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

The Mypay Com

Mypay com Index C Change in classification Disregarded entity to corporation, Subsequent Elections Disregarded entity to partnership, Change in default classification. Mypay com , Subsequent Elections Partnership to corporation, Subsequent Elections Partnership to disregarded entity, Change in default classification. Mypay com , Subsequent Elections Recognition of gain or loss, Change in default classification. Mypay com , Change in default classification. Mypay com , Subsequent Elections Classification as a corporation, LLCs Classified as Corporations Classification as a Disregarded Entity, LLCs Classified as Disregarded Entities Classification as a Partnership, LLCs Classified as Partnerships Classification Election, LLCs Classified as Corporations Classification of an LLC Default classification, Classification of an LLC Elected classification, Classification of an LLC Comments on publication, Comments and suggestions. Mypay com E Employer identification number (see Taxpayer identification number) Employment tax, Employment tax and certain excise taxes. Mypay com Excise taxes, Employment tax and certain excise taxes. Mypay com I Information, How to get more, How To Get More Information S Self-employment tax, Self-employment tax rule for disregarded entity LLCs. Mypay com Small Business Administration, Small Business Administration Social security number (see Taxpayer identification number) Subchapter S election, LLCs Classified as Corporations Suggestions for publication, Comments and suggestions. Mypay com T Tax help (see Information, How to get more) Taxpayer Advocate, Contacting your Taxpayer Advocate. Mypay com Taxpayer identification number, Taxpayer identification number. Mypay com Prev  Up     Home   More Online Publications