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Irs Tax Return 2011

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Irs Tax Return 2011

Irs tax return 2011 Publication 551 - Main Content Table of Contents Cost BasisStocks and Bonds Real Property Business Assets Allocating the Basis Adjusted BasisIncreases to Basis Decreases to Basis Adjustments to Basis Example Basis Other Than CostProperty Received for Services Taxable Exchanges Nontaxable Exchanges Property Transferred From a Spouse Property Received as a Gift Inherited Property Property Changed to Business or Rental Use How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). Irs tax return 2011 Cost Basis The basis of property you buy is usually its cost. Irs tax return 2011 The cost is the amount you pay in cash, debt obligations, other property, or services. Irs tax return 2011 Your cost also includes amounts you pay for the following items. Irs tax return 2011 Sales tax, Freight, Installation and testing, Excise taxes, Legal and accounting fees (when they must be capitalized), Revenue stamps, Recording fees, and Real estate taxes (if assumed for the seller). Irs tax return 2011  You may also have to capitalize (add to basis) certain other costs related to buying or producing property. Irs tax return 2011 Loans with low or no interest. Irs tax return 2011   If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price, minus the amount considered to be unstated interest. Irs tax return 2011 You generally have unstated interest if your interest rate is less than the applicable federal rate. Irs tax return 2011 For more information, see Unstated Interest and Original Issue Discount in Publication 537. Irs tax return 2011 Purchase of a business. Irs tax return 2011   When you purchase a trade or business, you generally purchase all assets used in the business operations, such as land, buildings, and machinery. Irs tax return 2011 Allocate the price among the various assets, including any section 197 intangibles. Irs tax return 2011 See Allocating the Basis, later. Irs tax return 2011 Stocks and Bonds The basis of stocks or bonds you buy is generally the purchase price plus any costs of purchase, such as commissions and recording or transfer fees. Irs tax return 2011 If you get stocks or bonds other than by purchase, your basis is usually determined by the fair market value (FMV) or the previous owner's adjusted basis of the stock. Irs tax return 2011 You must adjust the basis of stocks for certain events that occur after purchase. Irs tax return 2011 See Stocks and Bonds in chapter 4 of Publication 550 for more information on the basis of stock. Irs tax return 2011 Identifying stock or bonds sold. Irs tax return 2011   If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stock or bonds. Irs tax return 2011 If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. Irs tax return 2011 For more information about identifying securities you sell, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. Irs tax return 2011 Mutual fund shares. Irs tax return 2011   If you sell mutual fund shares acquired at different times and prices, you can choose to use an average basis. Irs tax return 2011 For more information, see Publication 550. Irs tax return 2011 Real Property Real property, also called real estate, is land and generally anything built on or attached to it. Irs tax return 2011 If you buy real property, certain fees and other expenses become part of your cost basis in the property. Irs tax return 2011 Real estate taxes. Irs tax return 2011   If you pay real estate taxes the seller owed on real property you bought, and the seller did not reimburse you, treat those taxes as part of your basis. Irs tax return 2011 You cannot deduct them as taxes. Irs tax return 2011   If you reimburse the seller for taxes the seller paid for you, you can usually deduct that amount as an expense in the year of purchase. Irs tax return 2011 Do not include that amount in the basis of the property. Irs tax return 2011 If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. Irs tax return 2011 Settlement costs. Irs tax return 2011   Your basis includes the settlement fees and closing costs for buying property. Irs tax return 2011 You cannot include in your basis the fees and costs for getting a loan on property. Irs tax return 2011 A fee for buying property is a cost that must be paid even if you bought the property for cash. Irs tax return 2011   The following items are some of the settlement fees or closing costs you can include in the basis of your property. Irs tax return 2011 Abstract fees (abstract of title fees); Charges for installing utility services; Legal fees (including title search and preparation of the sales contract and deed); Recording fees; Surveys; Transfer taxes; Owner's title insurance; and Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. Irs tax return 2011   Settlement costs do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Irs tax return 2011   The following items are some settlement fees and closing costs you cannot include in the basis of the property. Irs tax return 2011 Casualty insurance premiums. Irs tax return 2011 Rent for occupancy of the property before closing. Irs tax return 2011 Charges for utilities or other services related to occupancy of the property before closing. Irs tax return 2011 Charges connected with getting a loan. Irs tax return 2011 The following are examples of these charges. Irs tax return 2011 Points (discount points, loan origination fees). Irs tax return 2011 Mortgage insurance premiums. Irs tax return 2011 Loan assumption fees. Irs tax return 2011 Cost of a credit report. Irs tax return 2011 Fees for an appraisal required by a lender. Irs tax return 2011 Fees for refinancing a mortgage. Irs tax return 2011 If these costs relate to business property, items (1) through (3) are deductible as business expenses. Irs tax return 2011 Items (4) and (5) must be capitalized as costs of getting a loan and can be deducted over the period of the loan. Irs tax return 2011 Points. Irs tax return 2011   If you pay points to obtain a loan (including a mortgage, second mortgage, line of credit, or a home equity loan), do not add the points to the basis of the related property. Irs tax return 2011 Generally, you deduct the points over the term of the loan. Irs tax return 2011 For more information on how to deduct points, see Points in chapter 4 of Publication 535. Irs tax return 2011 Points on home mortgage. Irs tax return 2011   Special rules may apply to points you and the seller pay when you obtain a mortgage to purchase your main home. Irs tax return 2011 If certain requirements are met, you can deduct the points in full for the year in which they are paid. Irs tax return 2011 Reduce the basis of your home by any seller-paid points. Irs tax return 2011 For more information, see Points in Publication 936, Home Mortgage Interest Deduction. Irs tax return 2011 Assumption of mortgage. Irs tax return 2011   If you buy property and assume (or buy subject to) an existing mortgage on the property, your basis includes the amount you pay for the property plus the amount to be paid on the mortgage. Irs tax return 2011 Example. Irs tax return 2011 If you buy a building for $20,000 cash and assume a mortgage of $80,000 on it, your basis is $100,000. Irs tax return 2011 Constructing assets. Irs tax return 2011   If you build property or have assets built for you, your expenses for this construction are part of your basis. Irs tax return 2011 Some of these expenses include the following costs. Irs tax return 2011 Land, Labor and materials, Architect's fees, Building permit charges, Payments to contractors, Payments for rental equipment, and Inspection fees. Irs tax return 2011 In addition, if you own a business and use your employees, material, and equipment to build an asset, do not deduct the following expenses. Irs tax return 2011 You must include them in the asset's basis. Irs tax return 2011 Employee wages paid for the construction work, reduced by any employment credits allowed; Depreciation on equipment you own while it is used in the construction; Operating and maintenance costs for equipment used in the construction; and The cost of business supplies and materials used in the construction. Irs tax return 2011    Do not include the value of your own labor, or any other labor you did not pay for, in the basis of any property you construct. Irs tax return 2011 Business Assets If you purchase property to use in your business, your basis is usually its actual cost to you. Irs tax return 2011 If you construct, create, or otherwise produce property, you must capitalize the costs as your basis. Irs tax return 2011 In certain circumstances, you may be subject to the uniform capitalization rules, next. Irs tax return 2011 Uniform Capitalization Rules The uniform capitalization rules specify the costs you add to basis in certain circumstances. Irs tax return 2011 Activities subject to the rules. Irs tax return 2011   You must use the uniform capitalization rules if you do any of the following in your trade or business or activity carried on for profit. Irs tax return 2011 Produce real or tangible personal property for use in the business or activity, Produce real or tangible personal property for sale to customers, or Acquire property for resale. Irs tax return 2011 However, this rule does not apply to personal property if your average annual gross receipts for the 3 previous tax years are $10 million or less. Irs tax return 2011   You produce property if you construct, build, install, manufacture, develop, improve, create, raise, or grow the property. Irs tax return 2011 Treat property produced for you under a contract as produced by you up to the amount you pay or costs you otherwise incur for the property. Irs tax return 2011 Tangible personal property includes films, sound recordings, video tapes, books, or similar property. Irs tax return 2011    Under the uniform capitalization rules, you must capitalize all direct costs and an allocable part of most indirect costs you incur due to your production or resale activities. Irs tax return 2011 To capitalize means to include certain expenses in the basis of property you produce or in your inventory costs rather than deduct them as a current expense. Irs tax return 2011 You recover these costs through deductions for depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Irs tax return 2011   Any cost you cannot use to figure your taxable income for any tax year is not subject to the uniform capitalization rules. Irs tax return 2011 Example. Irs tax return 2011 If you incur a business meal expense for which your deduction would be limited to 50% of the cost of the meal, that amount is subject to the uniform capitalization rules. Irs tax return 2011 The nondeductible part of the cost is not subject to the uniform capitalization rules. Irs tax return 2011 More information. Irs tax return 2011   For more information about these rules, see the regulations under section 263A of the Internal Revenue Code and Publication 538, Accounting Periods and Methods. Irs tax return 2011 Exceptions. Irs tax return 2011   The following are not subject to the uniform capitalization rules. Irs tax return 2011 Property you produce that you do not use in your trade, business, or activity conducted for profit; Qualified creative expenses you pay or incur as a free-lance (self-employed) writer, photographer, or artist that are otherwise deductible on your tax return; Property you produce under a long-term contract, except for certain home construction contracts; Research and experimental expenses deductible under section 174 of the Internal Revenue Code; and Costs for personal property acquired for resale if your (or your predecessor's) average annual gross receipts for the 3 previous tax years do not exceed $10 million. Irs tax return 2011 For other exceptions to the uniform capitalization rules, see section 1. Irs tax return 2011 263A-1(b) of the regulations. Irs tax return 2011   For information on the special rules that apply to costs incurred in the business of farming, see chapter 6 of Publication 225, Farmer's Tax Guide. Irs tax return 2011 Intangible Assets Intangible assets include goodwill, patents, copyrights, trademarks, trade names, and franchises. Irs tax return 2011 The basis of an intangible asset is usually the cost to buy or create it. Irs tax return 2011 If you acquire multiple assets, for example a going business for a lump sum, see Allocating the Basis below to figure the basis of the individual assets. Irs tax return 2011 The basis of certain intangibles can be amortized. Irs tax return 2011 See chapter 8 of Publication 535 for information on the amortization of these costs. Irs tax return 2011 Patents. Irs tax return 2011   The basis of a patent you get for an invention is the cost of development, such as research and experimental expenditures, drawings, working models, and attorneys' and governmental fees. Irs tax return 2011 If you deduct the research and experimental expenditures as current business expenses, you cannot include them in the basis of the patent. Irs tax return 2011 The value of the inventor's time spent on an invention is not part of the basis. Irs tax return 2011 Copyrights. Irs tax return 2011   If you are an author, the basis of a copyright will usually be the cost of getting the copyright plus copyright fees, attorneys' fees, clerical assistance, and the cost of plates that remain in your possession. Irs tax return 2011 Do not include the value of your time as the author, or any other person's time you did not pay for. Irs tax return 2011 Franchises, trademarks, and trade names. Irs tax return 2011   If you buy a franchise, trademark, or trade name, the basis is its cost, unless you can deduct your payments as a business expense. Irs tax return 2011 Allocating the Basis If you buy multiple assets for a lump sum, allocate the amount you pay among the assets you receive. Irs tax return 2011 You must make this allocation to figure your basis for depreciation and gain or loss on a later disposition of any of these assets. Irs tax return 2011 See Trade or Business Acquired below. Irs tax return 2011 Group of Assets Acquired If you buy multiple assets for a lump sum, you and the seller may agree to a specific allocation of the purchase price among the assets in the sales contract. Irs tax return 2011 If this allocation is based on the value of each asset and you and the seller have adverse tax interests, the allocation generally will be accepted. Irs tax return 2011 However, see Trade or Business Acquired, next. Irs tax return 2011 Trade or Business Acquired If you acquire a trade or business, allocate the consideration paid to the various assets acquired. Irs tax return 2011 Generally, reduce the consideration paid by any cash and general deposit accounts (including checking and savings accounts) received. Irs tax return 2011 Allocate the remaining consideration to the other business assets received in proportion to (but not more than) their fair market value in the following order. Irs tax return 2011 Certificates of deposit, U. Irs tax return 2011 S. Irs tax return 2011 Government securities, foreign currency, and actively traded personal property, including stock and securities. Irs tax return 2011 Accounts receivable, other debt instruments, and assets you mark to market at least annually for federal income tax purposes. Irs tax return 2011 Property of a kind that would properly be included in inventory if on hand at the end of the tax year or property held primarily for sale to customers in the ordinary course of business. Irs tax return 2011 All other assets except section 197 intangibles, goodwill, and going concern value. Irs tax return 2011 Section 197 intangibles except goodwill and going concern value. Irs tax return 2011 Goodwill and going concern value (whether or not they qualify as section 197 intangibles). Irs tax return 2011 Agreement. Irs tax return 2011   The buyer and seller may enter into a written agreement as to the allocation of any consideration or the fair market value (FMV) of any of the assets. Irs tax return 2011 This agreement is binding on both parties unless the IRS determines the amounts are not appropriate. Irs tax return 2011 Reporting requirement. Irs tax return 2011   Both the buyer and seller involved in the sale of business assets must report to the IRS the allocation of the sales price among section 197 intangibles and the other business assets. Irs tax return 2011 Use Form 8594 to provide this information. Irs tax return 2011 The buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. Irs tax return 2011 More information. Irs tax return 2011   See Sale of a Business in chapter 2 of Publication 544 for more information. Irs tax return 2011 Land and Buildings If you buy buildings and the land on which they stand for a lump sum, allocate the basis of the property among the land and the buildings so you can figure the depreciation allowable on the buildings. Irs tax return 2011 Figure the basis of each asset by multiplying the lump sum by a fraction. Irs tax return 2011 The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. Irs tax return 2011 If you are not certain of the FMV of the land and buildings, you can allocate the basis based on their assessed values for real estate tax purposes. Irs tax return 2011 Demolition of building. Irs tax return 2011   Add demolition costs and other losses incurred for the demolition of any building to the basis of the land on which the demolished building was located. Irs tax return 2011 Do not claim the costs as a current deduction. Irs tax return 2011 Modification of building. Irs tax return 2011   A modification of a building will not be treated as a demolition if the following conditions are satisfied. Irs tax return 2011 75 percent or more of the existing external walls of the building are retained in place as internal or external walls, and 75 percent or more of the existing internal structural framework of the building is retained in place. Irs tax return 2011   If the building is a certified historic structure, the modification must also be part of a certified rehabilitation. Irs tax return 2011   If these conditions are met, add the costs of the modifications to the basis of the building. Irs tax return 2011 Subdivided lots. Irs tax return 2011   If you buy a tract of land and subdivide it, you must determine the basis of each lot. Irs tax return 2011 This is necessary because you must figure the gain or loss on the sale of each individual lot. Irs tax return 2011 As a result, you do not recover your entire cost in the tract until you have sold all of the lots. Irs tax return 2011   To determine the basis of an individual lot, multiply the total cost of the tract by a fraction. Irs tax return 2011 The numerator is the FMV of the lot and the denominator is the FMV of the entire tract. Irs tax return 2011 Future improvement costs. Irs tax return 2011   If you are a developer and sell subdivided lots before the development work is completed, you can (with IRS consent) include in the basis of the properties sold an allocation of the estimated future cost for common improvements. Irs tax return 2011 See Revenue Procedure 92–29 for more information, including an explanation of the procedures for getting consent from the IRS. Irs tax return 2011 Use of erroneous cost basis. Irs tax return 2011   If you made a mistake in figuring the cost basis of subdivided lots sold in previous years, you cannot correct the mistake for years for which the statute of limitations (generally 3 tax years) has expired. Irs tax return 2011 Figure the basis of any remaining lots by allocating the correct original cost basis of the entire tract among the original lots. Irs tax return 2011 Example. Irs tax return 2011 You bought a tract of land to which you assigned a cost of $15,000. Irs tax return 2011 You subdivided the land into 15 building lots of equal size and equitably divided your basis so that each lot had a basis of $1,000. Irs tax return 2011 You treated the sale of each lot as a separate transaction and figured gain or loss separately on each sale. Irs tax return 2011 Several years later you determine that your original basis in the tract was $22,500 and not $15,000. Irs tax return 2011 You sold eight lots using $8,000 of basis in years for which the statute of limitations has expired. Irs tax return 2011 You now can take $1,500 of basis into account for figuring gain or loss only on the sale of each of the remaining seven lots ($22,500 basis divided among all 15 lots). Irs tax return 2011 You cannot refigure the basis of the eight lots sold in tax years barred by the statute of limitations. Irs tax return 2011 Adjusted Basis Before figuring gain or loss on a sale, exchange, or other disposition of property or figuring allowable depreciation, depletion, or amortization, you must usually make certain adjustments to the basis of the property. Irs tax return 2011 The result of these adjustments to the basis is the adjusted basis. Irs tax return 2011 Increases to Basis Increase the basis of any property by all items properly added to a capital account. Irs tax return 2011 These include the cost of any improvements having a useful life of more than 1 year. Irs tax return 2011 Rehabilitation expenses also increase basis. Irs tax return 2011 However, you must subtract any rehabilitation credit allowed for these expenses before you add them to your basis. Irs tax return 2011 If you have to recapture any of the credit, increase your basis by the recaptured amount. Irs tax return 2011 If you make additions or improvements to business property, keep separate accounts for them. Irs tax return 2011 Also, you must depreciate the basis of each according to the depreciation rules that would apply to the underlying property if you had placed it in service at the same time you placed the addition or improvement in service. Irs tax return 2011 For more information, see Publication 946. Irs tax return 2011 The following items increase the basis of property. Irs tax return 2011 The cost of extending utility service lines to the property; Impact fees; Legal fees, such as the cost of defending and perfecting title; Legal fees for obtaining a decrease in an assessment levied against property to pay for local improvements; Zoning costs; and The capitalized value of a redeemable ground rent. Irs tax return 2011 Assessments for Local Improvements Increase the basis of property by assessments for items such as paving roads and building ditches that increase the value of the property assessed. Irs tax return 2011 Do not deduct them as taxes. Irs tax return 2011 However, you can deduct as taxes charges for maintenance, repairs, or interest charges related to the improvements. Irs tax return 2011 Example. Irs tax return 2011 Your city changes the street in front of your store into an enclosed pedestrian mall and assesses you and other affected landowners for the cost of the conversion. Irs tax return 2011 Add the assessment to your property's basis. Irs tax return 2011 In this example, the assessment is a depreciable asset. Irs tax return 2011 Deducting vs. Irs tax return 2011 Capitalizing Costs Do not add to your basis costs you can deduct as current expenses. Irs tax return 2011 For example, amounts paid for incidental repairs or maintenance that are deductible as business expenses cannot be added to basis. Irs tax return 2011 However, you can choose either to deduct or to capitalize certain other costs. Irs tax return 2011 If you capitalize these costs, include them in your basis. Irs tax return 2011 If you deduct them, do not include them in your basis. Irs tax return 2011 See Uniform Capitalization Rules earlier. Irs tax return 2011 The costs you can choose to deduct or to capitalize include the following. Irs tax return 2011 Carrying charges, such as interest and taxes, that you pay to own property, except carrying charges that must be capitalized under the uniform capitalization rules; Research and experimentation costs; Intangible drilling and development costs for oil, gas, and geothermal wells; Exploration costs for new mineral deposits; Mining development costs for a new mineral deposit; Costs of establishing, maintaining, or increasing the circulation of a newspaper or other periodical; and Costs of removing architectural and transportation barriers to people with disabilities and the elderly. Irs tax return 2011 If you claim the disabled access credit, you must reduce the amount you deduct or capitalize by the amount of the credit. Irs tax return 2011 For more information about deducting or capitalizing costs, see chapter 7 in Publication 535. Irs tax return 2011 Table 1. Irs tax return 2011 Examples of Increases and Decreases to Basis Increases to Basis Decreases to Basis Capital improvements:   Putting an addition on your home   Replacing an entire roof  Paving your driveway  Installing central air conditioning Rewiring your home Exclusion from income of subsidies for energy conservation measures  Casualty or theft loss deductions and insurance reimbursements  Vehicle credits Assessments for local improvements: Water connections Sidewalks Roads Section 179 deduction  Casualty losses: Restoring damaged property Depreciation  Nontaxable corporate distributions Legal fees:  Cost of defending and perfecting a title   Zoning costs   Decreases to Basis The following are some items that reduce the basis of property. Irs tax return 2011 Section 179 deduction; Nontaxable corporate distributions; Deductions previously allowed (or allowable) for amortization, depreciation, and depletion; Exclusion of subsidies for energy conservation measures; Vehicle credits; Residential energy credits; Postponed gain from sale of home; Investment credit (part or all) taken; Casualty and theft losses and insurance reimbursement; Certain canceled debt excluded from income; Rebates from a manufacturer or seller; Easements; Gas-guzzler tax; Adoption tax benefits; and Credit for employer-provided child care. Irs tax return 2011 Some of these items are discussed next. Irs tax return 2011 Casualties and Thefts If you have a casualty or theft loss, decrease the basis in your property by any insurance or other reimbursement and by any deductible loss not covered by insurance. Irs tax return 2011 You must increase your basis in the property by the amount you spend on repairs that substantially prolong the life of the property, increase its value, or adapt it to a different use. Irs tax return 2011 To make this determination, compare the repaired property to the property before the casualty. Irs tax return 2011 For more information on casualty and theft losses, see Publication 547, Casualties, Disasters, and Thefts. Irs tax return 2011 Easements The amount you receive for granting an easement is generally considered to be a sale of an interest in real property. Irs tax return 2011 It reduces the basis of the affected part of the property. Irs tax return 2011 If the amount received is more than the basis of the part of the property affected by the easement, reduce your basis in that part to zero and treat the excess as a recognized gain. Irs tax return 2011 Vehicle Credits Unless you elect not to claim the qualified plug-in electric vehicle credit, the alternative motor vehicle credit, or the qualified plug-in electric drive motor vehicle credit, you may have to reduce the basis of each qualified vehicle by certain amounts reported. Irs tax return 2011 For more information, see Form 8834, Qualified Plug-in Electric and Electric Vehicle Credit; Form 8910, Alternative Motor Vehicle Credit; Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit;and the related instructions. Irs tax return 2011 Gas-Guzzler Tax Decrease the basis in your car by the gas-guzzler (fuel economy) tax if you begin using the car within 1 year of the date of its first sale for ultimate use. Irs tax return 2011 This rule also applies to someone who later buys the car and begins using it not more than 1 year after the original sale for ultimate use. Irs tax return 2011 If the car is imported, the one-year period begins on the date of entry or withdrawal of the car from the warehouse if that date is later than the date of the first sale for ultimate use. Irs tax return 2011 Section 179 Deduction If you take the section 179 deduction for all or part of the cost of qualifying business property, decrease the basis of the property by the deduction. Irs tax return 2011 For more information about the section 179 deduction, see Publication 946. Irs tax return 2011 Exclusion of Subsidies for Energy Conservation Measures You can exclude from gross income any subsidy you received from a public utility company for the purchase or installation of any energy conservation measure for a dwelling unit. Irs tax return 2011 Reduce the basis of the property for which you received the subsidy by the excluded amount. Irs tax return 2011 For more information on this subsidy, see Publication 525. Irs tax return 2011 Depreciation Decrease the basis of property by the depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you chose. Irs tax return 2011 If you took less depreciation than you could have under the method chosen, decrease the basis by the amount you could have taken under that method. Irs tax return 2011 If you did not take a depreciation deduction, reduce the basis by the full amount of the depreciation you could have taken. Irs tax return 2011 Unless a timely election is made not to deduct the special depreciation allowance for property placed in service after September 10, 2001, decrease the property's basis by the special depreciation allowance you deducted or could have deducted. Irs tax return 2011 If you deducted more depreciation than you should have, decrease your basis by the amount equal to the depreciation you should have deducted plus the part of the excess depreciation you deducted that actually reduced your tax liability for the year. Irs tax return 2011 In decreasing your basis for depreciation, take into account the amount deducted on your tax returns as depreciation and any depreciation capitalized under the uniform capitalization rules. Irs tax return 2011 For information on figuring depreciation, see Publication 946. Irs tax return 2011 If you are claiming depreciation on a business vehicle, see Publication 463. Irs tax return 2011 If the car is not used more than 50% for business during the tax year, you may have to recapture excess depreciation. Irs tax return 2011 Include the excess depreciation in your gross income and add it to your basis in the property. Irs tax return 2011 For information on the computation of excess depreciation, see chapter 4 in Publication 463. Irs tax return 2011 Canceled Debt Excluded From Income If a debt you owe is canceled or forgiven, other than as a gift or bequest, you generally must include the canceled amount in your gross income for tax purposes. Irs tax return 2011 A debt includes any indebtedness for which you are liable or which attaches to property you hold. Irs tax return 2011 You can exclude canceled debt from income in the following situations. Irs tax return 2011 Debt canceled in a bankruptcy case or when you are insolvent, Qualified farm debt, and Qualified real property business debt (provided you are not a C corporation). Irs tax return 2011 If you exclude from income canceled debt under situation (1) or (2), you may have to reduce the basis of your depreciable and nondepreciable property. Irs tax return 2011 However, in situation (3), you must reduce the basis of your depreciable property by the excluded amount. Irs tax return 2011 For more information about canceled debt in a bankruptcy case or during insolvency, see Publication 908, Bankruptcy Tax Guide. Irs tax return 2011 For more information about canceled debt that is qualified farm debt, see chapter 3 in Publication 225. Irs tax return 2011 For more information about qualified real property business debt, see chapter 5 in Publication 334, Tax Guide for Small Business. Irs tax return 2011 Postponed Gain From Sale of Home If you postponed gain from the sale of your main home before May 7, 1997, you must reduce the basis of your new home by the postponed gain. Irs tax return 2011 For more information on the rules for the sale of a home, see Publication 523. Irs tax return 2011 Adoption Tax Benefits If you claim an adoption credit for the cost of improvements you added to the basis of your home, decrease the basis of your home by the credit allowed. Irs tax return 2011 This also applies to amounts you received under an employer's adoption assistance program and excluded from income. Irs tax return 2011 For more information Form 8839, Qualified Adoption Expenses. Irs tax return 2011 Employer-Provided Child Care If you are an employer, you can claim the employer-provided child care credit on amounts you paid or incurred to acquire, construct, rehabilitate, or expand property used as part of your qualified child care facility. Irs tax return 2011 You must reduce your basis in that property by the credit claimed. Irs tax return 2011 For more information, see Form 8882, Credit for Employer-Provided Child Care Facilities and Services. Irs tax return 2011 Adjustments to Basis Example In January 2005, you paid $80,000 for real property to be used as a factory. Irs tax return 2011 You also paid commissions of $2,000 and title search and legal fees of $600. Irs tax return 2011 You allocated the total cost of $82,600 between the land and the building—$10,325 for the land and $72,275 for the building. Irs tax return 2011 Immediately you spent $20,000 in remodeling the building before you placed it in service. Irs tax return 2011 You were allowed depreciation of $14,526 for the years 2005 through 2009. Irs tax return 2011 In 2008 you had a $5,000 casualty loss from a that was not covered by insurance on the building. Irs tax return 2011 You claimed a deduction for this loss. Irs tax return 2011 You spent $5,500 to repair the damages and extend the useful life of the building. Irs tax return 2011 The adjusted basis of the building on January 1, 2010, is figured as follows: Original cost of building including fees and commissions $72,275 Adjustments to basis:     Add:         Improvements 20,000   Repair of damages 5,500       $97,775 Subtract:       Depreciation $14,526     Deducted casualty loss 5,000 19,526 Adjusted basis on January 1, 2010 $78,249 The basis of the land, $10,325, remains unchanged. Irs tax return 2011 It is not affected by any of the above adjustments. Irs tax return 2011 Basis Other Than Cost There are many times when you cannot use cost as basis. Irs tax return 2011 In these cases, the fair market value or the adjusted basis of property may be used. Irs tax return 2011 Adjusted basis is discussed earlier. Irs tax return 2011 Fair market value (FMV). Irs tax return 2011   FMV is the price at which property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. Irs tax return 2011 Sales of similar property on or about the same date may be helpful in figuring the property's FMV. Irs tax return 2011 Property Received for Services If you receive property for services, include the property's FMV in income. Irs tax return 2011 The amount you include in income becomes your basis. Irs tax return 2011 If the services were performed for a price agreed on beforehand, it will be accepted as the FMV of the property if there is no evidence to the contrary. Irs tax return 2011 Bargain Purchases A bargain purchase is a purchase of an item for less than its FMV. Irs tax return 2011 If, as compensation for services, you purchase goods or other property at less than FMV, include the difference between the purchase price and the property's FMV in your income. Irs tax return 2011 Your basis in the property is its FMV (your purchase price plus the amount you include in income). Irs tax return 2011 If the difference between your purchase price and the FMV represents a qualified employee discount, do not include the difference in income. Irs tax return 2011 However, your basis in the property is still its FMV. Irs tax return 2011 See Employee Discounts in Publication 15-B. Irs tax return 2011 Restricted Property If you receive property for your services and the property is subject to certain restrictions, your basis in the property is its FMV when it becomes substantially vested unless you make the election discussed later. Irs tax return 2011 Property becomes substantially vested when your rights in the property or the rights of any person to whom you transfer the property are not subject to a substantial risk of forfeiture. Irs tax return 2011 There is substantial risk of forfeiture when the rights to full enjoyment of the property depend on the future performance of substantial services by any person. Irs tax return 2011 When the property becomes substantially vested, include the FMV, less any amount you paid for the property, in income. Irs tax return 2011 Example. Irs tax return 2011 Your employer gives you stock for services performed under the condition that you will have to return the stock unless you complete 5 years of service. Irs tax return 2011 The stock is under a substantial risk of forfeiture and is not substantially vested when you receive it. Irs tax return 2011 You do not report any income until you have completed the 5 years of service that satisfy the condition. Irs tax return 2011 Fair market value. Irs tax return 2011   Figure the FMV of property you received without considering any restriction except one that by its terms will never end. Irs tax return 2011 Example. Irs tax return 2011 You received stock from your employer for services you performed. Irs tax return 2011 If you want to sell the stock while you are still employed, you must sell the stock to your employer at book value. Irs tax return 2011 At your retirement or death, you or your estate must offer to sell the stock to your employer at its book value. Irs tax return 2011 This is a restriction that by its terms will never end and you must consider it when you figure the FMV. Irs tax return 2011 Election. Irs tax return 2011   You can choose to include in your gross income the FMV of the property at the time of transfer, less any amount you paid for it. Irs tax return 2011 If you make this choice, the substantially vested rules do not apply. Irs tax return 2011 Your basis is the amount you paid plus the amount you included in income. Irs tax return 2011   See the discussion of Restricted Property in Publication 525 for more information. Irs tax return 2011 Taxable Exchanges A taxable exchange is one in which the gain is taxable or the loss is deductible. Irs tax return 2011 A taxable gain or deductible loss is also known as a recognized gain or loss. Irs tax return 2011 If you receive property in exchange for other property in a taxable exchange, the basis of property you receive is usually its FMV at the time of the exchange. Irs tax return 2011 A taxable exchange occurs when you receive cash or property not similar or related in use to the property exchanged. Irs tax return 2011 Example. Irs tax return 2011 You trade a tract of farm land with an adjusted basis of $3,000 for a tractor that has an FMV of $6,000. Irs tax return 2011 You must report a taxable gain of $3,000 for the land. Irs tax return 2011 The tractor has a basis of $6,000. Irs tax return 2011 Involuntary Conversions If you receive property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, you can figure the basis of the replacement property you receive using the basis of the converted property. Irs tax return 2011 Similar or related property. Irs tax return 2011   If you receive replacement property similar or related in service or use to the converted property, the replacement property's basis is the old property's basis on the date of the conversion. Irs tax return 2011 However, make the following adjustments. Irs tax return 2011 Decrease the basis by the following. Irs tax return 2011 Any loss you recognize on the conversion, and Any money you receive that you do not spend on similar property. Irs tax return 2011 Increase the basis by the following. Irs tax return 2011 Any gain you recognize on the conversion, and Any cost of acquiring the replacement property. Irs tax return 2011 Money or property not similar or related. Irs tax return 2011   If you receive money or property not similar or related in service or use to the converted property, and you buy replacement property similar or related in service or use to the converted property, the basis of the new property is its cost decreased by the gain not recognized on the conversion. Irs tax return 2011 Example. Irs tax return 2011 The state condemned your property. Irs tax return 2011 The property had an adjusted basis of $26,000 and the state paid you $31,000 for it. Irs tax return 2011 You realized a gain of $5,000 ($31,000 − $26,000). Irs tax return 2011 You bought replacement property similar in use to the converted property for $29,000. Irs tax return 2011 You recognize a gain of $2,000 ($31,000 − $29,000), the unspent part of the payment from the state. Irs tax return 2011 Your gain not recognized is $3,000, the difference between the $5,000 realized gain and the $2,000 recognized gain. Irs tax return 2011 The basis of the new property is figured as follows: Cost of replacement property $29,000 Minus: Gain not recognized 3,000 Basis of the replacement property $26,000 Allocating the basis. Irs tax return 2011   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. Irs tax return 2011 Example. Irs tax return 2011 The state in the previous example condemned your unimproved real property and the replacement property you bought was improved real property with both land and buildings. Irs tax return 2011 Allocate the replacement property's $26,000 basis between land and buildings based on their respective costs. Irs tax return 2011 More information. Irs tax return 2011   For more information about condemnations, see Involuntary Conversions in Publication 544. Irs tax return 2011 For more information about casualty and theft losses, see Publication 547. Irs tax return 2011 Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. Irs tax return 2011 If you receive property in a nontaxable exchange, its basis is usually the same as the basis of the property you transferred. Irs tax return 2011 A nontaxable gain or loss is also known as an unrecognized gain or loss. Irs tax return 2011 Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. Irs tax return 2011 To qualify as a like-kind exchange, you must hold for business or investment purposes both the property you transfer and the property you receive. Irs tax return 2011 There must also be an exchange of like-kind property. Irs tax return 2011 For more information, see Like-Kind Exchanges in Publication 544. Irs tax return 2011 The basis of the property you receive is the same as the basis of the property you gave up. Irs tax return 2011 Example. Irs tax return 2011 You exchange real estate (adjusted basis $50,000, FMV $80,000) held for investment for other real estate (FMV $80,000) held for investment. Irs tax return 2011 Your basis in the new property is the same as the basis of the old ($50,000). Irs tax return 2011 Exchange expenses. Irs tax return 2011   Exchange expenses are generally the closing costs you pay. Irs tax return 2011 They include such items as brokerage commissions, attorney fees, deed preparation fees, etc. Irs tax return 2011 Add them to the basis of the like-kind property received. Irs tax return 2011 Property plus cash. Irs tax return 2011   If you trade property in a like-kind exchange and also pay money, the basis of the property received is the basis of the property you gave up increased by the money you paid. Irs tax return 2011 Example. Irs tax return 2011 You trade in a truck (adjusted basis $3,000) for another truck (FMV $7,500) and pay $4,000. Irs tax return 2011 Your basis in the new truck is $7,000 (the $3,000 basis of the old truck plus the $4,000 paid). Irs tax return 2011 Special rules for related persons. Irs tax return 2011   If a like-kind exchange takes place directly or indirectly between related persons and either party disposes of the property within 2 years after the exchange, the exchange no longer qualifies for like-kind exchange treatment. Irs tax return 2011 Each person must report any gain or loss not recognized on the original exchange. Irs tax return 2011 Each person reports it on the tax return filed for the year in which the later disposition occurs. Irs tax return 2011 If this rule applies, the basis of the property received in the original exchange will be its fair market value. Irs tax return 2011   These rules generally do not apply to the following kinds of property dispositions. Irs tax return 2011 Dispositions due to the death of either related person, Involuntary conversions, and Dispositions in which neither the original exchange nor the subsequent disposition had as a main purpose the avoidance of federal income tax. Irs tax return 2011 Related persons. Irs tax return 2011   Generally, related persons are ancestors, lineal descendants, brothers and sisters (whole or half), and a spouse. Irs tax return 2011   For other related persons (for example, two corporations, an individual and a corporation, a grantor and fiduciary, etc. Irs tax return 2011 ), see Nondeductible Loss in chapter 2 of Publication 544. Irs tax return 2011 Exchange of business property. Irs tax return 2011   Exchanging the assets of one business for the assets of another business is a multiple property exchange. Irs tax return 2011 For information on figuring basis, see Multiple Property Exchanges in chapter 1 of Publication 544. Irs tax return 2011 Partially Nontaxable Exchange A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like property. Irs tax return 2011 The basis of the property you receive is the same as the basis of the property you gave up, with the following adjustments. Irs tax return 2011 Decrease the basis by the following amounts. Irs tax return 2011 Any money you receive, and Any loss you recognize on the exchange. Irs tax return 2011 Increase the basis by the following amounts. Irs tax return 2011 Any additional costs you incur, and Any gain you recognize on the exchange. Irs tax return 2011 If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. Irs tax return 2011 Example. Irs tax return 2011 You traded a truck (adjusted basis $6,000) for a new truck (FMV $5,200) and $1,000 cash. Irs tax return 2011 You realized a gain of $200 ($6,200 − $6,000). Irs tax return 2011 This is the FMV of the truck received plus the cash minus the adjusted basis of the truck you traded ($5,200 + $1,000 – $6,000). Irs tax return 2011 You include all the gain in income (recognized gain) because the gain is less than the cash received. Irs tax return 2011 Your basis in the new truck is: Adjusted basis of old truck $6,000 Minus: Cash received (adjustment 1(a)) 1,000   $5,000 Plus: Gain recognized (adjustment 2(b)) 200 Basis of new truck $5,200 Allocation of basis. Irs tax return 2011   Allocate the basis first to the unlike property, other than money, up to its FMV on the date of the exchange. Irs tax return 2011 The rest is the basis of the like property. Irs tax return 2011 Example. Irs tax return 2011 You had an adjusted basis of $15,000 in real estate you held for investment. Irs tax return 2011 You exchanged it for other real estate to be held for investment with an FMV of $12,500, a truck with an FMV of $3,000, and $1,000 cash. Irs tax return 2011 The truck is unlike property. Irs tax return 2011 You realized a gain of $1,500 ($16,500 − $15,000). Irs tax return 2011 This is the FMV of the real estate received plus the FMV of the truck received plus the cash minus the adjusted basis of the real estate you traded ($12,500 + $3,000 + $1,000 – $15,000). Irs tax return 2011 You include in income (recognize) all $1,500 of the gain because it is less than the FMV of the unlike property plus the cash received. Irs tax return 2011 Your basis in the properties you received is figured as follows. Irs tax return 2011 Adjusted basis of real estate transferred $15,000 Minus: Cash received (adjustment 1(a)) 1,000   $14,000 Plus: Gain recognized (adjustment 2(b)) 1,500 Total basis of properties received $15,500 Allocate the total basis of $15,500 first to the unlike property — the truck ($3,000). Irs tax return 2011 This is the truck's FMV. Irs tax return 2011 The rest ($12,500) is the basis of the real estate. Irs tax return 2011 Sale and Purchase If you sell property and buy similar property in two mutually dependent transactions, you may have to treat the sale and purchase as a single nontaxable exchange. Irs tax return 2011 Example. Irs tax return 2011 You are a salesperson and you use one of your cars 100% for business. Irs tax return 2011 You have used this car in your sales activities for 2 years and have depreciated it. Irs tax return 2011 Your adjusted basis in the car is $22,600 and its FMV is $23,100. Irs tax return 2011 You are interested in a new car, which sells for $28,000. Irs tax return 2011 If you trade your old car and pay $4,900 for the new one, your basis for depreciation for the new car would be $27,500 ($4,900 plus the $22,600 basis of your old car). Irs tax return 2011 However, you want a higher basis for depreciating the new car, so you agree to pay the dealer $28,000 for the new car if he will pay you $23,100 for your old car. Irs tax return 2011 Because the two transactions are dependent on each other, you are treated as having exchanged your old car for the new one and paid $4,900 ($28,000 − $23,100). Irs tax return 2011 Your basis for depreciating the new car is $27,500, the same as if you traded the old car. Irs tax return 2011 Partial Business Use of Property If you have property used partly for business and partly for personal use, and you exchange it in a nontaxable exchange for property to be used wholly or partly in your business, the basis of the property you receive is figured as if you had exchanged two properties. Irs tax return 2011 The first is an exchange of like-kind property. Irs tax return 2011 The second is personal-use property on which gain is recognized and loss is not recognized. Irs tax return 2011 First, figure your adjusted basis in the property as if you transferred two separate properties. Irs tax return 2011 Figure the adjusted basis of each part of the property by taking into account any adjustments to basis. Irs tax return 2011 Deduct the depreciation you took or could have taken from the adjusted basis of the business part. Irs tax return 2011 Then figure the amount realized for your property and allocate it to the business and nonbusiness parts of the property. Irs tax return 2011 The business part of the property is permitted to be exchanged tax free. Irs tax return 2011 However, you must recognize any gain from the exchange of the nonbusiness part. Irs tax return 2011 You are deemed to have received, in exchange for the nonbusiness part, an amount equal to its FMV on the date of the exchange. Irs tax return 2011 The basis of the property you acquired is the total basis of the property transferred (adjusted to the date of the exchange), increased by any gain recognized on the nonbusiness part. Irs tax return 2011 If the nonbusiness part of the property transferred is your main home, you may qualify to exclude from income all or part of the gain on that part. Irs tax return 2011 For more information, see Publication 523. Irs tax return 2011 Trade of car used partly in business. Irs tax return 2011   If you trade in a car you used partly in your business for another car you will use in your business, your basis for depreciation of the new car is not the same as your basis for figuring a gain or loss on its sale. Irs tax return 2011   For information on figuring your basis for depreciation, see Publication 463. Irs tax return 2011 Property Transferred From a Spouse The basis of property transferred to you or transferred in trust for your benefit by your spouse (or former spouse if the transfer is incident to divorce), is the same as your spouse's adjusted basis. Irs tax return 2011 However, adjust your basis for any gain recognized by your spouse or former spouse on property transferred in trust. Irs tax return 2011 This rule applies only to a transfer of property in trust in which the liabilities assumed, plus the liabilities to which the property is subject, are more than the adjusted basis of the property transferred. Irs tax return 2011 If the property transferred to you is a series E, series EE, or series I United States savings bond, the transferor must include in income the interest accrued to the date of transfer. Irs tax return 2011 Your basis in the bond immediately after the transfer is equal to the transferor's basis increased by the interest income includible in the transferor's income. Irs tax return 2011 For more information on these bonds, see Publication 550. Irs tax return 2011 At the time of the transfer, the transferor must give you the records necessary to determine the adjusted basis and holding period of the property as of the date of transfer. Irs tax return 2011 For more information, see Publication 504, Divorced or Separated Individuals. Irs tax return 2011 Property Received as a Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined earlier) to the donor just before it was given to you, its FMV at the time it was given to you, and any gift tax paid on it. Irs tax return 2011 FMV Less Than Donor's Adjusted Basis If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. Irs tax return 2011 Your basis for figuring gain is the same as the donor's adjusted basis plus or minus any required adjustment to basis while you held the property. Irs tax return 2011 Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustment to basis while you held the property (see Adjusted Basis earlier). Irs tax return 2011 If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and have a gain, you have neither gain nor loss on the sale or disposition of the property. Irs tax return 2011 Example. Irs tax return 2011 You received an acre of land as a gift. Irs tax return 2011 At the time of the gift, the land had an FMV of $8,000. Irs tax return 2011 The donor's adjusted basis was $10,000. Irs tax return 2011 After you received the land, no events occurred to increase or decrease your basis. Irs tax return 2011 If you sell the land for $12,000, you will have a $2,000 gain because you must use the donor's adjusted basis ($10,000) at the time of the gift as your basis to figure gain. Irs tax return 2011 If you sell the land for $7,000, you will have a $1,000 loss because you must use the FMV ($8,000) at the time of the gift as your basis to figure a loss. Irs tax return 2011 If the sales price is between $8,000 and $10,000, you have neither gain nor loss. Irs tax return 2011 For instance, if the sales price was $9,000 and you tried to figure a gain using the donor's adjusted basis ($10,000), you would get a $1,000 loss. Irs tax return 2011 If you then tried to figure a loss using the FMV ($8,000), you would get a $1,000 gain. Irs tax return 2011 Business property. Irs tax return 2011   If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deduction is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property. Irs tax return 2011 FMV Equal to or More Than Donor's Adjusted Basis If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift. Irs tax return 2011 Increase your basis by all or part of any gift tax paid, depending on the date of the gift. Irs tax return 2011 Also, for figuring gain or loss from a sale or other disposition of the property, or for figuring depreciation, depletion, or amortization deductions on business property, you must increase or decrease your basis by any required adjustments to basis while you held the property. Irs tax return 2011 See Adjusted Basis earlier. Irs tax return 2011 Gift received before 1977. Irs tax return 2011   If you received a gift before 1977, increase your basis in the gift (the donor's adjusted basis) by any gift tax paid on it. Irs tax return 2011 However, do not increase your basis above the FMV of the gift at the time it was given to you. Irs tax return 2011 Example 1. Irs tax return 2011 You were given a house in 1976 with an FMV of $21,000. Irs tax return 2011 The donor's adjusted basis was $20,000. Irs tax return 2011 The donor paid a gift tax of $500. Irs tax return 2011 Your basis is $20,500, the donor's adjusted basis plus the gift tax paid. Irs tax return 2011 Example 2. Irs tax return 2011 If, in Example 1, the gift tax paid had been $1,500, your basis would be $21,000. Irs tax return 2011 This is the donor's adjusted basis plus the gift tax paid, limited to the FMV of the house at the time you received the gift. Irs tax return 2011 Gift received after 1976. Irs tax return 2011   If you received a gift after 1976, increase your basis in the gift (the donor's adjusted basis) by the part of the gift tax paid on it that is due to the net increase in value of the gift. Irs tax return 2011 Figure the increase by multiplying the gift tax paid by a fraction. Irs tax return 2011 The numerator of the fraction is the net increase in value of the gift and the denominator is the amount of the gift. Irs tax return 2011   The net increase in value of the gift is the FMV of the gift less the donor's adjusted basis. Irs tax return 2011 The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Irs tax return 2011 For information on the gift tax, see Publication 950, Introduction to Estate and Gift Taxes. Irs tax return 2011 Example. Irs tax return 2011 In 2010, you received a gift of property from your mother that had an FMV of $50,000. Irs tax return 2011 Her adjusted basis was $20,000. Irs tax return 2011 The amount of the gift for gift tax purposes was $37,000 ($50,000 minus the $13,000 annual exclusion). Irs tax return 2011 She paid a gift tax of $9,000. Irs tax return 2011 Your basis, $27,290, is figured as follows: Fair market value $50,000 Minus: Adjusted basis 20,000 Net increase in value $30,000 Gift tax paid $9,000 Multiplied by ($30,000 ÷ $37,000) . Irs tax return 2011 81 Gift tax due to net increase in value $7,290 Adjusted basis of property to your mother 20,000 Your basis in the property $27,290 Inherited Property Special rules apply to property acquired from a decedent who died in 2010. Irs tax return 2011 See Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, for details. Irs tax return 2011 If you inherited property from a decedent who died before 2010, your basis in property you inherit from a decedent is generally one of the following. Irs tax return 2011 The FMV of the property at the date of the individual's death. Irs tax return 2011 The FMV on the alternate valuation date if the personal representative for the estate chooses to use alternate valuation. Irs tax return 2011 For information on the alternate valuation date, see the Instructions for Form 706. Irs tax return 2011 The value under the special-use valuation method for real property used in farming or a closely held business if chosen for estate tax purposes. Irs tax return 2011 This method is discussed later. Irs tax return 2011 The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement. Irs tax return 2011 For information on a qualified conservation easement, see the Instructions for Form 706. Irs tax return 2011 If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes. Irs tax return 2011 For more information, see the Instructions for Form 706. Irs tax return 2011 Appreciated property. Irs tax return 2011   The above rule does not apply to appreciated property you receive from a decedent if you or your spouse originally gave the property to the decedent within 1 year before the decedent's death. Irs tax return 2011 Your basis in this property is the same as the decedent's adjusted basis in the property immediately before his or her death, rather than its FMV. Irs tax return 2011 Appreciated property is any property whose FMV on the day it was given to the decedent is more than its adjusted basis. Irs tax return 2011 Community Property In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), husband and wife are each usually considered to own half the community property. Irs tax return 2011 When either spouse dies, the total value of the community property, even the part belonging to the surviving spouse, generally becomes the basis of the entire property. Irs tax return 2011 For this rule to apply, at least half the value of the community property interest must be includable in the decedent's gross estate, whether or not the estate must file a return. Irs tax return 2011 For example, you and your spouse owned community property that had a basis of $80,000. Irs tax return 2011 When your spouse died, half the FMV of the community interest was includible in your spouse's estate. Irs tax return 2011 The FMV of the community interest was $100,000. Irs tax return 2011 The basis of your half of the property after the death of your spouse is $50,000 (half of the $100,000 FMV). Irs tax return 2011 The basis of the other half to your spouse's heirs is also $50,000. Irs tax return 2011 For more information on community property, see Publication 555, Community Property. Irs tax return 2011 Property Held by Surviving Tenant The following example explains the rule for the basis of property held by a surviving tenant in joint tenancy or tenancy by the entirety. Irs tax return 2011 Example. Irs tax return 2011 John and Jim owned, as joint tenants with right of survivorship, business property they purchased for $30,000. Irs tax return 2011 John furnished two-thirds of the purchase price and Jim furnished one-third. Irs tax return 2011 Depreciation deductions allowed before John's death were $12,000. Irs tax return 2011 Under local law, each had a half interest in the income from the property. Irs tax return 2011 At the date of John's death, the property had an FMV of $60,000, two-thirds of which is includable in John's estate. Irs tax return 2011 Jim figures his basis in the property at the date of John's death as follows: Interest Jim bought with his own funds—1/3 of $30,000 cost $10,000   Interest Jim received on John's death—2/3 of $60,000 FMV 40,000 $50,000 Minus: ½ of $12,000 depreciation before John's death 6,000 Jim's basis at the date of John's death $44,000 If Jim had not contributed any part of the purchase price, his basis at the date of John's death would be $54,000. Irs tax return 2011 This is figured by subtracting from the $60,000 FMV, the $6,000 depreciation allocated to Jim's half interest before the date of death. Irs tax return 2011 If under local law Jim had no interest in the income from the property and he contributed no part of the purchase price, his basis at John's death would be $60,000, the FMV of the property. Irs tax return 2011 Qualified Joint Interest Include one-half of the value of a qualified joint interest in the decedent's gross estate. Irs tax return 2011 It does not matter how much each spouse contributed to the purchase price. Irs tax return 2011 Also, it does not matter which spouse dies first. Irs tax return 2011 A qualified joint interest is any interest in property held by husband and wife as either of the following. Irs tax return 2011 Tenants by the entirety, or Joint tenants with right of survivorship if husband and wife are the only joint tenants. Irs tax return 2011 Basis. Irs tax return 2011   As the surviving spouse, your basis in property you owned with your spouse as a qualified joint interest is the cost of your half of the property with certain adjustments. Irs tax return 2011 Decrease the cost by any deductions allowed to you for depreciation and depletion. Irs tax return 2011 Increase the reduced cost by your basis in the half you inherited. Irs tax return 2011 Farm or Closely Held Business Under certain conditions, when a person dies the executor or personal representative of that person's estate can choose to value the qualified real property on other than its FMV. Irs tax return 2011 If so, the executor or personal representative values the qualified real property based on its use as a farm or its use in a closely held business. Irs tax return 2011 If the executor or personal representative chooses this method of valuation for estate tax purposes, that value is the basis of the property for the heirs. Irs tax return 2011 Qualified heirs should be able to get the necessary value from the executor or personal representative of the estate. Irs tax return 2011 Special-use valuation. Irs tax return 2011   If you are a qualified heir who received special-use valuation property, your basis in the property is the estate's or trust's basis in that property immediately before the distribution. Irs tax return 2011 Increase your basis by any gain recognized by the estate or trust because of post-death appreciation. Irs tax return 2011 Post-death appreciation is the property's FMV on the date of distribution minus the property's FMV either on the date of the individual's death or the alternate valuation date. Irs tax return 2011 Figure all FMVs without regard to the special-use valuation. Irs tax return 2011   You can elect to increase your basis in special-use valuation property if it becomes subject to the additional estate tax. Irs tax return 2011 This tax is assessed if, within 10 years after the death of the decedent, you transfer the property to a person who is not a member of your family or the property stops being used as a farm or in a closely held business. Irs tax return 2011   To increase your basis in the property, you must make an irrevocable election and pay interest on the additional estate tax figured from the date 9 months after the decedent's death until the date of the payment of the additional estate tax. Irs tax return 2011 If you meet these requirements, increase your basis in the property to its FMV on the date of the decedent's death or the alternate valuation date. Irs tax return 2011 The increase in your basis is considered to have occurred immediately before the event that results in the additional estate tax. Irs tax return 2011   You make the election by filing with Form 706-A a statement that does all of the following. Irs tax return 2011 Contains your name, address, and taxpayer identification number and those of the estate; Identifies the election as an election under section 1016(c) of the Internal Revenue Code; Specifies the property for which the election is made; and Provides any additional information required by the Instructions for Form 706-A. Irs tax return 2011   For more information, see the Instructions for Form 706 and the Instructions for Form 706-A. Irs tax return 2011 Property Changed to Business or Rental Use If you hold property for personal use and then change it to business use or use it to produce rent, you must figure its basis for depreciation. Irs tax return 2011 An example of changing property held for personal use to business use would be renting out your former main home. Irs tax return 2011 Basis for depreciation. Irs tax return 2011   The basis for depreciation is the lesser of the following amounts. Irs tax return 2011 The FMV of the property on the date of the change, or Your adjusted basis on the date of the change. Irs tax return 2011 Example. Irs tax return 2011 Several years ago you paid $160,000 to have your home built on a lot that cost $25,000. Irs tax return 2011 You paid $20,000 for permanent improvements to the house and claimed a $2,000 casualty loss deduction for damage to the house before changing the property to rental use last year. Irs tax return 2011 Because land is not depreciable, you include only the cost of the house when figuring the basis for depreciation. Irs tax return 2011 Your adjusted basis in the house when you changed its use was $178,000 ($160,000 + $20,000 − $2,000). Irs tax return 2011 On the same date, your property had an FMV of $180,000, of which $15,000 was for the land and $165,000 was for the house. Irs tax return 2011 The basis for figuring depreciation on the house is its FMV on the date of change ($165,000) because it is less than your adjusted basis ($178,000). Irs tax return 2011 Sale of property. Irs tax return 2011   If you later sell or dispose of property changed to business or rental use, the basis of the property you use will depend on whether you are figuring gain or loss. Irs tax return 2011 Gain. Irs tax return 2011   The basis for figuring a gain is your adjusted basis when you sell the property. Irs tax return 2011 Example. Irs tax return 2011 Assume the same facts as in the previous example except that you sell the property at a gain after being allowed depreciation deductions of $37,500. Irs tax return 2011 Your adjusted basis for figuring gain is $165,500 ($178,000 + $25,000 (land) − $37,500). Irs tax return 2011 Loss. Irs tax return 2011   Figure the basis for a loss starting with the smaller of your adjusted basis or the FMV of the property at the time of the change to business or rental use. Irs tax return 2011 Then adjust this amount for the period after the change in the property's use, as discussed earlier under Adjusted Basis, to arrive at a basis for loss. Irs tax return 2011 Example. Irs tax return 2011 Assume the same facts as in the previous example, except that you sell the property at a loss after being allowed depreciation deductions of $37,500. Irs tax return 2011 In this case, you would start with the FMV on the date of the change to rental use ($180,000) because it is less than the adjusted basis of $203,000 ($178,000 + $25,000) on that date. Irs tax return 2011 Reduce that amount ($180,000) by the depreciation deductions to arrive at a basis for loss of $142,500 ($180,000 − $37,500). Irs tax return 2011 How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. Irs tax return 2011 By selecting the method that is best for you, you will have quick and easy access to tax help. Irs tax return 2011 Contacting your Taxpayer Advocate. Irs tax return 2011   The Taxpayer Advocate Service (TAS) is an independent organization within the IRS. Irs tax return 2011 We help taxpayers who are experiencing economic harm, such as not being able to provide necessities like housing, transportation, or food; taxpayers who are seeking help in resolving tax problems with the IRS; and those who believe that an IRS system or procedure is not working as it should. Irs tax return 2011 Here are seven things every taxpayer should know about TAS. Irs tax return 2011 TAS is your voice at the IRS. Irs tax return 2011 Our service is free, confidential, and tailored to meet your needs. Irs tax return 2011 You may be eligible for our help if you have tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you believe an IRS procedure just isn't working as it should. Irs tax return 2011 We help taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation. Irs tax return 2011 This includes businesses as well as individuals. Irs tax return 2011 Our employees know the IRS and how to navigate it. Irs tax return 2011 If you qualify for our help, we'll assign your case to an advocate who will listen to your problem, help you understand what needs to be done to resolve it, and stay with you every step of the way until your problem is resolved. Irs tax return 2011 We have at least one local taxpayer advocate in every state, the District of Columbia, and Puerto Rico. Irs tax return 2011 You can call your local advocate, whose number is in your phone book, in Publication 1546, Taxpayer Advocate Service—Your Voice at the IRS, and on our website at www. Irs tax return 2011 irs. Irs tax return 2011 gov/advocate. Irs tax return 2011 You can also call our toll-free line at 1-877-777-4778 or TTY/TDD 1-800-829-4059. Irs tax return 2011 You can learn about your rights and responsibilities as a taxpayer by visiting our online tax toolkit at www. Irs tax return 2011 taxtoolkit. Irs tax return 2011 irs. Irs tax return 2011 gov. Irs tax return 2011 You can get updates on hot tax topics by visiting our YouTube channel at www. Irs tax return 2011 youtube. Irs tax return 2011 com/tasnta and our Facebook page at www. Irs tax return 2011 facebook. Irs tax return 2011 com/YourVoiceAtIRS, or by following our tweets at www. Irs tax return 2011 twitter. Irs tax return 2011 com/YourVoiceAtIRS. Irs tax return 2011 Low Income Taxpayer Clinics (LITCs). Irs tax return 2011   The Low Income Taxpayer Clinic program serves individuals who have a problem with the IRS and whose income is below a certain level. Irs tax return 2011 LITCs are independent from the IRS. Irs tax return 2011 Most LITCs can provide representation before the IRS or in court on audits, tax collection disputes, and other issues for free or a small fee. Irs tax return 2011 If an individual's native language is not English, some clinics can provide multilingual information about taxpayer rights and responsibilities. Irs tax return 2011 For more information, see Publication 4134, Low Income Taxpayer Clinic List. Irs tax return 2011 This publication is available at IRS. Irs tax return 2011 gov, by calling 1-800-TAX-FORM (1-800-829-3676), or at your local IRS office. Irs tax return 2011 Free tax services. Irs tax return 2011   Publication 910, IRS Guide to Free Tax Services, is your guide to IRS services and resources. Irs tax return 2011 Learn about free tax information from the IRS, including publications, services, and education and assistance programs. Irs tax return 2011 The publication also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on the telephone. Irs tax return 2011 The majority of the information and services listed in this publication are available to you free of charge. Irs tax return 2011 If there is a fee associated with a resource or service, it is listed in the publication. Irs tax return 2011   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with d
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Irs tax return 2011 Publication 595 - Main Contents Table of Contents Capital Construction FundCCF Accounts Types of Accounts You Must Maintain Within a CCF Tax Treatment of CCF Deposits Tax Treatment of CCF Earnings Tax Treatment of CCF Withdrawals More Information How To Get Tax Help Capital Construction Fund The following sections discuss CCF accounts and the types of bookkeeping accounts you must maintain when you invest in a CCF account. Irs tax return 2011 They also discuss the income tax treatment of CCF deposits, earnings, and withdrawals. Irs tax return 2011 CCF Accounts This section explains who can open a CCF account and how to use the account to defer income tax. Irs tax return 2011 Opening a CCF account. Irs tax return 2011   If you are a U. Irs tax return 2011 S. Irs tax return 2011 citizen and you own or lease one or more eligible vessels (defined later), you can open a CCF account. Irs tax return 2011 However, before you open your CCF account, you must enter into an agreement with the Secretary of Commerce through the NMFS. Irs tax return 2011 This agreement will establish the following. Irs tax return 2011 Agreement vessels. Irs tax return 2011 Eligible vessels named in the agreement that will be the basis for the deferral of income tax. Irs tax return 2011 Planned use of withdrawals. Irs tax return 2011 Use of CCF funds to acquire, build, or rebuild a vessel. Irs tax return 2011 CCF depository. Irs tax return 2011 Where your CCF funds will be held. Irs tax return 2011    You can request an application kit or get additional information from NMFS at the following address. Irs tax return 2011 NOAA/NMFS, Financial Services Division, F/MB5 Capital Construction Fund Program 1315 East-West Highway Silver Spring, MD 20910-3282    You can obtain information on the Capital Construction Fund Program at the following website: www. Irs tax return 2011 nmfs. Irs tax return 2011 noaa. Irs tax return 2011 gov/mb/financial_services/ccf. Irs tax return 2011 htm. Irs tax return 2011    You can call NMFS to request an application kit or get additional information at (301) 713-2393 (ext. Irs tax return 2011 204). Irs tax return 2011 Their fax number is (301) 713-1939. Irs tax return 2011 Eligible vessels. Irs tax return 2011   There are two types of vessels that may be considered eligible, those weighing 5 tons or more and those weighing less than 5 tons. Irs tax return 2011 For each type, certain requirements must be met. Irs tax return 2011 Vessel weighing 5 tons or more. Irs tax return 2011   To be considered eligible, the vessel must meet all the following requirements. Irs tax return 2011 Be built or rebuilt in the United States. Irs tax return 2011 Be documented under the laws of the United States. Irs tax return 2011 Be used commercially in the fisheries of the United States. Irs tax return 2011 Be operated in the foreign or domestic commerce of the United States. Irs tax return 2011 Vessel weighing less than 5 tons. Irs tax return 2011   A small vessel, weighing at least 2 net tons but less than 5 net tons, must meet all the following requirements to be considered eligible. Irs tax return 2011 Be built or rebuilt in the United States. Irs tax return 2011 Be owned by a U. Irs tax return 2011 S. Irs tax return 2011 citizen. Irs tax return 2011 Have a home port in the United States. Irs tax return 2011 Be used commercially in the fisheries of the United States. Irs tax return 2011 Deferring tax on CCF deposits and earnings. Irs tax return 2011   You can use a CCF account to defer income tax by taking the following actions. Irs tax return 2011 Making deposits to your CCF account from taxable income. Irs tax return 2011 Excluding from income deposits assigned to certain accounts (discussed later). Irs tax return 2011 Making withdrawals from your CCF account when you acquire, build, or rebuild fishing vessels. Irs tax return 2011 Reducing the basis of fishing vessels you acquire, build, or rebuild to recapture amounts previously excluded from tax. Irs tax return 2011    Reporting requirements. Irs tax return 2011 Beginning with the tax year in which you establish your agreement, you must report annual deposit and withdrawal activity to the NMFS on NOAA Form 34-82. Irs tax return 2011 This form is due within 30 days after you file your federal income tax return even if no deposits or withdrawals are made. Irs tax return 2011 For more information, contact the NMFS at the address or phone number given earlier. Irs tax return 2011 Types of Accounts You Must Maintain Within a CCF This section discusses the three types of bookkeeping accounts you must maintain when you invest in a CCF account. Irs tax return 2011 Your total CCF deposits and earnings for any given year are limited to the amount attributed to these three accounts for that year. Irs tax return 2011 Capital account. Irs tax return 2011   The capital account consists primarily of amounts attributable to the following items. Irs tax return 2011 Allowable depreciation deductions for agreement vessels. Irs tax return 2011 Any nontaxable return of capital from either (a) or (b), below. Irs tax return 2011 The sale or other disposition of agreement vessels. Irs tax return 2011 Insurance or indemnity proceeds attributable to agreement vessels. Irs tax return 2011 Any tax-exempt interest earned on state or local bonds in your CCF account. Irs tax return 2011 Capital gain account. Irs tax return 2011   The capital gain account consists of amounts attributable to the following items reduced by any capital losses from assets held in your CCF account for more than 6 months. Irs tax return 2011 Any capital gain from either of the following sources. Irs tax return 2011 The sale or other disposition of agreement vessels held for more than 6 months. Irs tax return 2011 Insurance or indemnity proceeds attributable to agreement vessels held for more than 6 months. Irs tax return 2011 Any capital gain from assets held in your CCF account for more than 6 months. Irs tax return 2011 Ordinary income account. Irs tax return 2011   The ordinary income account consists of amounts attributable to the following items. Irs tax return 2011 Any earnings (without regard to the carryback of any net operating or net capital loss) from the operation of agreement vessels in the fisheries of the United States or in the foreign or domestic commerce of the United States. Irs tax return 2011 Any capital gain from the following sources reduced by any capital losses from assets held in your CCF account for 6 months or less. Irs tax return 2011 The sale or other disposition of agreement vessels held for 6 months or less. Irs tax return 2011 Insurance or indemnity proceeds attributable to agreement vessels held for 6 months or less. Irs tax return 2011 Any capital gain from assets held in your CCF account for 6 months or less. Irs tax return 2011 Any ordinary income (such as depreciation recapture) from either of the following sources. Irs tax return 2011 The sale or other disposition of agreement vessels. Irs tax return 2011 Insurance or indemnity proceeds attributable to agreement vessels. Irs tax return 2011 Any interest (not including tax-exempt interest from state and local bonds), most dividends, and other ordinary income earned on the assets in your CCF account. Irs tax return 2011 Tax Treatment of CCF Deposits This section explains the tax treatment of income used as the basis for CCF deposits. Irs tax return 2011 Capital gains. Irs tax return 2011   Do not report any transaction that produces a capital gain if you deposit the net proceeds into your CCF account. Irs tax return 2011 This treatment applies to either of the following transactions. Irs tax return 2011 The sale or other disposition of an agreement vessel. Irs tax return 2011 The receipt of insurance or indemnity proceeds attributable to an agreement vessel. Irs tax return 2011 Depreciation recapture. Irs tax return 2011   Do not report any transaction that produces depreciation recapture if you deposit the net proceeds into your CCF account. Irs tax return 2011 This treatment applies to either of the following transactions. Irs tax return 2011 The sale or other disposition of an agreement vessel. Irs tax return 2011 The receipt of insurance or indemnity proceeds attributable to an agreement vessel. Irs tax return 2011 Earnings from operations. Irs tax return 2011   Report earnings from the operation of agreement vessels on your Schedule C or C-EZ (Form 1040) even if you deposit part of these earnings into your CCF account. Irs tax return 2011 You subtract any part of the earnings you deposited into your CCF account from the amount you would otherwise enter as taxable income on Form 1040, line 43 (for 2005). Irs tax return 2011 Next to line 43, write “CCF” and the amount of the deposits. Irs tax return 2011 Do not deduct these CCF deposits on Schedule C or C-EZ (Form 1040). Irs tax return 2011 If you deposit earnings from operations into your CCF account and you must complete other forms such as Form 6251, Alternative Minimum Tax (Individuals), or a worksheet for Schedule D (Form 1040), you will need to make an extra computation. Irs tax return 2011 When the other form instructs you to use the amount from Form 1040, line 41 (for 2005), do not use that amount. Irs tax return 2011 Instead, add Form 1040, lines 42 and 43 (for 2005), and use that amount. Irs tax return 2011 Self-employment tax. Irs tax return 2011   You must use your net profit or loss from your fishing business to figure your self-employment tax. Irs tax return 2011 Do not reduce your net profit or loss by any earnings from operations you deposit into your CCF account. Irs tax return 2011    Partnerships and S corporations. Irs tax return 2011 The deduction for partnership earnings from operations deposited into a CCF account is separately stated on Schedule K (Form 1065), line 13d, and allocated to the partners on Schedule K-1 (Form 1065), box 13 (for 2005). Irs tax return 2011   The deduction for S corporation earnings deposited into a CCF account is separately stated on Schedule K (Form 1120S), line 12d, and allocated to the shareholders on Schedule K-1 (Form 1120S), box 12 (for 2005). Irs tax return 2011 Tax Treatment of CCF Earnings This section explains the tax treatment of the earnings from the assets in your CCF account when the earnings are redeposited or left in your account. Irs tax return 2011 However, if you choose to withdraw the earnings in the year earned, you must generally pay income tax on them. Irs tax return 2011 Capital gains. Irs tax return 2011   Do not report any capital gains from the sale of capital assets held in your CCF account. Irs tax return 2011 This includes capital gain distributions reported to you on Form 1099-DIV or a substitute statement. Irs tax return 2011 However, you should attach a statement to your tax return to list the payers and the amounts and to identify the capital gains as “CCF account earnings. Irs tax return 2011 ” Interest and dividends. Irs tax return 2011   Do not report any ordinary income (such as interest and dividends) you earn on the assets in your CCF account. Irs tax return 2011 However, you should attach a statement to your return to list the payers and the amounts and to identify them as “CCF account earnings. Irs tax return 2011 ”   If you are required to file Schedule B (Form 1040), you can add these earnings to the list of payers and amounts on line 1 or line 5 and identify them as “CCF earnings. Irs tax return 2011 ” Then, subtract the same amounts from the list and identify them as “CCF deposits. Irs tax return 2011 ” Tax-exempt interest. Irs tax return 2011   Do not report tax-exempt interest from state or local bonds you held in your CCF account. Irs tax return 2011 You are not required to report this interest on Form 1040, line 8b. Irs tax return 2011 Tax Treatment of CCF Withdrawals This section discusses the tax treatment of amounts you withdraw from your CCF account during the year. Irs tax return 2011 Qualified Withdrawals A qualified withdrawal from a CCF account is one that is approved by NMFS for either of the following uses. Irs tax return 2011 Acquiring, building, or rebuilding qualified vessels (defined next). Irs tax return 2011 Making principal payments on the mortgage of a qualified vessel. Irs tax return 2011 NMFS will not approve amounts withdrawn to purchase nets not continuously attached to the vessel, such as seine nets, gill set-nets, and gill drift-nets. Irs tax return 2011 NMFS will approve amounts withdrawn to purchase trawl nets. Irs tax return 2011 Qualified vessel. Irs tax return 2011   This is any vessel that meets all of the following requirements. Irs tax return 2011 The vessel was built or rebuilt in the United States. Irs tax return 2011 The vessel is documented under the laws of the United States. Irs tax return 2011 The person maintaining the CCF account agrees with the Secretary of Commerce that the vessel will be operated in United States foreign trade, Great Lakes trade, noncontiguous domestic trade, or the fisheries of the United States. Irs tax return 2011 How to determine the source of qualified withdrawals. Irs tax return 2011   When you make a qualified withdrawal, the amount is treated as being withdrawn in the following order from the accounts listed below. Irs tax return 2011 The capital account. Irs tax return 2011 The capital gain account. Irs tax return 2011 The ordinary income account. Irs tax return 2011 Excluding qualified withdrawals from tax. Irs tax return 2011   Do not report on your income tax return any qualified withdrawals from your CCF account. Irs tax return 2011 Reduce the depreciable basis of fishing vessels you acquire, build, or rebuild when you make a qualified withdrawal from either the capital gain or the ordinary income account. Irs tax return 2011 Nonqualified Withdrawals A nonqualified withdrawal from a CCF account is generally any withdrawal that is not a qualified withdrawal. Irs tax return 2011 Qualified withdrawals are defined under Qualified Withdrawals, earlier. Irs tax return 2011 Examples. Irs tax return 2011   Examples of nonqualified withdrawals include the following amounts from either the ordinary income account or the capital gain account. Irs tax return 2011 Amounts remaining in a CCF account upon termination of your agreement with NMFS. Irs tax return 2011 Amounts you withdraw and use to make principal payments on the mortgage of a vessel if the basis of that vessel and the bases of other vessels you own have already been reduced to zero. Irs tax return 2011 Amounts determined by the IRS to cause your CCF account balance to exceed the amount appropriate to meet your planned use of withdrawals. Irs tax return 2011 You will generally be given 3 years to revise your plans to cover this excess balance. Irs tax return 2011 Amounts you leave in your account for more than 25 years. Irs tax return 2011 There is a graduated schedule under which the percentage applied to determine the amount of the nonqualified withdrawal increases from 20% in the 26th year to 100% in the 30th year. Irs tax return 2011 How to determine the source of nonqualified withdrawals. Irs tax return 2011    When you make a nonqualified withdrawal from your CCF account, the amount is treated as being withdrawn in the following order from the accounts listed below. Irs tax return 2011 The ordinary income account. Irs tax return 2011 The capital gain account. Irs tax return 2011 The capital account. Irs tax return 2011 Paying tax on nonqualified withdrawals. Irs tax return 2011   In general, nonqualified withdrawals are taxed separately from your other gross income and at the highest marginal tax rate in effect for the year of withdrawal. Irs tax return 2011 However, nonqualified withdrawals treated as made from the capital gain account are taxed at a rate that cannot exceed 15% for individuals and 34% for corporations. Irs tax return 2011    Partnerships and S corporations. Irs tax return 2011 Taxable nonqualified partnership withdrawals are separately stated on Schedule K (Form 1065), line 20c, and allocated to the partners on Schedule K-1 (Form 1065), box 20 (for 2005). Irs tax return 2011 Taxable nonqualified withdrawals by an S corporation are separately stated on Schedule K (Form 1120S), line 17d, and allocated to the shareholders on Schedule K-1 (Form 1120S), box 17. Irs tax return 2011 Interest. Irs tax return 2011   You must pay interest on the additional tax due to nonqualified withdrawals that are treated as made from either the ordinary income or the capital gain account. Irs tax return 2011 The interest period begins on the last date for paying tax for the year for which you deposited the amount you withdrew from your CCF account. Irs tax return 2011 The period ends on the last date for paying tax for the year in which you make the nonqualified withdrawal. Irs tax return 2011 The interest rate on the nonqualified withdrawal is simple interest. Irs tax return 2011 The rate is subject to change annually and is published in the Federal Register. Irs tax return 2011    You also can call NMFS at (301) 713-2393 (ext. Irs tax return 2011 204) to get the current interest rate. Irs tax return 2011 Interest deduction. Irs tax return 2011   You can deduct the interest you pay on a nonqualified withdrawal as a trade or business expense. Irs tax return 2011 Reporting the additional tax and interest. Irs tax return 2011   Attach a statement to your income tax return showing your computation of the tax and the interest on a nonqualified withdrawal. Irs tax return 2011 Include the tax and interest on Form 1040, line 63 (for 2005). Irs tax return 2011 To the left of line 63, write in the amount of tax and interest and “CCF. Irs tax return 2011 ” Tax benefit rule. Irs tax return 2011   If any portion of your nonqualified withdrawal is properly attributable to contributions (not earnings on the contributions) you made to the CCF account that did not reduce your tax liability for any tax year prior to the withdrawal year, the following tax treatment applies. Irs tax return 2011 The part that did not reduce your tax liability for any year prior to the withdrawal year is not taxed. Irs tax return 2011 That part is allowed as a net operating loss deduction. Irs tax return 2011 More Information This section briefly discussed the CCF program. Irs tax return 2011 For more detailed information, see the following legislative authorities. Irs tax return 2011 Section 607 of the Merchant Marine Act of 1936, as amended (46 U. Irs tax return 2011 S. Irs tax return 2011 C. Irs tax return 2011 1177). Irs tax return 2011 Chapter 2, Part 259 of title 50 of the Code of Federal Regulations (50 C. Irs tax return 2011 F. Irs tax return 2011 R. Irs tax return 2011 , Part 259). Irs tax return 2011 Subchapter A, Part 3 of title 26 of the Code of Federal Regulations (26 C. Irs tax return 2011 F. Irs tax return 2011 R. Irs tax return 2011 , Part 3). Irs tax return 2011 Section 7518 of the Internal Revenue Code (IRC 7518). Irs tax return 2011 The application kit you can obtain from NMFS at the address or phone number given earlier may contain copies of some of these sources of additional information. Irs tax return 2011 Also, see their web page at www. Irs tax return 2011 nmfs. Irs tax return 2011 noaa. Irs tax return 2011 gov/mb/financial_services/ccf. Irs tax return 2011 htm. Irs tax return 2011 How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. Irs tax return 2011 By selecting the method that is best for you, you will have quick and easy access to tax help. Irs tax return 2011 Contacting your Taxpayer Advocate. Irs tax return 2011   If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate. Irs tax return 2011   The Taxpayer Advocate independently represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. Irs tax return 2011 While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review. Irs tax return 2011   To contact your Taxpayer Advocate: Call the Taxpayer Advocate toll free at 1-877-777-4778, Call, write, or fax the Taxpayer Advocate office in your area, Call 1-800-829-4059 if you are a TTY/TDD user, or Visit www. Irs tax return 2011 irs. Irs tax return 2011 gov/advocate. Irs tax return 2011   For more information, see Publication 1546, How To Get Help With Unresolved Tax Problems (now available in Chinese, Korean, Russian, and Vietnamese, in addition to English and Spanish). Irs tax return 2011 Free tax services. Irs tax return 2011   To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. Irs tax return 2011 It contains a list of free tax publications and an index of tax topics. Irs tax return 2011 It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics. Irs tax return 2011 Internet. Irs tax return 2011 You can access the IRS website 24 hours a day, 7 days a week, at www. Irs tax return 2011 irs. Irs tax return 2011 gov to: E-file your return. Irs tax return 2011 Find out about commercial tax preparation and e-file services available free to eligible taxpayers. Irs tax return 2011 Check the status of your refund. Irs tax return 2011 Click on Where's My Refund. Irs tax return 2011 Be sure to wait at least 6 weeks from the date you filed your return (3 weeks if you filed electronically). Irs tax return 2011 Have your tax return available because you will need to know your social security number, your filing status, and the exact whole dollar amount of your refund. Irs tax return 2011 Download forms, instructions, and publications. Irs tax return 2011 Order IRS products online. Irs tax return 2011 Research your tax questions online. Irs tax return 2011 Search publications online by topic or keyword. Irs tax return 2011 View Internal Revenue Bulletins (IRBs) published in the last few years. Irs tax return 2011 Figure your withholding allowances using our Form W-4 calculator. Irs tax return 2011 Sign up to receive local and national tax news by email. Irs tax return 2011 Get information on starting and operating a small business. Irs tax return 2011 Phone. Irs tax return 2011 Many services are available by phone. Irs tax return 2011 Ordering forms, instructions, and publications. Irs tax return 2011 Call 1-800-829-3676 to order current-year forms, instructions, and publications and prior-year forms and instructions. Irs tax return 2011 You should receive your order within 10 days. Irs tax return 2011 Asking tax questions. Irs tax return 2011 Call the IRS with your tax questions at 1-800-829-1040. Irs tax return 2011 Solving problems. Irs tax return 2011 You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. Irs tax return 2011 An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Irs tax return 2011 Call your local Taxpayer Assistance Center for an appointment. Irs tax return 2011 To find the number, go to www. Irs tax return 2011 irs. Irs tax return 2011 gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. Irs tax return 2011 TTY/TDD equipment. Irs tax return 2011 If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications. Irs tax return 2011 TeleTax topics. Irs tax return 2011 Call 1-800-829-4477 and press 2 to listen to pre-recorded messages covering various tax topics. Irs tax return 2011 Refund information. Irs tax return 2011 If you would like to check the status of your refund, call 1-800-829-4477 and press 1 for automated refund information and follow the recorded instructions or call 1-800-829-1954. Irs tax return 2011 Be sure to wait at least 6 weeks from the date you filed your return (3 weeks if you filed electronically). Irs tax return 2011 Have your tax return available because you will need to know your social security number, your filing status, and the exact whole dollar amount of your refund. Irs tax return 2011 Evaluating the quality of our telephone services. Irs tax return 2011 To ensure that IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. Irs tax return 2011 One method is for a second IRS representative to sometimes listen in on or record telephone calls. Irs tax return 2011 Another is to ask some callers to complete a short survey at the end of the call. Irs tax return 2011 Walk-in. Irs tax return 2011 Many products and services are available on a walk-in basis. Irs tax return 2011 Products. Irs tax return 2011 You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Irs tax return 2011 Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD-ROM or photocopy from reproducible proofs. Irs tax return 2011 Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes. Irs tax return 2011 Services. Irs tax return 2011 You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. Irs tax return 2011 An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Irs tax return 2011 If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you're more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. Irs tax return 2011 No appointment is necessary, but if you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. Irs tax return 2011 A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. Irs tax return 2011 To find the number, go to www. Irs tax return 2011 irs. Irs tax return 2011 gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. Irs tax return 2011 Mail. Irs tax return 2011 You can send your order for forms, instructions, and publications to the address below and receive a response within 10 business days after your request is received. Irs tax return 2011 National Distribution Center P. Irs tax return 2011 O. Irs tax return 2011 Box 8903 Bloomington, IL 61702-8903 CD-ROM for tax products. Irs tax return 2011 You can order Publication 1796, IRS Tax Products on CD-ROM, and obtain: A CD that is released twice so you have the latest products. Irs tax return 2011 The first release ships in late December and the final release ships in late February. Irs tax return 2011 Current-year forms, instructions, and publications. Irs tax return 2011 Prior-year forms, instructions, and publications. Irs tax return 2011 Tax Map: an electronic research tool and finding aid. Irs tax return 2011 Tax law frequently asked questions (FAQs). Irs tax return 2011 Tax Topics from the IRS telephone response system. Irs tax return 2011 Fill-in, print, and save features for most tax forms. Irs tax return 2011 Internal Revenue Bulletins. Irs tax return 2011 Toll-free and email technical support. Irs tax return 2011 Buy the CD-ROM from National Technical Information Service (NTIS) at www. Irs tax return 2011 irs. Irs tax return 2011 gov/cdorders for $25 (no handling fee) or call 1-877-233-6767 toll free to buy the CD-ROM for $25 (plus a $5 handling fee). Irs tax return 2011 CD-ROM for small businesses. Irs tax return 2011 Publication 3207, Small Business Resource Guide CD-ROM, has a new look and enhanced navigation features. Irs tax return 2011 This CD includes: Helpful information, such as how to prepare a business plan, find financing for your business, and much more. Irs tax return 2011 All the business tax forms, instructions, and publications needed to successfully manage a business. Irs tax return 2011 Tax law changes. Irs tax return 2011 IRS Tax Map to help you find forms, instructions, and publications by searching on a keyword or topic. Irs tax return 2011 Web links to various government agencies, business associations, and IRS organizations. Irs tax return 2011 “Rate the Product” survey—your opportunity to suggest changes for future editions. Irs tax return 2011 An updated version of this CD is available each year in early April. Irs tax return 2011 You can get a free copy by calling 1-800-829-3676 or by visiting www. Irs tax return 2011 irs. Irs tax return 2011 gov/smallbiz. Irs tax return 2011 Prev  Up  Next   Home   More Online Publications