Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Long Amended Tax Return

Tax Extension Online FreeWhere Can I File Back Taxes Online2012 Free Taxes OnlineHand R Block OnlineAmmend Tax Return2011 Online Tax ReturnWww Irs Gov Form1040xLate 2010 TaxesFillable 1040xTax Software 2011H&rblockAmended Tax Return 2012Free Online Tax Software 20101099ezFree Turbo Tax 1040ez1040ez 2009Amending Tax ReturnsFiling Taxes Self EmployedFree Tax Software For 20121040nr FormPrint 1040ez1040 Form 2012Free 1040ez FormsElectronic 1040ezTax Admendment1040ez 2011 InstructionsFreestatetaxreturn2011 Irs Form 53292008 Tax Software Free DownloadTax Forms 1040ezWhat Do I Need To File My 2012 Tax ReturnHow To Do An Amended Tax ReturnWhat Form Do I Need To Amend My TaxesH&r Block Tax Software2011 1040a40 Ez FormIrs 2011 Tax Return FormsFree State Income Tax FormIrs Forms 1040ezIrs Gov 1040x

Long Amended Tax Return

Long amended tax return 27. Long amended tax return   Tax Benefits for Work-Related Education Table of Contents What's New Introduction Useful Items - You may want to see: Qualifying Work-Related EducationEducation Required by Employer or by Law Education To Maintain or Improve Skills Education To Meet Minimum Requirements Education That Qualifies You for a New Trade or Business What Expenses Can Be DeductedUnclaimed reimbursement. Long amended tax return Transportation Expenses Travel Expenses No Double Benefit Allowed Reimbursements Deducting Business ExpensesSelf-Employed Persons Employees Performing Artists and Fee-Basis Officials Impairment-Related Work Expenses Recordkeeping What's New Standard mileage rate. Long amended tax return  Generally, if you claim a business deduction for work-related education and you drive your car to and from school, the amount you can deduct for miles driven from January 1, 2013, through December 31, 2013, is 56½ cents per mile. Long amended tax return For more information, see Transportation Expenses under What Expenses Can Be Deducted. Long amended tax return Introduction This chapter discusses work-related education expenses that you may be able to deduct as business expenses. Long amended tax return To claim such a deduction, you must: Itemize your deductions on Schedule A (Form 1040) if you are an employee, File Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040) if you are self-employed, and Have expenses for education that meet the requirements discussed under Qualifying Work-Related Education . Long amended tax return If you are an employee and can itemize your deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. Long amended tax return Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses (except for impairment-related work expenses of disabled individuals) is greater than 2% of your adjusted gross income. Long amended tax return See chapter 28. Long amended tax return If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. Long amended tax return Your work-related education expenses may also qualify you for other tax benefits, such as the American opportunity and lifetime learning credits (see chapter 35). Long amended tax return You may qualify for these other benefits even if you do not meet the requirements listed earlier. Long amended tax return Also, keep in mind that your work-related education expenses may qualify you to claim more than one tax benefit. Long amended tax return Generally, you may claim any number of benefits as long as you use different expenses to figure each one. Long amended tax return When you figure your taxes, you may want to compare these tax benefits so you can choose the method(s) that give you the lowest tax liability. Long amended tax return Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 970 Tax Benefits for Education Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses Schedule A (Form 1040) Itemized Deductions Qualifying Work-Related Education You can deduct the costs of qualifying work-related education as business expenses. Long amended tax return This is education that meets at least one of the following two tests. Long amended tax return The education is required by your employer or the law to keep your present salary, status, or job. Long amended tax return The required education must serve a bona fide business purpose of your employer. Long amended tax return The education maintains or improves skills needed in your present work. Long amended tax return However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it: Is needed to meet the minimum educational requirements of your present trade or business, or Is part of a program of study that will qualify you for a new trade or business. Long amended tax return You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a degree. Long amended tax return Use Figure 27-A, later, as a quick check to see if your education qualifies. Long amended tax return Education Required by Employer or by Law Once you have met the minimum educational requirements for your job, your employer or the law may require you to get more education. Long amended tax return This additional education is qualifying work-related education if all three of the following requirements are met. Long amended tax return It is required for you to keep your present salary, status, or job, The requirement serves a bona fide business purpose of your employer, and The education is not part of a program that will qualify you for a new trade or business. Long amended tax return When you get more education than your employer or the law requires, the additional education can be qualifying work-related education only if it maintains or improves skills required in your present work. Long amended tax return See Education To Maintain or Improve Skills , later. Long amended tax return Example. Long amended tax return You are a teacher who has satisfied the minimum requirements for teaching. Long amended tax return Your employer requires you to take an additional college course each year to keep your teaching job. Long amended tax return If the courses will not qualify you for a new trade or business, they are qualifying work-related education even if you eventually receive a master's degree and an increase in salary because of this extra education. Long amended tax return Education To Maintain or Improve Skills If your education is not required by your employer or the law, it can be qualifying work-related education only if it maintains or improves skills needed in your present work. Long amended tax return This could include refresher courses, courses on current developments, and academic or vocational courses. Long amended tax return Example. Long amended tax return You repair televisions, radios, and stereo systems for XYZ Store. Long amended tax return To keep up with the latest changes, you take special courses in radio and stereo service. Long amended tax return These courses maintain and improve skills required in your work. Long amended tax return Maintaining skills vs. Long amended tax return qualifying for new job. Long amended tax return   Education to maintain or improve skills needed in your present work is not qualifying education if it will also qualify you for a new trade or business. Long amended tax return Education during temporary absence. Long amended tax return   If you stop working for a year or less in order to get education to maintain or improve skills needed in your present work and then return to the same general type of work, your absence is considered temporary. Long amended tax return Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. Long amended tax return Example. Long amended tax return You quit your biology research job to become a full-time biology graduate student for one year. Long amended tax return If you return to work in biology research after completing the courses, the education is related to your present work even if you do not go back to work with the same employer. Long amended tax return Education during indefinite absence. Long amended tax return   If you stop work for more than a year, your absence from your job is considered indefinite. Long amended tax return Education during an indefinite absence, even if it maintains or improves skills needed in the work from which you are absent, is considered to qualify you for a new trade or business. Long amended tax return Therefore, it is not qualifying work-related education. Long amended tax return Education To Meet Minimum Requirements Education you need to meet the minimum educational requirements for your present trade or business is not qualifying work-related education. Long amended tax return The minimum educational requirements are determined by: Laws and regulations, Standards of your profession, trade, or business, and Your employer. Long amended tax return Once you have met the minimum educational requirements that were in effect when you were hired, you do not have to meet any new minimum educational requirements. Long amended tax return This means that if the minimum requirements change after you were hired, any education you need to meet the new requirements can be qualifying education. Long amended tax return You have not necessarily met the minimum educational requirements of your trade or business simply because you are already doing the work. Long amended tax return Example 1. Long amended tax return You are a full-time engineering student. Long amended tax return Although you have not received your degree or certification, you work part-time as an engineer for a firm that will employ you as a full-time engineer after you finish college. Long amended tax return Although your college engineering courses improve your skills in your present job, they are also needed to meet the minimum job requirements for a full-time engineer. Long amended tax return The education is not qualifying work-related education. Long amended tax return Example 2. Long amended tax return You are an accountant and you have met the minimum educational requirements of your employer. Long amended tax return Your employer later changes the minimum educational requirements and requires you to take college courses to keep your job. Long amended tax return These additional courses can be qualifying work-related education because you have already satisfied the minimum requirements that were in effect when you were hired. Long amended tax return Requirements for Teachers States or school districts usually set the minimum educational requirements for teachers. Long amended tax return The requirement is the college degree or the minimum number of college hours usually required of a person hired for that position. Long amended tax return If there are no requirements, you will have met the minimum educational requirements when you become a faculty member. Long amended tax return The determination of whether you are a faculty member of an educational institution must be made on the basis of the particular practices of the institution. Long amended tax return You generally will be considered a faculty member when one or more of the following occurs. Long amended tax return You have tenure. Long amended tax return Your years of service count toward obtaining tenure. Long amended tax return You have a vote in faculty decisions. Long amended tax return Your school makes contributions for you to a retirement plan other than social security or a similar program. Long amended tax return Example 1. Long amended tax return The law in your state requires beginning secondary school teachers to have a bachelor's degree, including 10 professional education courses. Long amended tax return In addition, to keep the job a teacher must complete a fifth year of training within 10 years from the date of hire. Long amended tax return If the employing school certifies to the state Department of Education that qualified teachers cannot be found, the school can hire persons with only 3 years of college. Long amended tax return However, to keep their jobs, these teachers must get a bachelor's degree and the required professional education courses within 3 years. Long amended tax return Under these facts, the bachelor's degree, whether or not it includes the 10 professional education courses, is considered the minimum educational requirement for qualification as a teacher in your state. Long amended tax return If you have all the required education except the fifth year, you have met the minimum educational requirements. Long amended tax return The fifth year of training is qualifying work-related education unless it is part of a program of study that will qualify you for a new trade or business. Long amended tax return Figure 27-A Does Your Work-Related Education Qualify? Please click here for the text description of the image. Long amended tax return Figure 27-A. Long amended tax return Does Your Work-Related Education Qualify?" Example 2. Long amended tax return Assume the same facts as in Example 1 except that you have a bachelor's degree and only six professional education courses. Long amended tax return The additional four education courses can be qualifying work-related education. Long amended tax return Although you do not have all the required courses, you have already met the minimum educational requirements. Long amended tax return Example 3. Long amended tax return Assume the same facts as in Example 1 except that you are hired with only 3 years of college. Long amended tax return The courses you take that lead to a bachelor's degree (including those in education) are not qualifying work-related education. Long amended tax return They are needed to meet the minimum educational requirements for employment as a teacher. Long amended tax return Example 4. Long amended tax return You have a bachelor's degree and you work as a temporary instructor at a university. Long amended tax return At the same time, you take graduate courses toward an advanced degree. Long amended tax return The rules of the university state that you can become a faculty member only if you get a graduate degree. Long amended tax return Also, you can keep your job as an instructor only as long as you show satisfactory progress toward getting this degree. Long amended tax return You have not met the minimum educational requirements to qualify you as a faculty member. Long amended tax return The graduate courses are not qualifying work-related education. Long amended tax return Certification in a new state. Long amended tax return   Once you have met the minimum educational requirements for teachers for your state, you are considered to have met the minimum educational requirements in all states. Long amended tax return This is true even if you must get additional education to be certified in another state. Long amended tax return Any additional education you need is qualifying work-related education. Long amended tax return You have already met the minimum requirements for teaching. Long amended tax return Teaching in another state is not a new trade or business. Long amended tax return Example. Long amended tax return You hold a permanent teaching certificate in State A and are employed as a teacher in that state for several years. Long amended tax return You move to State B and are promptly hired as a teacher. Long amended tax return You are required, however, to complete certain prescribed courses to get a permanent teaching certificate in State B. Long amended tax return These additional courses are qualifying work-related education because the teaching position in State B involves the same general kind of work for which you were qualified in State A. Long amended tax return Education That Qualifies You for a New Trade or Business Education that is part of a program of study that will qualify you for a new trade or business is not qualifying work-related education. Long amended tax return This is true even if you do not plan to enter that trade or business. Long amended tax return If you are an employee, a change of duties that involves the same general kind of work is not a new trade or business. Long amended tax return Example 1. Long amended tax return You are an accountant. Long amended tax return Your employer requires you to get a law degree at your own expense. Long amended tax return You register at a law school for the regular curriculum that leads to a law degree. Long amended tax return Even if you do not intend to become a lawyer, the education is not qualifying because the law degree will qualify you for a new trade or business. Long amended tax return Example 2. Long amended tax return You are a general practitioner of medicine. Long amended tax return You take a 2-week course to review developments in several specialized fields of medicine. Long amended tax return The course does not qualify you for a new profession. Long amended tax return It is qualifying work-related education because it maintains or improves skills required in your present profession. Long amended tax return Example 3. Long amended tax return While working in the private practice of psychiatry, you enter a program to study and train at an accredited psychoanalytic institute. Long amended tax return The program will lead to qualifying you to practice psychoanalysis. Long amended tax return The psychoanalytic training does not qualify you for a new profession. Long amended tax return It is qualifying work-related education because it maintains or improves skills required in your present profession. Long amended tax return Bar or CPA Review Course Review courses to prepare for the bar examination or the certified public accountant (CPA) examination are not qualifying work-related education. Long amended tax return They are part of a program of study that can qualify you for a new profession. Long amended tax return Teaching and Related Duties All teaching and related duties are considered the same general kind of work. Long amended tax return A change in duties in any of the following ways is not considered a change to a new business. Long amended tax return Elementary school teacher to secondary school teacher. Long amended tax return Teacher of one subject, such as biology, to teacher of another subject, such as art. Long amended tax return Classroom teacher to guidance counselor. Long amended tax return Classroom teacher to school administrator. Long amended tax return What Expenses Can Be Deducted If your education meets the requirements described earlier under Qualifying Work-Related Education , you can generally deduct your education expenses as business expenses. Long amended tax return If you are not self-employed, you can deduct business expenses only if you itemize your deductions. Long amended tax return You cannot deduct expenses related to tax-exempt and excluded income. Long amended tax return Deductible expenses. Long amended tax return   The following education expenses can be deducted. Long amended tax return Tuition, books, supplies, lab fees, and similar items. Long amended tax return Certain transportation and travel costs. Long amended tax return Other education expenses, such as costs of research and typing when writing a paper as part of an educational program. Long amended tax return Nondeductible expenses. Long amended tax return   You cannot deduct personal or capital expenses. Long amended tax return For example, you cannot deduct the dollar value of vacation time or annual leave you take to attend classes. Long amended tax return This amount is a personal expense. Long amended tax return Unclaimed reimbursement. Long amended tax return   If you do not claim reimbursement that you are entitled to receive from your employer, you cannot deduct the expenses that apply to that unclaimed reimbursement. Long amended tax return Example. Long amended tax return Your employer agrees to pay your education expenses if you file a voucher showing your expenses. Long amended tax return You do not file a voucher, and you do not get reimbursed. Long amended tax return Because you did not file a voucher, you cannot deduct the expenses on your tax return. Long amended tax return Transportation Expenses If your education qualifies, you can deduct local transportation costs of going directly from work to school. Long amended tax return If you are regularly employed and go to school on a temporary basis, you can also deduct the costs of returning from school to home. Long amended tax return Temporary basis. Long amended tax return   You go to school on a temporary basis if either of the following situations applies to you. Long amended tax return Your attendance at school is realistically expected to last 1 year or less and does indeed last for 1 year or less. Long amended tax return Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. Long amended tax return Your attendance is temporary up to the date you determine it will last more than 1 year. Long amended tax return Note. Long amended tax return If you are in either situation (1) or (2), your attendance is not temporary if facts and circumstances indicate otherwise. Long amended tax return Attendance not on a temporary basis. Long amended tax return   You do not go to school on a temporary basis if either of the following situations apply to you. Long amended tax return Your attendance at school is realistically expected to last more than 1 year. Long amended tax return It does not matter how long you actually attend. Long amended tax return Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. Long amended tax return Your attendance is not temporary after the date you determine it will last more than 1 year. Long amended tax return Deductible Transportation Expenses If you are regularly employed and go directly from home to school on a temporary basis, you can deduct the round-trip costs of transportation between your home and school. Long amended tax return This is true regardless of the location of the school, the distance traveled, or whether you attend school on nonwork days. Long amended tax return Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. Long amended tax return Transportation expenses do not include amounts spent for travel, meals, or lodging while you are away from home overnight. Long amended tax return Example 1. Long amended tax return You regularly work in a nearby town, and go directly from work to home. Long amended tax return You also attend school every work night for 3 months to take a course that improves your job skills. Long amended tax return Since you are attending school on a temporary basis, you can deduct your daily round-trip transportation expenses in going between home and school. Long amended tax return This is true regardless of the distance traveled. Long amended tax return Example 2. Long amended tax return Assume the same facts as in Example 1 except that on certain nights you go directly from work to school and then home. Long amended tax return You can deduct your transportation expenses from your regular work site to school and then home. Long amended tax return Example 3. Long amended tax return Assume the same facts as in Example 1 except that you attend the school for 9 months on Saturdays, nonwork days. Long amended tax return Since you are attending school on a temporary basis, you can deduct your round-trip transportation expenses in going between home and school. Long amended tax return Example 4. Long amended tax return Assume the same facts as in Example 1 except that you attend classes twice a week for 15 months. Long amended tax return Since your attendance in school is not considered temporary, you cannot deduct your transportation expenses in going between home and school. Long amended tax return If you go directly from work to school, you can deduct the one-way transportation expenses of going from work to school. Long amended tax return If you go from work to home to school and return home, your transportation expenses cannot be more than if you had gone directly from work to school. Long amended tax return Using your car. Long amended tax return   If you use your car (whether you own or lease it) for transportation to school, you can deduct your actual expenses or use the standard mileage rate to figure the amount you can deduct. Long amended tax return The standard mileage rate for miles driven from January 1, 2013, through December 31, 2013 is 56½ cents per mile. Long amended tax return Whichever method you use, you can also deduct parking fees and tolls. Long amended tax return See chapter 26 for information on deducting your actual expenses of using a car. Long amended tax return Travel Expenses You can deduct expenses for travel, meals (see 50% limit on meals , later), and lodging if you travel overnight mainly to obtain qualifying work-related education. Long amended tax return Travel expenses for qualifying work-related education are treated the same as travel expenses for other employee business purposes. Long amended tax return For more information, see chapter 26. Long amended tax return You cannot deduct expenses for personal activities, such as sightseeing, visiting, or entertaining. Long amended tax return Mainly personal travel. Long amended tax return   If your travel away from home is mainly personal, you cannot deduct all of your expenses for travel, meals, and lodging. Long amended tax return You can deduct only your expenses for lodging and 50% of your expenses for meals during the time you attend the qualified educational activities. Long amended tax return   Whether a trip's purpose is mainly personal or educational depends upon the facts and circumstances. Long amended tax return An important factor is the comparison of time spent on personal activities with time spent on educational activities. Long amended tax return If you spend more time on personal activities, the trip is considered mainly educational only if you can show a substantial nonpersonal reason for traveling to a particular location. Long amended tax return Example 1. Long amended tax return John works in Newark, New Jersey. Long amended tax return He traveled to Chicago to take a deductible 1-week course at the request of his employer. Long amended tax return His main reason for going to Chicago was to take the course. Long amended tax return While there, he took a sight-seeing trip, entertained some friends, and took a side trip to Pleasantville for a day. Long amended tax return Since the trip was mainly for business, John can deduct his round-trip airfare to Chicago. Long amended tax return He cannot deduct his transportation expenses of going to Pleasantville. Long amended tax return He can deduct only the meals (subject to the 50% limit) and lodging connected with his educational activities. Long amended tax return Example 2. Long amended tax return Sue works in Boston. Long amended tax return She went to a university in Michigan to take a course for work. Long amended tax return The course is qualifying work-related education. Long amended tax return She took one course, which is one-fourth of a full course load of study. Long amended tax return She spent the rest of the time on personal activities. Long amended tax return Her reasons for taking the course in Michigan were all personal. Long amended tax return Sue's trip is mainly personal because three-fourths of her time is considered personal time. Long amended tax return She cannot deduct the cost of her round-trip train ticket to Michigan. Long amended tax return She can deduct one-fourth of the meals (subject to the 50% limit) and lodging costs for the time she attended the university. Long amended tax return Example 3. Long amended tax return Dave works in Nashville and recently traveled to California to take a 2-week seminar. Long amended tax return The seminar is qualifying work-related education. Long amended tax return While there, he spent an extra 8 weeks on personal activities. Long amended tax return The facts, including the extra 8-week stay, show that his main purpose was to take a vacation. Long amended tax return Dave cannot deduct his round-trip airfare or his meals and lodging for the 8 weeks. Long amended tax return He can deduct only his expenses for meals (subject to the 50% limit) and lodging for the 2 weeks he attended the seminar. Long amended tax return Cruises and conventions. Long amended tax return   Certain cruises and conventions offer seminars or courses as part of their itinerary. Long amended tax return Even if the seminars or courses are work-related, your deduction for travel may be limited. Long amended tax return This applies to: Travel by ocean liner, cruise ship, or other form of luxury water transportation, and Conventions outside the North American area. Long amended tax return   For a discussion of the limits on travel expense deductions that apply to cruises and conventions, see Luxury Water Travel and Conventions in chapter 1 of Publication 463. Long amended tax return 50% limit on meals. Long amended tax return   You can deduct only 50% of the cost of your meals while traveling away from home to obtain qualifying work-related education. Long amended tax return You cannot have been reimbursed for the meals. Long amended tax return   Employees must use Form 2106 or Form 2106-EZ to apply the 50% limit. Long amended tax return Travel as Education You cannot deduct the cost of travel as a form of education even if it is directly related to your duties in your work or business. Long amended tax return Example. Long amended tax return You are a French language teacher. Long amended tax return While on sabbatical leave granted for travel, you traveled through France to improve your knowledge of the French language. Long amended tax return You chose your itinerary and most of your activities to improve your French language skills. Long amended tax return You cannot deduct your travel expenses as education expenses. Long amended tax return This is true even if you spent most of your time learning French by visiting French schools and families, attending movies or plays, and engaging in similar activities. Long amended tax return No Double Benefit Allowed You cannot do either of the following. Long amended tax return Deduct work-related education expenses as business expenses if you benefit from these expenses under any other provision of the law, for example, the tuition and fees deduction (see chapter 35). Long amended tax return Deduct work-related education expenses paid with tax-free scholarship, grant, or employer-provided educational assistance. Long amended tax return See Adjustments to Qualifying Work-Related Education Expenses , next. Long amended tax return Adjustments to Qualifying Work-Related Education Expenses If you pay qualifying work-related education expenses with certain tax-free funds, you cannot claim a deduction for those amounts. Long amended tax return You must reduce the qualifying expenses by the amount of such expenses allocable to the tax-free educational assistance. Long amended tax return For more information, see chapter 12 of Publication 970. Long amended tax return Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see chapter 1 of Publication 970), The tax-free part of Pell grants (see chapter 1 of Publication 970), The tax-free part of employer-provided educational assistance (see chapter 11 of Publication 970), Veterans' educational assistance (see chapter 1 of Publication 970), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received for education assistance. Long amended tax return Amounts that do not reduce qualifying work-related education expenses. Long amended tax return   Do not reduce the qualifying work-related education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. Long amended tax return   Also, do not reduce the qualifying work-related education expenses by any scholarship or fellowship reported as income on the student's return or any scholarship which, by its terms, cannot be applied to qualifying work-related education expenses. Long amended tax return Reimbursements How you treat reimbursements depends on the arrangement you have with your employer. Long amended tax return There are two basic types of reimbursement arrangements—accountable plans and nonaccountable plans. Long amended tax return You can tell the type of plan you are reimbursed under by the way the reimbursement is reported on your Form W-2. Long amended tax return For information on how to treat reimbursements under both accountable and nonaccountable plans, see Reimbursements in chapter 26. Long amended tax return Deducting Business Expenses Self-employed persons and employees report business expenses differently. Long amended tax return The following information explains what forms you must use to deduct the cost of your qualifying work-related education as a business expense. Long amended tax return Self-Employed Persons If you are self-employed, report the cost of your qualifying work-related education on the appropriate form used to report your business income and expenses (generally Schedule C, C-EZ, or F). Long amended tax return If your educational expenses include expenses for a car or truck, travel, or meals, report those expenses the same way you report other business expenses for those items. Long amended tax return See the instructions for the form you file for information on how to complete it. Long amended tax return Employees If you are an employee, you can deduct the cost of qualifying work-related education only if you: Did not receive (and were not entitled to receive) any reimbursement from your employer, Were reimbursed under a nonaccountable plan (amount is included in box 1 of Form W-2), or Received reimbursement under an accountable plan, but the amount received was less than your expenses for which you claimed reimbursement. Long amended tax return If either (1) or (2) applies, you can deduct the total qualifying cost. Long amended tax return If (3) applies, you can deduct only the qualifying costs that were more than your reimbursement. Long amended tax return In order to deduct the cost of your qualifying work-related education as a business expense, include the amount with your deduction for any other employee business expenses on Schedule A (Form 1040), line 21. Long amended tax return (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. Long amended tax return ) This deduction (except for impairment-related work expenses of disabled individuals) is subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. Long amended tax return See chapter 28. Long amended tax return Form 2106 or 2106-EZ. Long amended tax return   To figure your deduction for employee business expenses, including qualifying work-related education, you generally must complete Form 2106 or Form 2106-EZ. Long amended tax return Form not required. Long amended tax return   Do not complete either Form 2106 or Form 2106-EZ if: If amounts included in box 1 of your Form W-2, are not considered reimbursements, and You are not claiming travel, transportation, meal, or entertainment expenses. Long amended tax return   If you meet both of these requirements, enter the expenses directly on Schedule A (Form 1040), line 21. Long amended tax return (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. Long amended tax return ) Using Form 2106-EZ. Long amended tax return   This form is shorter and easier to use than Form 2106. Long amended tax return Generally, you can use this form if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are using the standard mileage rate if you are claiming vehicle expenses. Long amended tax return   If you do not meet both of these requirements, use Form 2106. Long amended tax return Performing Artists and Fee-Basis Officials If you are a qualified performing artist, or a state (or local) government official who is paid in whole or in part on a fee basis, you can deduct the cost of your qualifying work-related education as an adjustment to gross income rather than as an itemized deduction. Long amended tax return Include the cost of your qualifying work-related education with any other employee business expenses on Form 1040, line 24. Long amended tax return You do not have to itemize your deductions on Schedule A (Form 1040), and, therefore, the deduction is not subject to the 2%-of-adjusted-gross-income limit. Long amended tax return You must complete Form 2106 or 2106-EZ to figure your deduction, even if you meet the requirements described earlier under Form not required . Long amended tax return For more information on qualified performing artists, see chapter 6 of Publication 463. Long amended tax return Impairment-Related Work Expenses If you are disabled and have impairment-related work expenses that are necessary for you to be able to get qualifying work-related education, you can deduct these expenses on Schedule A (Form 1040), line 28. Long amended tax return They are not subject to the 2%-of-adjusted-gross-income limit. Long amended tax return To deduct these expenses, you must complete Form 2106 or 2106-EZ even if you meet the requirements described earlier under Form not required . Long amended tax return For more information on impairment-related work expenses, see chapter 6 of Publication 463. Long amended tax return Recordkeeping You must keep records as proof of any deduction claimed on your tax return. Long amended tax return Generally, you should keep your records for 3 years from the date of filing the tax return and claiming the deduction. Long amended tax return For specific information about keeping records of business expenses, see Recordkeeping in chapter 26. Long amended tax return Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Employee Tool & Equipment Plans

This resource page provides information and guidance related to Employee Tool and Equipment Plans, sometimes called Service Technician’s Tool Reimbursement Plans (Tool Plans). Tool Plans are programs that are marketed in various industries including auto dealership and repair facilities and other trades that require employees to provide their own tools. The plans typically purport to receive tax-favored treatment as “accountable plans” under Internal Revenue Code § 62(c) and the accompanying regulations.

Available Guidance and other Information

View recent Department of Justice activity

Revenue Rule 2012-25
Revenue Rule 2012-25 clarifies that an arrangement that recharacterizes taxable wages as nontaxable reimbursements or allowances does not satisfy the business connection requirement of the accountable plan rules under § 62(c) and the applicable regulations.  The ruling includes three examples of programs that do not satisfy the business connection requirement of the accountable plan rules because they impermissibly recharacterize wages.  It also includes an example in which the reimbursement arrangement satisfies the business connection requirement of the accountable plan rules because the employer’s plan only reimburses employees when a deductible business expense has been incurred in connection with performing services for the employer and the reimbursement is not in lieu of wages that the employees would otherwise receive.

ILM 201120021
A reimbursement or other expense allowance arrangement that pays an amount regardless of whether an expense is paid or incurred or reasonably expected to be paid or incurred by the employee in performing services for the employer violates the business connection requirement of an accountable plan. Specifically, such an arrangement violates the business connection’s reimbursement requirement under Treas. Reg. § 1.62-2(d)(3)(i). Accordingly, payments made under the arrangement are treated as made under a nonaccountable plan. Amounts treated as paid under a nonaccountable plan must be included in the employee’s gross income for the taxable year, are subject to withholding and payment of employment taxes, and must be reported as wages or other compensation on the employee’s Form W-2.

Employee Tool & Equipment Plans Alert
The Internal Revenue Service has established a compliance team to address significant concerns with certain Employee Tool and Equipment Plans that purport to receive tax-favored treatment as accountable plans.

IRS Letter Ruling 200930029
An employer's expense reimbursement plan satisfies the business connection, substantiation, and return of excess requirements of an accountable plan.  Payments made under the Plan in accordance with the terms of the plan will be excluded from the Technician’s income and will not be wages subject to the withholding and payment of employment taxes.

Chief Counsel Advice -   ILM 200745018
A legal memorandum that concludes that an employer's tool reimbursement plan does not satisfy the requirements of an accountable plan. 

Revenue Ruling 2005-52
This ruling holds that tool allowances paid to employees are not paid under an accountable plan because the substantiation and return of excess requirements are not met. 

 

Page Last Reviewed or Updated: 13-Feb-2014

The Long Amended Tax Return

Long amended tax return 14. Long amended tax return   Sale of Property Table of Contents Reminder Introduction Useful Items - You may want to see: Sales and TradesWhat Is a Sale or Trade? How To Figure Gain or Loss Nontaxable Trades Transfers Between Spouses Related Party Transactions Capital Gains and LossesCapital or Ordinary Gain or Loss Capital Assets and Noncapital Assets Holding Period Nonbusiness Bad Debts Wash Sales Rollover of Gain From Publicly Traded Securities Reminder Foreign income. Long amended tax return  If you are a U. Long amended tax return S. Long amended tax return citizen who sells property located outside the United States, you must report all gains and losses from the sale of that property on your tax return unless it is exempt by U. Long amended tax return S. Long amended tax return law. Long amended tax return This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the payer. Long amended tax return Introduction This chapter discusses the tax consequences of selling or trading investment property. Long amended tax return It explains the following. Long amended tax return What a sale or trade is. Long amended tax return Figuring gain or loss. Long amended tax return Nontaxable trades. Long amended tax return Related party transactions. Long amended tax return Capital gains or losses. Long amended tax return Capital assets and noncapital assets. Long amended tax return Holding period. Long amended tax return Rollover of gain from publicly traded securities. Long amended tax return Other property transactions. Long amended tax return   Certain transfers of property are not discussed here. Long amended tax return They are discussed in other IRS publications. Long amended tax return These include the following. Long amended tax return Sales of a main home, covered in chapter 15. Long amended tax return Installment sales, covered in Publication 537, Installment Sales. Long amended tax return Transactions involving business property, covered in Publication 544, Sales and Other Dispositions of Assets. Long amended tax return Dispositions of an interest in a passive activity, covered in Publication 925, Passive Activity and At-Risk Rules. Long amended tax return    Publication 550, Investment Income and Expenses (Including Capital Gains and Losses), provides a more detailed discussion about sales and trades of investment property. Long amended tax return Publication 550 includes information about the rules covering nonbusiness bad debts, straddles, section 1256 contracts, puts and calls, commodity futures, short sales, and wash sales. Long amended tax return It also discusses investment-related expenses. Long amended tax return Useful Items - You may want to see: Publication 550 Investment Income and Expenses Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 8949 Sales and Other Dispositions of Capital Assets 8824 Like-Kind Exchanges Sales and Trades If you sold property such as stocks, bonds, or certain commodities through a broker during the year, you should receive, for each sale, a Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or substitute statement, from the broker. Long amended tax return Generally, you should receive the statement by February 15 of the next year. Long amended tax return It will show the gross proceeds from the sale. Long amended tax return If you sold a covered security in 2013, your 1099-B (or substitute statement) will show your basis. Long amended tax return Generally, a covered security is a security you acquired after 2010, with certain exceptions. Long amended tax return See the Instructions for Form 8949. Long amended tax return The IRS will also get a copy of Form 1099-B from the broker. Long amended tax return Use Form 1099-B (or substitute statement received from your broker) to complete Form 8949. Long amended tax return What Is a Sale or Trade? This section explains what is a sale or trade. Long amended tax return It also explains certain transactions and events that are treated as sales or trades. Long amended tax return A sale is generally a transfer of property for money or a mortgage, note, or other promise to pay money. Long amended tax return A trade is a transfer of property for other property or services and may be taxed in the same way as a sale. Long amended tax return Sale and purchase. Long amended tax return   Ordinarily, a transaction is not a trade when you voluntarily sell property for cash and immediately buy similar property to replace it. Long amended tax return The sale and purchase are two separate transactions. Long amended tax return But see Like-kind exchanges under Nontaxable Trades, later. Long amended tax return Redemption of stock. Long amended tax return   A redemption of stock is treated as a sale or trade and is subject to the capital gain or loss provisions unless the redemption is a dividend or other distribution on stock. Long amended tax return Dividend versus sale or trade. Long amended tax return   Whether a redemption is treated as a sale, trade, dividend, or other distribution depends on the circumstances in each case. Long amended tax return Both direct and indirect ownership of stock will be considered. Long amended tax return The redemption is treated as a sale or trade of stock if: The redemption is not essentially equivalent to a dividend (see chapter 8), There is a substantially disproportionate redemption of stock, There is a complete redemption of all the stock of the corporation owned by the shareholder, or The redemption is a distribution in partial liquidation of a corporation. Long amended tax return Redemption or retirement of bonds. Long amended tax return   A redemption or retirement of bonds or notes at their maturity is generally treated as a sale or trade. Long amended tax return   In addition, a significant modification of a bond is treated as a trade of the original bond for a new bond. Long amended tax return For details, see Regulations section 1. Long amended tax return 1001-3. Long amended tax return Surrender of stock. Long amended tax return   A surrender of stock by a dominant shareholder who retains ownership of more than half of the corporation's voting shares is treated as a contribution to capital rather than as an immediate loss deductible from taxable income. Long amended tax return The surrendering shareholder must reallocate his or her basis in the surrendered shares to the shares he or she retains. Long amended tax return Worthless securities. Long amended tax return    Stocks, stock rights, and bonds (other than those held for sale by a securities dealer) that became completely worthless during the tax year are treated as though they were sold on the last day of the tax year. Long amended tax return This affects whether your capital loss is long term or short term. Long amended tax return See Holding Period , later. Long amended tax return   Worthless securities also include securities that you abandon after March 12, 2008. Long amended tax return To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. Long amended tax return All the facts and circumstances determine whether the transaction is properly characterized as an abandonment or other type of transaction, such as an actual sale or exchange, contribution to capital, dividend, or gift. Long amended tax return    If you are a cash basis taxpayer and make payments on a negotiable promissory note that you issued for stock that became worthless, you can deduct these payments as losses in the years you actually make the payments. Long amended tax return Do not deduct them in the year the stock became worthless. Long amended tax return How to report loss. Long amended tax return    Report worthless securities in Part I or Part II, whichever applies, of Form 8949. Long amended tax return In column (a), enter “Worthless. Long amended tax return ”    Report your worthless securities transactions on Form 8949 with the correct box checked for these transactions. Long amended tax return See Form 8949 and the Instructions for Form 8949. Long amended tax return For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Long amended tax return See also Schedule D (Form 1040), Form 8949, and their separate instructions. Long amended tax return Filing a claim for refund. Long amended tax return   If you do not claim a loss for a worthless security on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the loss. Long amended tax return You must use Form 1040X, Amended U. Long amended tax return S. Long amended tax return Individual Income Tax Return, to amend your return for the year the security became worthless. Long amended tax return You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. Long amended tax return For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. Long amended tax return How To Figure Gain or Loss You figure gain or loss on a sale or trade of property by comparing the amount you realize with the adjusted basis of the property. Long amended tax return Gain. Long amended tax return   If the amount you realize from a sale or trade is more than the adjusted basis of the property you transfer, the difference is a gain. Long amended tax return Loss. Long amended tax return   If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. Long amended tax return Adjusted basis. Long amended tax return   The adjusted basis of property is your original cost or other original basis properly adjusted (increased or decreased) for certain items. Long amended tax return See chapter 13 for more information about determining the adjusted basis of property. Long amended tax return Amount realized. Long amended tax return   The amount you realize from a sale or trade of property is everything you receive for the property minus your expenses of sale (such as redemption fees, sales commissions, sales charges, or exit fees). Long amended tax return Amount realized includes the money you receive plus the fair market value of any property or services you receive. Long amended tax return If you received a note or other debt instrument for the property, see How To Figure Gain or Loss in chapter 4 of Publication 550 to figure the amount realized. Long amended tax return If you finance the buyer's purchase of your property and the debt instrument does not provide for adequate stated interest, the unstated interest that you must report as ordinary income will reduce the amount realized from the sale. Long amended tax return For more information, see Publication 537. Long amended tax return Fair market value. Long amended tax return   Fair market value is the price at which the property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. Long amended tax return Example. Long amended tax return You trade A Company stock with an adjusted basis of $7,000 for B Company stock with a fair market value of $10,000, which is your amount realized. Long amended tax return Your gain is $3,000 ($10,000 − $7,000). Long amended tax return Debt paid off. Long amended tax return    A debt against the property, or against you, that is paid off as a part of the transaction, or that is assumed by the buyer, must be included in the amount realized. Long amended tax return This is true even if neither you nor the buyer is personally liable for the debt. Long amended tax return For example, if you sell or trade property that is subject to a nonrecourse loan, the amount you realize generally includes the full amount of the note assumed by the buyer even if the amount of the note is more than the fair market value of the property. Long amended tax return Example. Long amended tax return You sell stock that you had pledged as security for a bank loan of $8,000. Long amended tax return Your basis in the stock is $6,000. Long amended tax return The buyer pays off your bank loan and pays you $20,000 in cash. Long amended tax return The amount realized is $28,000 ($20,000 + $8,000). Long amended tax return Your gain is $22,000 ($28,000 − $6,000). Long amended tax return Payment of cash. Long amended tax return   If you trade property and cash for other property, the amount you realize is the fair market value of the property you receive. Long amended tax return Determine your gain or loss by subtracting the cash you pay plus the adjusted basis of the property you trade in from the amount you realize. Long amended tax return If the result is a positive number, it is a gain. Long amended tax return If the result is a negative number, it is a loss. Long amended tax return No gain or loss. Long amended tax return   You may have to use a basis for figuring gain that is different from the basis used for figuring loss. Long amended tax return In this case, you may have neither a gain nor a loss. Long amended tax return See Basis Other Than Cost in chapter 13. Long amended tax return Nontaxable Trades This section discusses trades that generally do not result in a taxable gain or deductible loss. Long amended tax return For more information on nontaxable trades, see chapter 1 of Publication 544. Long amended tax return Like-kind exchanges. Long amended tax return   If you trade business or investment property for other business or investment property of a like kind, you do not pay tax on any gain or deduct any loss until you sell or dispose of the property you receive. Long amended tax return To be nontaxable, a trade must meet all six of the following conditions. Long amended tax return The property must be business or investment property. Long amended tax return You must hold both the property you trade and the property you receive for productive use in your trade or business or for investment. Long amended tax return Neither property may be property used for personal purposes, such as your home or family car. Long amended tax return The property must not be held primarily for sale. Long amended tax return The property you trade and the property you receive must not be property you sell to customers, such as merchandise. Long amended tax return The property must not be stocks, bonds, notes, choses in action, certificates of trust or beneficial interest, or other securities or evidences of indebtedness or interest, including partnership interests. Long amended tax return However, see Special rules for mutual ditch, reservoir, or irrigation company stock, in chapter 4 of Publication 550 for an exception. Long amended tax return Also, you can have a nontaxable trade of corporate stocks under a different rule, as discussed later. Long amended tax return There must be a trade of like property. Long amended tax return The trade of real estate for real estate, or personal property for similar personal property, is a trade of like property. Long amended tax return The trade of an apartment house for a store building, or a panel truck for a pickup truck, is a trade of like property. Long amended tax return The trade of a piece of machinery for a store building is not a trade of like property. Long amended tax return Real property located in the United States and real property located outside the United States are not like property. Long amended tax return Also, personal property used predominantly within the United States and personal property used predominantly outside the United States are not like property. Long amended tax return The property to be received must be identified in writing within 45 days after the date you transfer the property given up in the trade. Long amended tax return The property to be received must be received by the earlier of: The 180th day after the date on which you transfer the property given up in the trade, or The due date, including extensions, for your tax return for the year in which the transfer of the property given up occurs. Long amended tax return    If you trade property with a related party in a like-kind exchange, a special rule may apply. Long amended tax return See Related Party Transactions , later in this chapter. Long amended tax return Also, see chapter 1 of Publication 544 for more information on exchanges of business property and special rules for exchanges using qualified intermediaries or involving multiple properties. Long amended tax return Partly nontaxable exchange. Long amended tax return   If you receive money or unlike property in addition to like property, and the above six conditions are met, you have a partly nontaxable trade. Long amended tax return You are taxed on any gain you realize, but only up to the amount of the money and the fair market value of the unlike property you receive. Long amended tax return You cannot deduct a loss. Long amended tax return Like property and unlike property transferred. Long amended tax return   If you give up unlike property in addition to the like property, you must recognize gain or loss on the unlike property you give up. Long amended tax return The gain or loss is the difference between the adjusted basis of the unlike property and its fair market value. Long amended tax return Like property and money transferred. Long amended tax return   If all of the above conditions (1) – (6) are met, you have a nontaxable trade even if you pay money in addition to the like property. Long amended tax return Basis of property received. Long amended tax return   To figure the basis of the property received, see Nontaxable Exchanges in chapter 13. Long amended tax return How to report. Long amended tax return   You must report the trade of like property on Form 8824. Long amended tax return If you figure a recognized gain or loss on Form 8824, report it on Schedule D (Form 1040), or on Form 4797, Sales of Business Property, whichever applies. Long amended tax return See the instructions for Line 22 in the Instructions for Form 8824. Long amended tax return   For information on using Form 4797, see chapter 4 of Publication 544. Long amended tax return Corporate stocks. Long amended tax return   The following trades of corporate stocks generally do not result in a taxable gain or a deductible loss. Long amended tax return Corporate reorganizations. Long amended tax return   In some instances, a company will give you common stock for preferred stock, preferred stock for common stock, or stock in one corporation for stock in another corporation. Long amended tax return If this is a result of a merger, recapitalization, transfer to a controlled corporation, bankruptcy, corporate division, corporate acquisition, or other corporate reorganization, you do not recognize gain or loss. Long amended tax return Stock for stock of the same corporation. Long amended tax return   You can exchange common stock for common stock or preferred stock for preferred stock in the same corporation without having a recognized gain or loss. Long amended tax return This is true for a trade between two stockholders as well as a trade between a stockholder and the corporation. Long amended tax return Convertible stocks and bonds. Long amended tax return   You generally will not have a recognized gain or loss if you convert bonds into stock or preferred stock into common stock of the same corporation according to a conversion privilege in the terms of the bond or the preferred stock certificate. Long amended tax return Property for stock of a controlled corporation. Long amended tax return   If you transfer property to a corporation solely in exchange for stock in that corporation, and immediately after the trade you are in control of the corporation, you ordinarily will not recognize a gain or loss. Long amended tax return This rule applies both to individuals and to groups who transfer property to a corporation. Long amended tax return It does not apply if the corporation is an investment company. Long amended tax return   For this purpose, to be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock of the corporation. Long amended tax return   If this provision applies to you, you may have to attach to your return a complete statement of all facts pertinent to the exchange. Long amended tax return For details, see Regulations section 1. Long amended tax return 351-3. Long amended tax return Additional information. Long amended tax return   For more information on trades of stock, see Nontaxable Trades in chapter 4 of Publication 550. Long amended tax return Insurance policies and annuities. Long amended tax return   You will not have a recognized gain or loss if the insured or annuitant is the same under both contracts and you trade: A life insurance contract for another life insurance contract or for an endowment or annuity contract or for a qualified long-term care insurance contract, An endowment contract for another endowment contract that provides for regular payments beginning at a date no later than the beginning date under the old contract or for an annuity contract or for a qualified long-term insurance contract, An annuity contract for annuity contract or for a qualified long-term care insurance contract, or A qualified long-term care insurance contract for a qualified long-term care insurance contract. Long amended tax return   You also may not have to recognize gain or loss on an exchange of a portion of an annuity contract for another annuity contract. Long amended tax return For transfers completed before October 24, 2011, see Revenue Ruling 2003-76 in Internal Revenue Bulletin 2003-33 and Revenue Procedure 2008-24 in Internal Revenue Bulletin 2008-13. Long amended tax return Revenue Ruling 2003-76 is available at www. Long amended tax return irs. Long amended tax return gov/irb/2003-33_IRB/ar11. Long amended tax return html. Long amended tax return Revenue Procedure 2008-24 is available at www. Long amended tax return irs. Long amended tax return gov/irb/2008-13_IRB/ar13. Long amended tax return html. Long amended tax return For transfers completed on or after October 24, 2011, see Revenue Ruling 2003-76, above, and Revenue Procedure 2011-38, in Internal Revenue Bulletin 2011-30. Long amended tax return Revenue Procedure 2011-38 is available at www. Long amended tax return irs. Long amended tax return gov/irb/2011-30_IRB/ar09. Long amended tax return html. Long amended tax return   For tax years beginning after December 31, 2010, amounts received as an annuity for a period of 10 years or more, or for the lives of one or more individuals, under any portion of an annuity, endowment, or life insurance contract, are treated as a separate contract and are considered partial annuities. Long amended tax return A portion of an annuity, endowment, or life insurance contract may be annuitized, provided that the annuitization period is for 10 years or more or for the lives of one or more individuals. Long amended tax return The investment in the contract is allocated between the part of the contract from which amounts are received as an annuity and the part of the contract from which amounts are not received as an annuity. Long amended tax return   Exchanges of contracts not included in this list, such as an annuity contract for an endowment contract, or an annuity or endowment contract for a life insurance contract, are taxable. Long amended tax return Demutualization of life insurance companies. Long amended tax return   If you received stock in exchange for your equity interest as a policyholder or an annuitant, you generally will not have a recognized gain or loss. Long amended tax return See Demutualization of Life Insurance Companies in Publication 550. Long amended tax return U. Long amended tax return S. Long amended tax return Treasury notes or bonds. Long amended tax return   You can trade certain issues of U. Long amended tax return S. Long amended tax return Treasury obligations for other issues designated by the Secretary of the Treasury, with no gain or loss recognized on the trade. Long amended tax return See Savings bonds traded in chapter 1 of Publication 550 for more information. Long amended tax return Transfers Between Spouses Generally, no gain or loss is recognized on a transfer of property from an individual to (or in trust for the benefit of) a spouse, or if incident to a divorce, a former spouse. Long amended tax return This nonrecognition rule does not apply in the following situations. Long amended tax return The recipient spouse or former spouse is a nonresident alien. Long amended tax return Property is transferred in trust and liability exceeds basis. Long amended tax return Gain must be recognized to the extent the amount of the liabilities assumed by the trust, plus any liabilities on the property, exceed the adjusted basis of the property. Long amended tax return For other situations, see Transfers Between Spouses in chapter 4 of Publication 550. Long amended tax return Any transfer of property to a spouse or former spouse on which gain or loss is not recognized is treated by the recipient as a gift and is not considered a sale or exchange. Long amended tax return The recipient's basis in the property will be the same as the adjusted basis of the giver immediately before the transfer. Long amended tax return This carryover basis rule applies whether the adjusted basis of the transferred property is less than, equal to, or greater than either its fair market value at the time of transfer or any consideration paid by the recipient. Long amended tax return This rule applies for purposes of determining loss as well as gain. Long amended tax return Any gain recognized on a transfer in trust increases the basis. Long amended tax return A transfer of property is incident to a divorce if the transfer occurs within 1 year after the date on which the marriage ends, or if the transfer is related to the ending of the marriage. Long amended tax return Related Party Transactions Special rules apply to the sale or trade of property between related parties. Long amended tax return Gain on sale or trade of depreciable property. Long amended tax return   Your gain from the sale or trade of property to a related party may be ordinary income, rather than capital gain, if the property can be depreciated by the party receiving it. Long amended tax return See chapter 3 of Publication 544 for more information. Long amended tax return Like-kind exchanges. Long amended tax return   Generally, if you trade business or investment property for other business or investment property of a like kind, no gain or loss is recognized. Long amended tax return See Like-kind exchanges , earlier, under Nontaxable Trades. Long amended tax return   This rule also applies to trades of property between related parties, defined next under Losses on sales or trades of property. Long amended tax return However, if either you or the related party disposes of the like property within 2 years after the trade, you both must report any gain or loss not recognized on the original trade on your return filed for the year in which the later disposition occurs. Long amended tax return See Related Party Transactions in chapter 4 of Publication 550 for exceptions. Long amended tax return Losses on sales or trades of property. Long amended tax return   You cannot deduct a loss on the sale or trade of property, other than a distribution in complete liquidation of a corporation, if the transaction is directly or indirectly between you and the following related parties. Long amended tax return Members of your family. Long amended tax return This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. Long amended tax return ), and lineal descendants (children, grandchildren, etc. Long amended tax return ). Long amended tax return A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. Long amended tax return A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. Long amended tax return (See Constructive ownership of stock , later. Long amended tax return ) A tax-exempt charitable or educational organization directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable. Long amended tax return   In addition, a loss on the sale or trade of property is not deductible if the transaction is directly or indirectly between the following related parties. Long amended tax return A grantor and fiduciary, or the fiduciary and beneficiary, of any trust. Long amended tax return Fiduciaries of two different trusts, or the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. Long amended tax return A trust fiduciary and a corporation of which more than 50% in value of the outstanding stock is directly or indirectly owned by or for the trust, or by or for the grantor of the trust. Long amended tax return A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest, or the profits interest, in the partnership. Long amended tax return Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. Long amended tax return Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. Long amended tax return An executor and a beneficiary of an estate (except in the case of a sale or trade to satisfy a pecuniary bequest). Long amended tax return Two corporations that are members of the same controlled group. Long amended tax return (Under certain conditions, however, these losses are not disallowed but must be deferred. Long amended tax return ) Two partnerships if the same persons own, directly or indirectly, more than 50% of the capital interests or the profit interests in both partnerships. Long amended tax return Multiple property sales or trades. Long amended tax return   If you sell or trade to a related party a number of blocks of stock or pieces of property in a lump sum, you must figure the gain or loss separately for each block of stock or piece of property. Long amended tax return The gain on each item may be taxable. Long amended tax return However, you cannot deduct the loss on any item. Long amended tax return Also, you cannot reduce gains from the sales of any of these items by losses on the sales of any of the other items. Long amended tax return Indirect transactions. Long amended tax return   You cannot deduct your loss on the sale of stock through your broker if, under a prearranged plan, a related party buys the same stock you had owned. Long amended tax return This does not apply to a trade between related parties through an exchange that is purely coincidental and is not prearranged. Long amended tax return Constructive ownership of stock. Long amended tax return   In determining whether a person directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. Long amended tax return Rule 1. Long amended tax return   Stock directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. Long amended tax return Rule 2. Long amended tax return   An individual is considered to own the stock directly or indirectly owned by or for his or her family. Long amended tax return Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. Long amended tax return Rule 3. Long amended tax return   An individual owning, other than by applying rule 2, any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. Long amended tax return Rule 4. Long amended tax return   When applying rule 1, 2, or 3, stock constructively owned by a person under rule 1 is treated as actually owned by that person. Long amended tax return But stock constructively owned by an individual under rule 2 or rule 3 is not treated as owned by that individual for again applying either rule 2 or rule 3 to make another person the constructive owner of the stock. Long amended tax return Property received from a related party. Long amended tax return    If you sell or trade at a gain property you acquired from a related party, you recognize the gain only to the extent it is more than the loss previously disallowed to the related party. Long amended tax return This rule applies only if you are the original transferee and you acquired the property by purchase or exchange. Long amended tax return This rule does not apply if the related party's loss was disallowed because of the wash sale rules described in chapter 4 of Publication 550 under Wash Sales. Long amended tax return   If you sell or trade at a loss property you acquired from a related party, you cannot recognize the loss that was not allowed to the related party. Long amended tax return Example 1. Long amended tax return Your brother sells you stock for $7,600. Long amended tax return His cost basis is $10,000. Long amended tax return Your brother cannot deduct the loss of $2,400. Long amended tax return Later, you sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900. Long amended tax return Your reportable gain is $500 (the $2,900 gain minus the $2,400 loss not allowed to your brother). Long amended tax return Example 2. Long amended tax return If, in Example 1, you sold the stock for $6,900 instead of $10,500, your recognized loss is only $700 (your $7,600 basis minus $6,900). Long amended tax return You cannot deduct the loss that was not allowed to your brother. Long amended tax return Capital Gains and Losses This section discusses the tax treatment of gains and losses from different types of investment transactions. Long amended tax return Character of gain or loss. Long amended tax return   You need to classify your gains and losses as either ordinary or capital gains or losses. Long amended tax return You then need to classify your capital gains and losses as either short term or long term. Long amended tax return If you have long-term gains and losses, you must identify your 28% rate gains and losses. Long amended tax return If you have a net capital gain, you must also identify any unrecaptured section 1250 gain. Long amended tax return   The correct classification and identification helps you figure the limit on capital losses and the correct tax on capital gains. Long amended tax return Reporting capital gains and losses is explained in chapter 16. Long amended tax return Capital or Ordinary Gain or Loss If you have a taxable gain or a deductible loss from a transaction, it may be either a capital gain or loss or an ordinary gain or loss, depending on the circumstances. Long amended tax return Generally, a sale or trade of a capital asset (defined next) results in a capital gain or loss. Long amended tax return A sale or trade of a noncapital asset generally results in ordinary gain or loss. Long amended tax return Depending on the circumstances, a gain or loss on a sale or trade of property used in a trade or business may be treated as either capital or ordinary, as explained in Publication 544. Long amended tax return In some situations, part of your gain or loss may be a capital gain or loss and part may be an ordinary gain or loss. Long amended tax return Capital Assets and Noncapital Assets For the most part, everything you own and use for personal purposes, pleasure, or investment is a capital asset. Long amended tax return Some examples are: Stocks or bonds held in your personal account, A house owned and used by you and your family, Household furnishings, A car used for pleasure or commuting, Coin or stamp collections, Gems and jewelry, and Gold, silver, or any other metal. Long amended tax return Any property you own is a capital asset, except the following noncapital assets. Long amended tax return Property held mainly for sale to customers or property that will physically become a part of the merchandise for sale to customers. Long amended tax return For an exception, see Capital Asset Treatment for Self-Created Musical Works , later. Long amended tax return Depreciable property used in your trade or business, even if fully depreciated. Long amended tax return Real property used in your trade or business. Long amended tax return A copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property that is: Created by your personal efforts, Prepared or produced for you (in the case of a letter, memorandum, or similar property), or Acquired under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced. Long amended tax return For an exception to this rule, see Capital Asset Treatment for Self-Created Musical Works , later. Long amended tax return Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of property described in (1). Long amended tax return U. Long amended tax return S. Long amended tax return Government publications that you received from the government free or for less than the normal sales price, or that you acquired under circumstances entitling you to the basis of someone who received the publications free or for less than the normal sales price. Long amended tax return Certain commodities derivative financial instruments held by commodities derivatives dealers. Long amended tax return Hedging transactions, but only if the transaction is clearly identified as a hedging transaction before the close of the day on which it was acquired, originated, or entered into. Long amended tax return Supplies of a type you regularly use or consume in the ordinary course of your trade or business. Long amended tax return Investment Property Investment property is a capital asset. Long amended tax return Any gain or loss from its sale or trade is generally a capital gain or loss. Long amended tax return Gold, silver, stamps, coins, gems, etc. Long amended tax return   These are capital assets except when they are held for sale by a dealer. Long amended tax return Any gain or loss you have from their sale or trade generally is a capital gain or loss. Long amended tax return Stocks, stock rights, and bonds. Long amended tax return   All of these (including stock received as a dividend) are capital assets except when held for sale by a securities dealer. Long amended tax return However, if you own small business stock, see Losses on Section 1244 (Small Business) Stock , later, and Losses on Small Business Investment Company Stock, in chapter 4 of Publication 550. Long amended tax return Personal Use Property Property held for personal use only, rather than for investment, is a capital asset, and you must report a gain from its sale as a capital gain. Long amended tax return However, you cannot deduct a loss from selling personal use property. Long amended tax return Capital Asset Treatment for Self-Created Musical Works You can elect to treat musical compositions and copyrights in musical works as capital assets when you sell or exchange them if: Your personal efforts created the property, or You acquired the property under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced. Long amended tax return You must make a separate election for each musical composition (or copyright in a musical work) sold or exchanged during the tax year. Long amended tax return You must make the election on or before the due date (including extensions) of the income tax return for the tax year of the sale or exchange. Long amended tax return You must make the election on Form 8949 by treating the sale or exchange as the sale or exchange of a capital asset, according to Form 8949, Schedule D (Form 1040), and their separate instructions. Long amended tax return For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Long amended tax return See also Schedule D (Form 1040), Form 8949, and their separate instructions. Long amended tax return You can revoke the election if you have IRS approval. Long amended tax return To get IRS approval, you must submit a request for a letter ruling under the appropriate IRS revenue procedure. Long amended tax return See, for example, Rev. Long amended tax return Proc. Long amended tax return 2013-1, corrected by Announcement 2013–9, and amplified and modified by Rev. Long amended tax return Proc. Long amended tax return 2013–32, available at www. Long amended tax return irs. Long amended tax return gov/irb/2013-01_IRB/ar06. Long amended tax return html. Long amended tax return Alternatively, you are granted an automatic 6-month extension from the due date of your income tax return (excluding extensions) to revoke the election, provided you timely file your income tax return, and within this 6-month extension period, you file Form 1040X that treats the sale or exchange as the sale or exchange of property that is not a capital asset. Long amended tax return Discounted Debt Instruments Treat your gain or loss on the sale, redemption, or retirement of a bond or other debt instrument originally issued at a discount or bought at a discount as capital gain or loss, except as explained in the following discussions. Long amended tax return Short-term government obligations. Long amended tax return   Treat gains on short-term federal, state, or local government obligations (other than tax-exempt obligations) as ordinary income up to your ratable share of the acquisition discount. Long amended tax return This treatment applies to obligations with a fixed maturity date not more than 1 year from the date of issue. Long amended tax return Acquisition discount is the stated redemption price at maturity minus your basis in the obligation. Long amended tax return   However, do not treat these gains as income to the extent you previously included the discount in income. Long amended tax return See Discount on Short-Term Obligations in chapter 1 of Publication 550. Long amended tax return Short-term nongovernment obligations. Long amended tax return   Treat gains on short-term nongovernment obligations as ordinary income up to your ratable share of original issue discount (OID). Long amended tax return This treatment applies to obligations with a fixed maturity date of not more than 1 year from the date of issue. Long amended tax return   However, to the extent you previously included the discount in income, you do not have to include it in income again. Long amended tax return See Discount on Short-Term Obligations in chapter 1 of Publication 550. Long amended tax return Tax-exempt state and local government bonds. Long amended tax return   If these bonds were originally issued at a discount before September 4, 1982, or you acquired them before March 2, 1984, treat your part of OID as tax-exempt interest. Long amended tax return To figure your gain or loss on the sale or trade of these bonds, reduce the amount realized by your part of OID. Long amended tax return   If the bonds were issued after September 3, 1982, and acquired after March 1, 1984, increase the adjusted basis by your part of OID to figure gain or loss. Long amended tax return For more information on the basis of these bonds, see Discounted Debt Instruments in chapter 4 of Publication 550. Long amended tax return   Any gain from market discount is usually taxable on disposition or redemption of tax-exempt bonds. Long amended tax return If you bought the bonds before May 1, 1993, the gain from market discount is capital gain. Long amended tax return If you bought the bonds after April 30, 1993, the gain is ordinary income. Long amended tax return   You figure the market discount by subtracting the price you paid for the bond from the sum of the original issue price of the bond and the amount of accumulated OID from the date of issue that represented interest to any earlier holders. Long amended tax return For more information, see Market Discount Bonds in chapter 1 of Publication 550. Long amended tax return    A loss on the sale or other disposition of a tax-exempt state or local government bond is deductible as a capital loss. Long amended tax return Redeemed before maturity. Long amended tax return   If a state or local bond issued before June 9, 1980, is redeemed before it matures, the OID is not taxable to you. Long amended tax return   If a state or local bond issued after June 8, 1980, is redeemed before it matures, the part of OID earned while you hold the bond is not taxable to you. Long amended tax return However, you must report the unearned part of OID as a capital gain. Long amended tax return Example. Long amended tax return On July 2, 2002, the date of issue, you bought a 20-year, 6% municipal bond for $800. Long amended tax return The face amount of the bond was $1,000. Long amended tax return The $200 discount was OID. Long amended tax return At the time the bond was issued, the issuer had no intention of redeeming it before it matured. Long amended tax return The bond was callable at its face amount beginning 10 years after the issue date. Long amended tax return The issuer redeemed the bond at the end of 11 years (July 2, 2013) for its face amount of $1,000 plus accrued annual interest of $60. Long amended tax return The OID earned during the time you held the bond, $73, is not taxable. Long amended tax return The $60 accrued annual interest also is not taxable. Long amended tax return However, you must report the unearned part of OID ($127) as a capital gain. Long amended tax return Long-term debt instruments issued after 1954 and before May 28, 1969 (or before July 2, 1982, if a government instrument). Long amended tax return   If you sell, trade, or redeem for a gain one of these debt instruments, the part of your gain that is not more than your ratable share of the OID at the time of the sale or redemption is ordinary income. Long amended tax return The rest of the gain is capital gain. Long amended tax return If, however, there was an intention to call the debt instrument before maturity, all of your gain that is not more than the entire OID is treated as ordinary income at the time of the sale. Long amended tax return This treatment of taxable gain also applies to corporate instruments issued after May 27, 1969, under a written commitment that was binding on May 27, 1969, and at all times thereafter. Long amended tax return Long-term debt instruments issued after May 27, 1969 (or after July 1, 1982, if a government instrument). Long amended tax return   If you hold one of these debt instruments, you must include a part of OID in your gross income each year you own the instrument. Long amended tax return Your basis in that debt instrument is increased by the amount of OID that you have included in your gross income. Long amended tax return See Original Issue Discount (OID) in chapter 7 for information about OID that you must report on your tax return. Long amended tax return   If you sell or trade the debt instrument before maturity, your gain is a capital gain. Long amended tax return However, if at the time the instrument was originally issued there was an intention to call it before its maturity, your gain generally is ordinary income to the extent of the entire OID reduced by any amounts of OID previously includible in your income. Long amended tax return In this case, the rest of the gain is capital gain. Long amended tax return Market discount bonds. Long amended tax return   If the debt instrument has market discount and you chose to include the discount in income as it accrued, increase your basis in the debt instrument by the accrued discount to figure capital gain or loss on its disposition. Long amended tax return If you did not choose to include the discount in income as it accrued, you must report gain as ordinary interest income up to the instrument's accrued market discount. Long amended tax return The rest of the gain is capital gain. Long amended tax return See Market Discount Bonds in chapter 1 of Publication 550. Long amended tax return   A different rule applies to market discount bonds issued before July 19, 1984, and purchased by you before May 1, 1993. Long amended tax return See Market discount bonds under Discounted Debt Instruments in chapter 4 of Publication 550. Long amended tax return Retirement of debt instrument. Long amended tax return   Any amount you receive on the retirement of a debt instrument is treated in the same way as if you had sold or traded that instrument. Long amended tax return Notes of individuals. Long amended tax return   If you hold an obligation of an individual issued with OID after March 1, 1984, you generally must include the OID in your income currently, and your gain or loss on its sale or retirement is generally capital gain or loss. Long amended tax return An exception to this treatment applies if the obligation is a loan between individuals and all the following requirements are met. Long amended tax return The lender is not in the business of lending money. Long amended tax return The amount of the loan, plus the amount of any outstanding prior loans, is $10,000 or less. Long amended tax return Avoiding federal tax is not one of the principal purposes of the loan. Long amended tax return   If the exception applies, or the obligation was issued before March 2, 1984, you do not include the OID in your income currently. Long amended tax return When you sell or redeem the obligation, the part of your gain that is not more than your accrued share of OID at that time is ordinary income. Long amended tax return The rest of the gain, if any, is capital gain. Long amended tax return Any loss on the sale or redemption is capital loss. Long amended tax return Deposit in Insolvent or Bankrupt Financial Institution If you lose money you have on deposit in a bank, credit union, or other financial institution that becomes insolvent or bankrupt, you may be able to deduct your loss in one of three ways. Long amended tax return Ordinary loss. Long amended tax return Casualty loss. Long amended tax return Nonbusiness bad debt (short-term capital loss). Long amended tax return  For more information, see Deposit in Insolvent or Bankrupt Financial Institution, in chapter 4 of Publication 550. Long amended tax return Sale of Annuity The part of any gain on the sale of an annuity contract before its maturity date that is based on interest accumulated on the contract is ordinary income. Long amended tax return Losses on Section 1244 (Small Business) Stock You can deduct as an ordinary loss, rather than as a capital loss, your loss on the sale, trade, or worthlessness of section 1244 stock. Long amended tax return Report the loss on Form 4797, line 10. Long amended tax return Any gain on section 1244 stock is a capital gain if the stock is a capital asset in your hands. Long amended tax return Report the gain on Form 8949. Long amended tax return See Losses on Section 1244 (Small Business) Stock in chapter 4 of Publication 550. Long amended tax return For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Long amended tax return See also Schedule D (Form 1040), Form 8949, and their separate instructions. Long amended tax return Holding Period If you sold or traded investment property, you must determine your holding period for the property. Long amended tax return Your holding period determines whether any capital gain or loss was a short-term or long-term capital gain or loss. Long amended tax return Long-term or short-term. Long amended tax return   If you hold investment property more than 1 year, any capital gain or loss is a long-term capital gain or loss. Long amended tax return If you hold the property 1 year or less, any capital gain or loss is a short-term capital gain or loss. Long amended tax return   To determine how long you held the investment property, begin counting on the date after the day you acquired the property. Long amended tax return The day you disposed of the property is part of your holding period. Long amended tax return Example. Long amended tax return If you bought investment property on February 6, 2012, and sold it on February 6, 2013, your holding period is not more than 1 year and you have a short-term capital gain or loss. Long amended tax return If you sold it on February 7, 2013, your holding period is more than 1 year and you will have a long-term capital gain or loss. Long amended tax return Securities traded on established market. Long amended tax return   For securities traded on an established securities market, your holding period begins the day after the trade date you bought the securities, and ends on the trade date you sold them. Long amended tax return    Do not confuse the trade date with the settlement date, which is the date by which the stock must be delivered and payment must be made. Long amended tax return Example. Long amended tax return You are a cash method, calendar year taxpayer. Long amended tax return You sold stock at a gain on December 30, 2013. Long amended tax return According to the rules of the stock exchange, the sale was closed by delivery of the stock 4 trading days after the sale, on January 6, 2014. Long amended tax return You received payment of the sales price on that same day. Long amended tax return Report your gain on your 2013 return, even though you received the payment in 2014. Long amended tax return The gain is long term or short term depending on whether you held the stock more than 1 year. Long amended tax return Your holding period ended on December 30. Long amended tax return If you had sold the stock at a loss, you would also report it on your 2013 return. Long amended tax return U. Long amended tax return S. Long amended tax return Treasury notes and bonds. Long amended tax return   The holding period of U. Long amended tax return S. Long amended tax return Treasury notes and bonds sold at auction on the basis of yield starts the day after the Secretary of the Treasury, through news releases, gives notification of acceptance to successful bidders. Long amended tax return The holding period of U. Long amended tax return S. Long amended tax return Treasury notes and bonds sold through an offering on a subscription basis at a specified yield starts the day after the subscription is submitted. Long amended tax return Automatic investment service. Long amended tax return   In determining your holding period for shares bought by the bank or other agent, full shares are considered bought first and any fractional shares are considered bought last. Long amended tax return Your holding period starts on the day after the bank's purchase date. Long amended tax return If a share was bought over more than one purchase date, your holding period for that share is a split holding period. Long amended tax return A part of the share is considered to have been bought on each date that stock was bought by the bank with the proceeds of available funds. Long amended tax return Nontaxable trades. Long amended tax return   If you acquire investment property in a trade for other investment property and your basis for the new property is determined, in whole or in part, by your basis in the old property, your holding period for the new property begins on the day following the date you acquired the old property. Long amended tax return Property received as a gift. Long amended tax return   If you receive a gift of property and your basis is determined by the donor's adjusted basis, your holding period is considered to have started on the same day the donor's holding period started. Long amended tax return   If your basis is determined by the fair market value of the property, your holding period starts on the day after the date of the gift. Long amended tax return Inherited property. Long amended tax return   Generally, if you inherited investment property, your capital gain or loss on any later disposition of that property is long-term capital gain or loss. Long amended tax return This is true regardless of how long you actually held the property. Long amended tax return However, if you inherited property from someone who died in 2010, see the information below. Long amended tax return Inherited property from someone who died in 2010. Long amended tax return   If you inherit investment property from a decedent who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your holding period. Long amended tax return Real property bought. Long amended tax return   To figure how long you have held real property bought under an unconditional contract, begin counting on the day after you received title to it or on the day after you took possession of it and assumed the burdens and privileges of ownership, whichever happened first. Long amended tax return However, taking delivery or possession of real property under an option agreement is not enough to start the holding period. Long amended tax return The holding period cannot start until there is an actual contract of sale. Long amended tax return The holding period of the seller cannot end before that time. Long amended tax return Real property repossessed. Long amended tax return   If you sell real property but keep a security interest in it, and then later repossess the property under the terms of the sales contract, your holding period for a later sale includes the period you held the property before the original sale and the period after the repossession. Long amended tax return Your holding period does not include the time between the original sale and the repossession. Long amended tax return That is, it does not include the period during which the first buyer held the property. Long amended tax return Stock dividends. Long amended tax return   The holding period for stock you received as a taxable stock dividend begins on the date of distribution. Long amended tax return   The holding period for new stock you received as a nontaxable stock dividend begins on the same day as the holding period of the old stock. Long amended tax return This rule also applies to stock acquired in a “spin-off,” which is a distribution of stock or securities in a controlled corporation. Long amended tax return Nontaxable stock rights. Long amended tax return   Your holding period for nontaxable stock rights begins on the same day as the holding period of the underlying stock. Long amended tax return The holding period for stock acquired through the exercise of stock rights begins on the date the right was exercised. Long amended tax return Nonbusiness Bad Debts If someone owes you money that you cannot collect, you have a bad debt. Long amended tax return You may be able to deduct the amount owed to you when you figure your tax for the year the debt becomes worthless. Long amended tax return Generally, nonbusiness bad debts are bad debts that did not come from operating your trade or business, and are deductible as short-term capital losses. Long amended tax return To be deductible, nonbusiness bad debts must be totally worthless. Long amended tax return You cannot deduct a partly worthless nonbusiness debt. Long amended tax return Genuine debt required. Long amended tax return   A debt must be genuine for you to deduct a loss. Long amended tax return A debt is genuine if it arises from a debtor-creditor relationship based on a valid and enforceable obligation to repay a fixed or determinable sum of money. Long amended tax return Basis in bad debt required. Long amended tax return    To deduct a bad debt, you must have a basis in it—that is, you must have already included the amount in your income or loaned out your cash. Long amended tax return For example, you cannot claim a bad debt deduction for court-ordered child support not paid to you by your former spouse. Long amended tax return If you are a cash method taxpayer (as most individuals are), you generally cannot take a bad debt deduction for unpaid salaries, wages, rents, fees, interest, dividends, and similar items. Long amended tax return When deductible. Long amended tax return   You can take a bad debt deduction only in the year the debt becomes worthless. Long amended tax return You do not have to wait until a debt is due to determine whether it is worthless. Long amended tax return A debt becomes worthless when there is no longer any chance that the amount owed will be paid. Long amended tax return   It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. Long amended tax return You must only show that you have taken reasonable steps to collect the debt. Long amended tax return Bankruptcy of your debtor is generally good evidence of the worthlessness of at least a part of an unsecured and unpreferred debt. Long amended tax return How to report bad debts. Long amended tax return    Deduct nonbusiness bad debts as short-term capital losses on Form 8949. Long amended tax return    Make sure you report your bad debt(s) (and any other short-term transactions for which you did not receive a Form 1099-B) on Form 8949, Part I, with box C checked. Long amended tax return    For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Long amended tax return See also Schedule D (Form 1040), Form 8949, and their separate instructions. Long amended tax return   For each bad debt, attach a statement to your return that contains: A description of the debt, including the amount, and the date it became due, The name of the debtor, and any business or family relationship between you and the debtor, The efforts you made to collect the debt, and Why you decided the debt was worthless. Long amended tax return For example, you could show that the borrower has declared bankruptcy, or that legal action to collect would probably not result in payment of any part of the debt. Long amended tax return Filing a claim for refund. Long amended tax return    If you do not deduct a bad debt on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the bad debt. Long amended tax return To do this, use Form 1040X to amend your return for the year the debt became worthless. Long amended tax return You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. Long amended tax return For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. Long amended tax return Additional information. Long amended tax return   For more information, see Nonbusiness Bad Debts in Publication 550. Long amended tax return For information on business bad debts, see chapter 10 of Publication 535, Business Expenses. Long amended tax return Wash Sales You cannot deduct losses from sales or trades of stock or securities in a wash sale. Long amended tax return A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you: Buy substantially identical stock or securities, Acquire substantially identical stock or securities in a fully taxable trade, Acquire a contract or option to buy substantially identical stock or securities, or Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA. Long amended tax return If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities (except in (4) above). Long amended tax return The result is your basis in the new stock or securities. Long amended tax return This adjustment postpones the loss deduction until the disposition of the new stock or securities. Long amended tax return Your holding period for the new stock or securities includes the holding period of the stock or securities sold. Long amended tax return For more information, see Wash Sales, in chapter 4 of Publication 550. Long amended tax return Rollover of Gain From Publicly Traded Securities You may qualify for a tax-free rollover of certain gains from the sale of publicly traded securities. Long amended tax return This means that if you buy certain replacement property and make the choice described in this section, you postpone part or all of your gain. Long amended tax return You postpone the gain by adjusting the basis of the replacement property as described in Basis of replacement property , later. Long amended tax return This postpones your gain until the year you dispose of the replacement property. Long amended tax return You qualify to make this choice if you meet all the following tests. Long amended tax return You sell publicly traded securities at a gain. Long amended tax return Publicly traded securities are securities traded on an established securities market. Long amended tax return Your gain from the sale is a capital gain. Long amended tax return During the 60-day period beginning on the date of the sale, you buy replacement property. Long amended tax return This replacement property must be either common stock of, or a partnership interest in a specialized small business investment company (SSBIC). Long amended tax return This is any partnership or corporation licensed by the Small Business Administration under section 301(d) of the Small Business Investment Act of 1958, as in effect on May 13, 1993. Long amended tax return Amount of gain recognized. Long amended tax return   If you make the choice described in this section, you must recognize gain only up to the following amount. Long amended tax return The amount realized on the sale, minus The cost of any common stock or partnership interest in an SSBIC that you bought during the 60-day period beginning on the date of sale (and did not previously take into account on an earlier sale of publicly traded securities). Long amended tax return  If this amount is less than the amount of your gain, you can postpone the rest of your gain, subject to the limit described next. Long amended tax return If this amount is equal to or more than the amount of your gain, you must recognize the full amount of your gain. Long amended tax return Limit on gain postponed. Long amended tax return   The amount of gain you can postpone each year is limited to the smaller of: $50,000 ($25,000 if you are married and file a separate return), or $500,000 ($250,000 if you are married and file a separate return), minus the amount of gain you postponed for all earlier years. Long amended tax return Basis of replacement property. Long amended tax return   You must subtract the amount of postponed gain from the basis of your replacement property. Long amended tax return How to report and postpone gain. Long amended tax return    See How to report and postpone gain under Rollover of Gain From Publicly Traded Securities in chapter 4 of Publication 550 for details. Long amended tax return Prev  Up  Next   Home   More Online Publications