation award. Irs tax form 1040 ez Special assessment retained out of award. Irs tax form 1040 ez   When only part of your property is condemned, a special assessment levied against the remaining property may be retained by the governing body out of your condemnation award. Irs tax form 1040 ez An assessment may be levied if the remaining part of your property benefited by the improvement resulting from the condemnation. Irs tax form 1040 ez Examples of improvements that may cause a special assessment are widening a street and installing a sewer. Irs tax form 1040 ez   To figure your net condemnation award, you must reduce the amount of the award by the assessment retained out of the award. Irs tax form 1040 ez Example. Irs tax form 1040 ez To widen the street in front of your home, the city condemned a 25-foot deep strip of your land. Irs tax form 1040 ez You were awarded $5,000 for this and spent $300 to get the award. Irs tax form 1040 ez Before paying the award, the city levied a special assessment of $700 for the street improvement against your remaining property. Irs tax form 1040 ez The city then paid you only $4,300. Irs tax form 1040 ez Your net award is $4,000 ($5,000 total award minus $300 expenses in obtaining the award and $700 for the special assessment retained). Irs tax form 1040 ez If the $700 special assessment was not retained out of the award and you were paid $5,000, your net award would be $4,700 ($5,000 − $300). Irs tax form 1040 ez The net award would not change, even if you later paid the assessment from the amount you received. Irs tax form 1040 ez Severance damages received. Irs tax form 1040 ez   If severance damages are included in the condemnation proceeds, the special assessment retained out of the severance damages is first used to reduce the severance damages. Irs tax form 1040 ez Any balance of the special assessment is used to reduce the condemnation award. Irs tax form 1040 ez Example. Irs tax form 1040 ez You were awarded $4,000 for the condemnation of your property and $1,000 for severance damages. Irs tax form 1040 ez You spent $300 to obtain the severance damages. Irs tax form 1040 ez A special assessment of $800 was retained out of the award. Irs tax form 1040 ez The $1,000 severance damages are reduced to zero by first subtracting the $300 expenses and then $700 of the special assessment. Irs tax form 1040 ez Your $4,000 condemnation award is reduced by the $100 balance of the special assessment, leaving a $3,900 net condemnation award. Irs tax form 1040 ez Part business or rental. Irs tax form 1040 ez   If you used part of your condemned property as your home and part as business or rental property, treat each part as a separate property. Irs tax form 1040 ez Figure your gain or loss separately because gain or loss on each part may be treated differently. Irs tax form 1040 ez   Some examples of this type of property are a building in which you live and operate a grocery, and a building in which you live on the first floor and rent out the second floor. Irs tax form 1040 ez Example. Irs tax form 1040 ez You sold your building for $24,000 under threat of condemnation to a public utility company that had the authority to condemn. Irs tax form 1040 ez You rented half the building and lived in the other half. Irs tax form 1040 ez You paid $25,000 for the building and spent an additional $1,000 for a new roof. Irs tax form 1040 ez You claimed allowable depreciation of $4,600 on the rental half. Irs tax form 1040 ez You spent $200 in legal expenses to obtain the condemnation award. Irs tax form 1040 ez Figure your gain or loss as follows. Irs tax form 1040 ez     Resi- dential Part Busi- ness Part 1) Condemnation award received $12,000 $12,000 2) Minus: Legal expenses, $200 100 100 3) Net condemnation award $11,900 $11,900 4) Adjusted basis:       ½ of original cost, $25,000 $12,500 $12,500   Plus: ½ of cost of roof, $1,000 500 500   Total $13,000 $13,000 5) Minus: Depreciation   4,600 6) Adjusted basis, business part   $8,400 7) (Loss) on residential property ($1,100)   8) Gain on business property $3,500 The loss on the residential part of the property is not deductible. Irs tax form 1040 ez Postponement of Gain Do not report the gain on condemned property if you receive only property that is similar or related in service or use to the condemned property. Irs tax form 1040 ez Your basis for the new property is the same as your basis for the old. Irs tax form 1040 ez Money or unlike property received. Irs tax form 1040 ez   You ordinarily must report the gain if you receive money or unlike property. Irs tax form 1040 ez You can elect to postpone reporting the gain if you buy property that is similar or related in service or use to the condemned property within the replacement period, discussed later. Irs tax form 1040 ez You also can elect to postpone reporting the gain if you buy a controlling interest (at least 80%) in a corporation owning property that is similar or related in service or use to the condemned property. Irs tax form 1040 ez See Controlling interest in a corporation, later. Irs tax form 1040 ez   To postpone reporting all the gain, you must buy replacement property costing at least as much as the amount realized for the condemned property. Irs tax form 1040 ez If the cost of the replacement property is less than the amount realized, you must report the gain up to the unspent part of the amount realized. Irs tax form 1040 ez   The basis of the replacement property is its cost, reduced by the postponed gain. Irs tax form 1040 ez Also, if your replacement property is stock in a corporation that owns property similar or related in service or use, the corporation generally will reduce its basis in its assets by the amount by which you reduce your basis in the stock. Irs tax form 1040 ez See Controlling interest in a corporation, later. Irs tax form 1040 ez You can use Part 3 of Table 1-3 to figure the gain you must report and your postponed gain. Irs tax form 1040 ez Postponing gain on severance damages. Irs tax form 1040 ez   If you received severance damages for part of your property because another part was condemned and you buy replacement property, you can elect to postpone reporting gain. Irs tax form 1040 ez See Treatment of severance damages, earlier. Irs tax form 1040 ez You can postpone reporting all your gain if the replacement property costs at least as much as your net severance damages plus your net condemnation award (if resulting in gain). Irs tax form 1040 ez   You also can make this election if you spend the severance damages, together with other money you received for the condemned property (if resulting in gain), to acquire nearby property that will allow you to continue your business. Irs tax form 1040 ez If suitable nearby property is not available and you are forced to sell the remaining property and relocate in order to continue your business, see Postponing gain on the sale of related property, next. Irs tax form 1040 ez   If you restore the remaining property to its former usefulness, you can treat the cost of restoring it as the cost of replacement property. Irs tax form 1040 ez Postponing gain on the sale of related property. Irs tax form 1040 ez   If you sell property that is related to the condemned property and then buy replacement property, you can elect to postpone reporting gain on the sale. Irs tax form 1040 ez You must meet the requirements explained earlier under Related property voluntarily sold. Irs tax form 1040 ez You can postpone reporting all your gain if the replacement property costs at least as much as the amount realized from the sale plus your net condemnation award (if resulting in gain) plus your net severance damages, if any (if resulting in gain). Irs tax form 1040 ez Buying replacement property from a related person. Irs tax form 1040 ez   Certain taxpayers cannot postpone reporting gain from a condemnation if they buy the replacement property from a related person. Irs tax form 1040 ez For information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2. Irs tax form 1040 ez   This rule applies to the following taxpayers. Irs tax form 1040 ez C corporations. Irs tax form 1040 ez Partnerships in which more than 50% of the capital or profits interest is owned by  C corporations. Irs tax form 1040 ez All others (including individuals, partnerships (other than those in (2)), and S corporations) if the total realized gain for the tax year on all involuntarily converted properties on which there is realized gain of more than $100,000. Irs tax form 1040 ez   For taxpayers described in (3) above, gains cannot be offset with any losses when determining whether the total gain is more than $100,000. Irs tax form 1040 ez If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. Irs tax form 1040 ez If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. Irs tax form 1040 ez Exception. Irs tax form 1040 ez   This rule does not apply if the related person acquired the property from an unrelated person within the replacement period. Irs tax form 1040 ez Advance payment. Irs tax form 1040 ez   If you pay a contractor in advance to build your replacement property, you have not bought replacement property unless it is finished before the end of the replacement period (discussed later). Irs tax form 1040 ez Replacement property. Irs tax form 1040 ez   To postpone reporting gain, you must buy replacement property for the specific purpose of replacing your condemned property. Irs tax form 1040 ez You do not have to use the actual funds from the condemnation award to acquire the replacement property. Irs tax form 1040 ez Property you acquire by gift or inheritance does not qualify as replacement property. Irs tax form 1040 ez Similar or related in service or use. Irs tax form 1040 ez   Your replacement property must be similar or related in service or use to the property it replaces. Irs tax form 1040 ez   If the condemned property is real property you held for productive use in your trade or business or for investment (other than property held mainly for sale), like-kind property to be held either for productive use in trade or business or for investment will be treated as property similar or related in service or use. Irs tax form 1040 ez For a discussion of like-kind property, see Like-Kind Property under Like-Kind Exchanges, later. Irs tax form 1040 ez Owner-user. Irs tax form 1040 ez   If you are an owner-user, similar or related in service or use means that replacement property must function in the same way as the property it replaces. Irs tax form 1040 ez Example. Irs tax form 1040 ez Your home was condemned and you invested the proceeds from the condemnation in a grocery store. Irs tax form 1040 ez Your replacement property is not similar or related in service or use to the condemned property. Irs tax form 1040 ez To be similar or related in service or use, your replacement property must also be used by you as your home. Irs tax form 1040 ez Owner-investor. Irs tax form 1040 ez   If you are an owner-investor, similar or related in service or use means that any replacement property must have the same relationship of services or uses to you as the property it replaces. Irs tax form 1040 ez You decide this by determining all the following information. Irs tax form 1040 ez Whether the properties are of similar service to you. Irs tax form 1040 ez The nature of the business risks connected with the properties. Irs tax form 1040 ez What the properties demand of you in the way of management, service, and relations to your tenants. Irs tax form 1040 ez Example. Irs tax form 1040 ez You owned land and a building you rented to a manufacturing company. Irs tax form 1040 ez The building was condemned. Irs tax form 1040 ez During the replacement period, you had a new building built on other land you already owned. Irs tax form 1040 ez You rented out the new building for use as a wholesale grocery warehouse. Irs tax form 1040 ez The replacement property is also rental property, so the two properties are considered similar or related in service or use if there is a similarity in all the following areas. Irs tax form 1040 ez Your management activities. Irs tax form 1040 ez The amount and kind of services you provide to your tenants. Irs tax form 1040 ez The nature of your business risks connected with the properties. Irs tax form 1040 ez Leasehold replaced with fee simple property. Irs tax form 1040 ez   Fee simple property you will use in your trade or business or for investment can qualify as replacement property that is similar or related in service or use to a condemned leasehold if you use it in the same business and for the identical purpose as the condemned leasehold. Irs tax form 1040 ez   A fee simple property interest generally is a property interest that entitles the owner to the entire property with unconditional power to dispose of it during his or her lifetime. Irs tax form 1040 ez A leasehold is property held under a lease, usually for a term of years. Irs tax form 1040 ez Outdoor advertising display replaced with real property. Irs tax form 1040 ez   You can elect to treat an outdoor advertising display as real property. Irs tax form 1040 ez If you make this election and you replace the display with real property in which you hold a different kind of interest, your replacement property can qualify as like-kind property. Irs tax form 1040 ez For example, real property bought to replace a destroyed billboard and leased property on which the billboard was located qualify as property of a like-kind. Irs tax form 1040 ez   You can make this election only if you did not claim a section 179 deduction for the display. Irs tax form 1040 ez You cannot cancel this election unless you get the consent of the IRS. Irs tax form 1040 ez   An outdoor advertising display is a sign or device rigidly assembled and permanently attached to the ground, a building, or any other permanent structure used to display a commercial or other advertisement to the public. Irs tax form 1040 ez Substituting replacement property. Irs tax form 1040 ez   Once you designate certain property as replacement property on your tax return, you cannot substitute other qualified property. Irs tax form 1040 ez But, if your previously designated replacement property does not qualify, you can substitute qualified property if you acquire it within the replacement period. Irs tax form 1040 ez Controlling interest in a corporation. Irs tax form 1040 ez   You can replace property by acquiring a controlling interest in a corporation that owns property similar or related in service or use to your condemned property. Irs tax form 1040 ez You have controlling interest if you own stock having at least 80% of the combined voting power of all classes of stock entitled to vote and at least 80% of the total number of shares of all other classes of stock of the corporation. Irs tax form 1040 ez Basis adjustment to corporation's property. Irs tax form 1040 ez   The basis of property held by the corporation at the time you acquired control must be reduced by your postponed gain, if any. Irs tax form 1040 ez You are not required to reduce the adjusted basis of the corporation's properties below your adjusted basis in the corporation's stock (determined after reduction by your postponed gain). Irs tax form 1040 ez   Allocate this reduction to the following classes of property in the order shown below. Irs tax form 1040 ez Property that is similar or related in service or use to the condemned property. Irs tax form 1040 ez Depreciable property not reduced in (1). Irs tax form 1040 ez All other property. Irs tax form 1040 ez If two or more properties fall in the same class, allocate the reduction to each property in proportion to the adjusted basis of all the properties in that class. Irs tax form 1040 ez The reduced basis of any single property cannot be less than zero. Irs tax form 1040 ez Main home replaced. Irs tax form 1040 ez   If your gain from a condemnation of your main home is more than you can exclude from your income (see Main home condemned under Gain or Loss From Condemnations, earlier), you can postpone reporting the rest of the gain by buying replacement property that is similar or related in service or use. Irs tax form 1040 ez The replacement property must cost at least as much as the amount realized from the condemnation minus the excluded gain. Irs tax form 1040 ez   You must reduce the basis of your replacement property by the postponed gain. Irs tax form 1040 ez Also, if you postpone reporting any part of your gain under these rules, you are treated as having owned and used the replacement property as your main home for the period you owned and used the condemned property as your main home. Irs tax form 1040 ez Example. Irs tax form 1040 ez City authorities condemned your home that you had used as a personal residence for 5 years prior to the condemnation. Irs tax form 1040 ez The city paid you a condemnation award of $400,000. Irs tax form 1040 ez Your adjusted basis in the property was $80,000. Irs tax form 1040 ez You realize a gain of $320,000 ($400,000 − $80,000). Irs tax form 1040 ez You purchased a new home for $100,000. Irs tax form 1040 ez You can exclude $250,000 of the realized gain from your gross income. Irs tax form 1040 ez The amount realized is then treated as being $150,000 ($400,000 − $250,000) and the gain realized is $70,000 ($150,000 amount realized − $80,000 adjusted basis). Irs tax form 1040 ez You must recognize $50,000 of the gain ($150,000 amount realized − $100,000 cost of new home). Irs tax form 1040 ez The remaining $20,000 of realized gain is postponed. Irs tax form 1040 ez Your basis in the new home is $80,000 ($100,000 cost − $20,000 gain postponed). Irs tax form 1040 ez Replacement period. Irs tax form 1040 ez   To postpone reporting your gain from a condemnation, you must buy replacement property within a certain period of time. Irs tax form 1040 ez This is the replacement period. Irs tax form 1040 ez   The replacement period for a condemnation begins on the earlier of the following dates. Irs tax form 1040 ez The date on which you disposed of the condemned property. Irs tax form 1040 ez The date on which the threat of condemnation began. Irs tax form 1040 ez   The replacement period generally ends 2 years after the end of the first tax year in which any part of the gain on the condemnation is realized. Irs tax form 1040 ez However, see the exceptions below. Irs tax form 1040 ez Three-year replacement period for certain property. Irs tax form 1040 ez   If real property held for use in a trade or business or for investment (not including property held primarily for sale) is condemned, the replacement period ends 3 years after the end of the first tax year in which any part of the gain on the condemnation is realized. Irs tax form 1040 ez However, this 3-year replacement period cannot be used if you replace the condemned property by acquiring control of a corporation owning property that is similar or related in service or use. Irs tax form 1040 ez Five-year replacement period for certain property. Irs tax form 1040 ez   The replacement period ends 5 years after the end of the first tax year in which any part of the gain is realized on the compulsory or involuntary conversion of the following qualified property. Irs tax form 1040 ez Property in any Midwestern disaster area compulsorily or involuntarily converted on or after the applicable disaster date as a result of severe storms, tornadoes, or flooding, but only if substantially all of the use of the replacement property is in a Midwestern disaster area. Irs tax form 1040 ez Property in the Kansas disaster area compulsorily or involuntarily converted after May 3, 2007, but only if substantially all of the use of the replacement property is in the Kansas disaster area. Irs tax form 1040 ez Property in the Hurricane Katrina disaster area compulsorily or involuntarily converted after August 24, 2005, as a result of Hurricane Katrina, but only if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. Irs tax form 1040 ez Extended replacement period for taxpayers affected by other federally declared disasters. Irs tax form 1040 ez    If you are affected by a federally declared disaster, the IRS may grant disaster relief by extending the periods to perform certain tax-related acts for 2013, including the replacement period, by up to one year. Irs tax form 1040 ez For more information visit www. Irs tax form 1040 ez irs. Irs tax form 1040 ez gov/uac/Tax-Relief-in-Disaster-Situations. Irs tax form 1040 ez Weather-related sales of livestock in an area eligible for federal assistance. Irs tax form 1040 ez   Generally, if the sale or exchange of livestock is due to drought, flood, or other weather-related conditions in an area eligible for federal assistance, the replacement period ends 4 years after the close of the first tax year in which you realize any part of your gain from the sale or exchange. Irs tax form 1040 ez    If the weather-related conditions continue for longer than 3 years, the replacement period may be extended on a regional basis until the end of your first drought-free year for the applicable region. Irs tax form 1040 ez See Notice 2006-82. Irs tax form 1040 ez You can find Notice 2006-82 on page 529 of Internal Revenue Bulletin 2006-39 at www. Irs tax form 1040 ez irs. Irs tax form 1040 ez gov/irb/2006-39_IRB/ar13. Irs tax form 1040 ez html. Irs tax form 1040 ez    Each year, the IRS publishes a list of counties, districts, cities, or parishes for which exceptional, extreme, or severe drought was reported during the preceding 12 months. Irs tax form 1040 ez If you qualified for a 4-year replacement period for livestock sold or exchanged on account of drought and your replacement period is scheduled to expire at the end of 2013 (or at the end of the tax year that includes August 31, 2013), see Notice 2013-62. Irs tax form 1040 ez You can find Notice 2013-62 on page 466 of Internal Revenue Bulletin 2013-45 at www. Irs tax form 1040 ez irs. Irs tax form 1040 ez gov/irb/2013-45_IRB/ar04. Irs tax form 1040 ez html. Irs tax form 1040 ez The replacement period will be extended under Notice 2006-82 if the applicable region is on the list included in Notice 2013-62. Irs tax form 1040 ez Determining when gain is realized. Irs tax form 1040 ez   If you are a cash basis taxpayer, you realize gain when you receive payments that are more than your basis in the property. Irs tax form 1040 ez If the condemning authority makes deposits with the court, you realize gain when you withdraw (or have the right to withdraw) amounts that are more than your basis. Irs tax form 1040 ez   This applies even if the amounts received are only partial or advance payments and the full award has not yet been determined. Irs tax form 1040 ez A replacement will be too late if you wait for a final determination that does not take place in the applicable replacement period after you first realize gain. Irs tax form 1040 ez   For accrual basis taxpayers, gain (if any) accrues in the earlier year when either of the following occurs. Irs tax form 1040 ez All events have occurred that fix the right to the condemnation award and the amount can be determined with reasonable accuracy. Irs tax form 1040 ez All or part of the award is actually or constructively received. Irs tax form 1040 ez For example, if you have an absolute right to a part of a condemnation award when it is deposited with the court, the amount deposited accrues in the year the deposit is made even though the full amount of the award is still contested. Irs tax form 1040 ez Replacement property bought before the condemnation. Irs tax form 1040 ez   If you buy your replacement property after there is a threat of condemnation but before the actual condemnation and you still hold the replacement property at the time of the condemnation, you have bought your replacement property within the replacement period. Irs tax form 1040 ez Property you acquire before there is a threat of condemnation does not qualify as replacement property acquired within the replacement period. Irs tax form 1040 ez Example. Irs tax form 1040 ez On April 3, 2012, city authorities notified you that your property would be condemned. Irs tax form 1040 ez On June 5, 2012, you acquired property to replace the property to be condemned. Irs tax form 1040 ez You still had the new property when the city took possession of your old property on September 4, 2013. Irs tax form 1040 ez You have made a replacement within the replacement period. Irs tax form 1040 ez Extension. Irs tax form 1040 ez   You can request an extension of the replacement period from the IRS director for your area. Irs tax form 1040 ez You should apply before the end of the replacement period. Irs tax form 1040 ez Your request should explain in detail why you need an extension. Irs tax form 1040 ez The IRS will consider a request filed within a reasonable time after the replacement period if you can show reasonable cause for the delay. Irs tax form 1040 ez An extension of the replacement period will be granted if you can show reasonable cause for not making the replacement within the regular period. Irs tax form 1040 ez   Ordinarily, requests for extensions are granted near the end of the replacement period or the extended replacement period. Irs tax form 1040 ez Extensions are usually limited to a period of 1 year or less. Irs tax form 1040 ez The high market value or scarcity of replacement property is not a sufficient reason for granting an extension. Irs tax form 1040 ez If your replacement property is being built and you clearly show that the replacement or restoration cannot be made within the replacement peri
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The Irs Tax Form 1040 Ez

Irs tax form 1040 ez Internal Revenue Bulletin:  2011-12  March 21, 2011  Rev. Irs tax form 1040 ez Proc. Irs tax form 1040 ez 2011-21 Table of Contents SECTION 1. Irs tax form 1040 ez PURPOSE SECTION 2. Irs tax form 1040 ez BACKGROUND SECTION 3. Irs tax form 1040 ez SCOPE SECTION 4. Irs tax form 1040 ez APPLICATION SECTION 5. Irs tax form 1040 ez EFFECTIVE DATE SECTION 6. Irs tax form 1040 ez EFFECT ON OTHER DOCUMENTS SECTION 7. Irs tax form 1040 ez DRAFTING INFORMATION SECTION 1. Irs tax form 1040 ez PURPOSE This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2011, including separate tables of limitations on depreciation deductions for trucks and vans; (2) the amounts that must be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2011, including a separate table of inclusion amounts for lessees of trucks and vans; and (3) revised tables of depreciation limitations and lessee inclusion amounts for passenger automobiles that were first placed in service or first leased by the taxpayer, respectively, during 2010 and to which the 50 percent additional first year depreciation deduction under § 168(k)(1)(A) of the Internal Revenue Code or the 100 percent additional first year depreciation deduction under § 168(k)(5) applies. Irs tax form 1040 ez The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7). Irs tax form 1040 ez SECTION 2. Irs tax form 1040 ez BACKGROUND . Irs tax form 1040 ez 01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. Irs tax form 1040 ez For passenger automobiles placed in service after 1988, § 280F(d)(7) requires the Internal Revenue Service to increase the amounts allowable as depreciation deductions by a price inflation adjustment amount. Irs tax form 1040 ez The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. Irs tax form 1040 ez This change reflects the higher rate of price inflation for trucks and vans since 1988. Irs tax form 1040 ez . Irs tax form 1040 ez 02 Section 2022(a) of the Small Business Jobs Act of 2010, Pub. Irs tax form 1040 ez L. Irs tax form 1040 ez No. Irs tax form 1040 ez 111-240, 124 Stat. Irs tax form 1040 ez 2504 (September 27, 2010), extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property (as defined in § 168(k)(2)) acquired by the taxpayer after December 31, 2007, and before January 1, 2011, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2011. Irs tax form 1040 ez Section 401(a) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. Irs tax form 1040 ez L. Irs tax form 1040 ez No. Irs tax form 1040 ez 111-312, 124 Stat. Irs tax form 1040 ez 3296 (Dec. Irs tax form 1040 ez 17, 2010) (the “Act”) further extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property acquired by the taxpayer after December 31, 2007, and before January 1, 2013, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2013. Irs tax form 1040 ez Section 401(b) of the Act further amended § 168(k) by adding § 168(k)(5). Irs tax form 1040 ez It allows a 100 percent additional first year depreciation deduction for qualified property acquired by a taxpayer after September 8, 2010, and before January 1, 2012, if the taxpayer places the property in service generally before January 1, 2012. Irs tax form 1040 ez Section 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A)(i) by $8,000 for passenger automobiles to which the additional first year depreciation deduction under § 168(k) (hereinafter, referred to as “§ 168(k) additional first year depreciation deduction”) applies. Irs tax form 1040 ez . Irs tax form 1040 ez 03 Section 168(k)(2)(D)(i) provides that the § 168(k) additional first year depreciation deduction does not apply to any property required to be depreciated under the alternative depreciation system of § 168(g), including property described in § 280F(b)(1). Irs tax form 1040 ez Section 168(k)(2)(D)(iii) permits a taxpayer to elect out of the § 168(k) additional first year depreciation deduction for any class of property. Irs tax form 1040 ez Section 168(k)(4), as amended by the Act, permits a corporation to elect to increase the alternative minimum tax (“AMT”) credit limitation under § 53(c), instead of claiming the § 168(k) additional first year depreciation deduction for all eligible qualified property placed in service after December 31, 2010, that is round 2 extension property (as defined in § 168(k)(4)(I)(iv). Irs tax form 1040 ez Accordingly, this revenue procedure provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction applies. Irs tax form 1040 ez This revenue procedure also provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction does not apply, either because taxpayer (1) purchased the passenger automobile used; (2) did not use the passenger automobile during 2011 more than 50 percent for business purposes; (3) elected out of the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(2)(D)(iii); or (4) elected to increase the § 53 AMT credit limitation in lieu of claiming § 168(k) additional first year depreciation. Irs tax form 1040 ez . Irs tax form 1040 ez 04 Section 280F(c) requires a reduction in the deduction allowed to the lessee of a leased passenger automobile. Irs tax form 1040 ez The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. Irs tax form 1040 ez Under § 1. Irs tax form 1040 ez 280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an amount determined by applying a formula to the amount obtained from a table. Irs tax form 1040 ez One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. Irs tax form 1040 ez Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased. Irs tax form 1040 ez SECTION 3. Irs tax form 1040 ez SCOPE . Irs tax form 1040 ez 01 The limitations on depreciation deductions in section 4. Irs tax form 1040 ez 01(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2011, and continue to apply for each taxable year that the passenger automobile remains in service. Irs tax form 1040 ez . Irs tax form 1040 ez 02 The tables in section 4. Irs tax form 1040 ez 02 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2011. Irs tax form 1040 ez Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. Irs tax form 1040 ez See Rev. Irs tax form 1040 ez Proc. Irs tax form 1040 ez 2006-18, 2006-1 C. Irs tax form 1040 ez B. Irs tax form 1040 ez 645, for passenger automobiles first leased during calendar year 2006; Rev. Irs tax form 1040 ez Proc. Irs tax form 1040 ez 2007-30, 2007-1 C. Irs tax form 1040 ez B. Irs tax form 1040 ez 1104, for passenger automobiles first leased during calendar year 2007; Rev. Irs tax form 1040 ez Proc. Irs tax form 1040 ez 2008-22, 2008-1 C. Irs tax form 1040 ez B. Irs tax form 1040 ez 658, for passenger automobiles first leased during calendar year 2008; Rev. Irs tax form 1040 ez Proc. Irs tax form 1040 ez 2009-24, 2009-1 C. Irs tax form 1040 ez B. Irs tax form 1040 ez 885, for passenger automobiles first leased during calendar year 2009; and Rev. Irs tax form 1040 ez Proc. Irs tax form 1040 ez 2010-18, 2010-1 C. Irs tax form 1040 ez B. Irs tax form 1040 ez 427, as amplified and modified by section 4. Irs tax form 1040 ez 03 of this revenue procedure, for passenger automobiles first leased during calendar year 2010. Irs tax form 1040 ez SECTION 4. Irs tax form 1040 ez APPLICATION . Irs tax form 1040 ez 01 Limitations on Depreciation Deductions for Certain Automobiles. Irs tax form 1040 ez (1) Amount of the inflation adjustment. Irs tax form 1040 ez (a) Passenger automobiles (other than trucks or vans). Irs tax form 1040 ez Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. Irs tax form 1040 ez Section 280F(d)(7)(B)(ii) defines the term “CPI automobile component” as the automobile component of the Consumer Price Index for all Urban Consumers published by the Department of Labor. Irs tax form 1040 ez The new car component of the CPI was 115. Irs tax form 1040 ez 2 for October 1987 and 137. Irs tax form 1040 ez 880 for October 2010. Irs tax form 1040 ez The October 2010 index exceeded the October 1987 index by 22. Irs tax form 1040 ez 680. Irs tax form 1040 ez Therefore, the automobile price inflation adjustment for 2011 for passenger automobiles (other than trucks and vans) is 19. Irs tax form 1040 ez 69 percent (22. Irs tax form 1040 ez 680/115. Irs tax form 1040 ez 2 x 100%). Irs tax form 1040 ez The dollar limitations in § 280F(a) are multiplied by a factor of 0. Irs tax form 1040 ez 1969, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2011. Irs tax form 1040 ez This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2011. Irs tax form 1040 ez (b) Trucks and vans. Irs tax form 1040 ez To determine the dollar limitations for trucks and vans first placed in service during calendar year 2011, the Service uses the new truck component of the CPI instead of the new car component. Irs tax form 1040 ez The new truck component of the CPI was 112. Irs tax form 1040 ez 4 for October 1987 and 142. Irs tax form 1040 ez 556 for October 2010. Irs tax form 1040 ez The October 2010 index exceeded the October 1987 index by 30. Irs tax form 1040 ez 156. Irs tax form 1040 ez Therefore, the automobile price inflation adjustment for 2011 for trucks and vans is 26. Irs tax form 1040 ez 83 percent (30. Irs tax form 1040 ez 156/112. Irs tax form 1040 ez 4 x 100%). Irs tax form 1040 ez The dollar limitations in § 280F(a) are multiplied by a factor of 0. Irs tax form 1040 ez 2683, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations for trucks and vans. Irs tax form 1040 ez This adjustment applies to all trucks and vans that are first placed in service in calendar year 2011. Irs tax form 1040 ez (2) Amount of the limitation. Irs tax form 1040 ez Tables 1 through 4 contain the dollar amount of the depreciation limitation for each taxable year for passenger automobiles a taxpayer places in service in calendar year 2011. Irs tax form 1040 ez Use Table 1 for a passenger automobile (other than a truck or van), and Table 2 for a truck or van, placed in service in calendar year 2011 for which the § 168(k) additional first year depreciation deduction applies. Irs tax form 1040 ez Use Table 3 for a passenger automobile (other than a truck or van), and Table 4 for a truck or van, placed in service in calendar year 2011 for which the § 168(k) additional first year depreciation deduction does not apply. Irs tax form 1040 ez The Service intends to issue additional guidance addressing the interaction between the 100 percent additional first year depreciation deduction and § 280F(a) for the taxable years subsequent to the first taxable year. Irs tax form 1040 ez REV. Irs tax form 1040 ez PROC. Irs tax form 1040 ez 2011-21 TABLE 1 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2011 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 REV. Irs tax form 1040 ez PROC. Irs tax form 1040 ez 2011-21 TABLE 2 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2011 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,260 2nd Tax Year $5,200 3rd Tax Year $3,150 Each Succeeding Year $1,875 REV. Irs tax form 1040 ez PROC. Irs tax form 1040 ez 2011-21 TABLE 3 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2011 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 REV. Irs tax form 1040 ez PROC. Irs tax form 1040 ez 2011-21 TABLE 4 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2011 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,260 2nd Tax Year $5,200 3rd Tax Year $3,150 Each Succeeding Year $1,875 . Irs tax form 1040 ez 02 Inclusions in Income of Lessees of Passenger Automobiles. Irs tax form 1040 ez A taxpayer must follow the procedures in § 1. Irs tax form 1040 ez 280F-7(a) for determining the inclusion amounts for passenger automobiles first leased in calendar year 2011. Irs tax form 1040 ez In applying these procedures, lessees of passenger automobiles other than trucks and vans should use Table 5 of this revenue procedure, while lessees of trucks and vans should use Table 6 of this revenue procedure. Irs tax form 1040 ez REV. Irs tax form 1040 ez PROC. Irs tax form 1040 ez 2011-21 TABLE 5 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2011 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & later $18,500 $19,000 3 8 11 13 16 19,000 19,500 4 9 13 15 18 19,500 20,000 4 10 15 17 20 20,000 20,500 5 11 16 19 23 20,500 21,000 5 12 18 21 25 21,000 21,500 6 13 19 24 26 21,500 22,000 6 14 21 26 29 22,000 23,000 7 16 23 29 32 23,000 24,000 8 18 27 32 37 24,000 25,000 9 20 30 36 42 25,000 26,000 10 23 33 40 46 26,000 27,000 11 25 36 44 51 27,000 28,000 12 27 40 48 55 28,000 29,000 13 29 43 52 60 29,000 30,000 14 31 47 55 65 30,000 31,000 15 34 49 60 69 31,000 32,000 16 36 53 63 73 32,000 33,000 17 38 56 68 77 33,000 34,000 18 40 60 71 82 34,000 35,000 19 42 63 75 87 35,000 36,000 20 45 66 79 91 36,000 37,000 21 47 69 83 96 37,000 38,000 22 49 73 87 100 38,000 39,000 23 51 76 91 105 39,000 40,000 24 53 80 94 110 40,000 41,000 25 56 82 99 114 41,000 42,000 26 58 86 102 119 42,000 43,000 27 60 89 107 123 43,000 44,000 28 62 93 110 128 44,000 45,000 29 64 96 114 133 45,000 46,000 30 67 98 119 137 46,000 47,000 31 69 102 122 141 47,000 48,000 32 71 105 127 145 48,000 49,000 33 73 109 130 150 49,000 50,000 34 76 111 134 155 50,000 51,000 35 78 115 138 159 51,000 52,000 36 80 118 142 164 52,000 53,000 37 82 122 146 168 53,000 54,000 38 84 125 150 173 54,000 55,000 39 87 128 153 178 55,000 56,000 40 89 131 158 182 56,000 57,000 41 91 135 161 187 57,000 58,000 42 93 138 166 191 58,000 59,000 43 95 142 169 196 59,000 60,000 44 98 144 174 200 60,000 62,000 46 101 149 179 207 62,000 64,000 48 105 156 187 216 64,000 66,000 50 109 163 195 225 66,000 68,000 52 114 169 203 234 68,000 70,000 54 118 176 211 243 70,000 72,000 56 123 182 218 253 72,000 74,000 58 127 189 226 262 74,000 76,000 60 132 195 234 270 76,000 78,000 62 136 202 242 279 78,000 80,000 64 140 209 250 288 80,000 85,000 67 148 220 264 304 85,000 90,000 72 159 237 283 327 90,000 95,000 77 170 253 303 350 95,000 100,000 82 181 269 323 372 100,000 110,000 90 198 293 352 406 110,000 120,000 100 220 326 391 452 120,000 130,000 110 242 359 430 497 130,000 140,000 120 264 392 469 543 140,000 150,000 130 286 424 509 588 150,000 160,000 140 308 457 548 633 160,000 170,000 150 330 490 587 679 170,000 180,000 160 352 523 626 724 180,000 190,000 170 374 555 666 769 190,000 200,000 180 396 588 705 815 200,000 210,000 190 418 621 744 860 210,000 220,000 200 440 654 784 904 220,000 230,000 210 462 687 823 950 230,000 240,000 220 484 719 863 995 240,000 And up 230 506 752 902 1,040 REV. Irs tax form 1040 ez PROC. Irs tax form 1040 ez 2011-21 TABLE 6 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2011 Fair Market Value of Truck or Van Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & later $19,000 $19,500 3 7 9 12 13 19,500 20,000 3 8 11 14 15 20,000 20,500 4 9 13 15 18 20,500 21,000 4 10 15 17 20 21,000 21,500 5 11 16 20 22 21,500 22,000 5 12 18 22 24 22,000 23,000 6 14 20 24 29 23,000 24,000 7 16 24 28 32 24,000 25,000 8 18 27 32 37 25,000 26,000 9 20 31 36 41 26,000 27,000 10 23 33 40 46 27,000 28,000 11 25 37 43 51 28,000 29,000 12 27 40 48 55 29,000 30,000 13 29 43 52 60 30,000 31,000 14 31 47 56 64 31,000 32,000 15 34 49 60 69 32,000 33,000 16 36 53 63 74 33,000 34,000 17 38 56 68 78 34,000 35,000 18 40 60 71 83 35,000 36,000 19 43 62 76 87 36,000 37,000 20 45 66 79 92 37,000 38,000 21 47 69 83 97 38,000 39,000 22 49 73 87 101 39,000 40,000 23 51 76 91 105 40,000 41,000 24 54 79 95 109 41,000 42,000 25 56 82 99 114 42,000 43,000 26 58 86 103 118 43,000 44,000 27 60 89 107 123 44,000 45,000 28 62 93 110 128 45,000 46,000 29 65 95 115 132 46,000 47,000 30 67 99 118 137 47,000 48,000 31 69 102 123 141 48,000 49,000 32 71 106 126 146 49,000 50,000 33 73 109 130 151 50,000 51,000 34 76 112 134 155 51,000 52,000 35 78 115 138 160 52,000 53,000 36 80 118 143 164 53,000 54,000 37 82 122 146 169 54,000 55,000 38 84 125 150 173 55,000 56,000 39 87 128 154 177 56,000 57,000 40 89 131 158 182 57,000 58,000 41 91 135 162 186 58,000 59,000 42 93 138 166 191 59,000 60,000 43 95 142 169 196 60,000 62,000 45 99 146 175 203 62,000 64,000 47 103 153 183 212 64,000 66,000 49 107 160 191 221 66,000 68,000 51 112 166 199 229 68,000 70,000 53 116 173 206 239 70,000 72,000 55 121 179 214 248 72,000 74,000 57 125 186 222 257 74,000 76,000 59 129 192 231 266 76,000 78,000 61 134 198 239 275 78,000 80,000 63 138 205 246 285 80,000 85,000 66 146 217 260 300 85,000 90,000 71 157 233 280 322 90,000 95,000 76 168 250 299 345 95,000 100,000 81 179 266 319 368 100,000 110,000 89 196 290 348 402 110,000 120,000 99 218 323 387 447 120,000 130,000 109 240 355 427 493 130,000 140,000 119 262 388 466 538 140,000 150,000 129 284 421 505 583 150,000 160,000 139 306 454 544 629 160,000 170,000 149 328 487 583 674 170,000 180,000 159 350 519 623 719 180,000 190,000 169 372 552 662 765 190,000 200,000 179 394 585 701 810 200,000 210,000 189 416 618 740 856 210,000 220,000 199 438 651 779 901 220,000 230,000 209 460 683 819 946 230,000 240,000 219 482 716 858 992 240,000 And up 229 504 749 897 1,037 . Irs tax form 1040 ez 03 Revised Amounts for Passenger Automobiles Placed in Service During 2010. Irs tax form 1040 ez (1) Calculation of the Revised Amount. Irs tax form 1040 ez The revised depreciation limits provided in this section 4. Irs tax form 1040 ez 03 were calculated by increasing the existing limitations on the first year allowance in Rev. Irs tax form 1040 ez Proc. Irs tax form 1040 ez 2010-18 by $8,000 as provided in § 168(k)(2)(F)(i). Irs tax form 1040 ez (2) Amount of the Revised Limitation. Irs tax form 1040 ez For passenger automobiles (that are not trucks or vans) placed in service by the taxpayer in calendar year 2010 for which the § 168(k) additional first year depreciation deduction applies, Table 7 of this revenue procedure contains the revised dollar amount of the depreciation limitations for each taxable year. Irs tax form 1040 ez For trucks or vans placed in service by the taxpayer in calendar year 2010 for which the § 168(k) additional first year depreciation deduction applies, Table 8 of this revenue procedure contains the revised dollar amount of the depreciation limitations for each taxable year. Irs tax form 1040 ez If the § 168(k) additional first year depreciation deduction does not apply to a passenger automobile placed in service by the taxpayer in calendar year 2010, the depreciation limitations for each taxable year in Tables 1 and 2 of Rev. Irs tax form 1040 ez Proc. Irs tax form 1040 ez 2010-18 apply. Irs tax form 1040 ez REV. Irs tax form 1040 ez PROC. Irs tax form 1040 ez 2011-21 TABLE 7 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2010 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 REV. Irs tax form 1040 ez PROC. Irs tax form 1040 ez 2011-21 TABLE 8 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2010 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 (3) Modification to lease inclusion amounts for 2010. Irs tax form 1040 ez The lease inclusion amounts in Tables 3 and 4 of Rev. Irs tax form 1040 ez Proc. Irs tax form 1040 ez 2010-18 are modified by striking the first four lines of the inclusion amounts in each table. Irs tax form 1040 ez Consequently, Table 3 of Rev. Irs tax form 1040 ez Proc. Irs tax form 1040 ez 2010-18 applies to passenger automobiles (other than trucks and vans) that are first leased by the taxpayer in calendar year 2010 with a fair market value over $18,500, and Table 4 of Rev. Irs tax form 1040 ez Proc. Irs tax form 1040 ez 2010-18 applies to trucks and vans that are first leased by the taxpayer in calendar year 2010 with a fair market value over $19,000. Irs tax form 1040 ez SECTION 5. Irs tax form 1040 ez EFFECTIVE DATE This revenue procedure, with the exception of section 4. Irs tax form 1040 ez 03, applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2011. Irs tax form 1040 ez Section 4. Irs tax form 1040 ez 03 of this revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2010. Irs tax form 1040 ez SECTION 6. Irs tax form 1040 ez EFFECT ON OTHER DOCUMENTS Rev. Irs tax form 1040 ez Proc. Irs tax form 1040 ez 2010-18 is amplified and modified. Irs tax form 1040 ez SECTION 7. Irs tax form 1040 ez DRAFTING INFORMATION The principal author of this revenue procedure is Bernard P. Irs tax form 1040 ez Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). Irs tax form 1040 ez For further information regarding this revenue procedure, contact Mr. Irs tax form 1040 ez Harvey at (202) 622-4930 (not a toll-free call). Irs tax form 1040 ez Prev  Up  Next   Home   More Internal Revenue Bulletins