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Need 2007 Taxes

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Need 2007 Taxes

Need 2007 taxes Index A Additional Medicare Tax, What's New Allocated tips, Allocated Tips Assistance (see Tax help) C Cash tips, How to keep a daily tip record. Need 2007 taxes Credit card charge tips, How to keep a daily tip record. Need 2007 taxes D Daily tip record, Keeping a Daily Tip Record E Electronic tip record, Electronic tip record. Need 2007 taxes Electronic tip statement, Electronic tip statement. Need 2007 taxes Employers Giving money to, for taxes, Giving your employer money for taxes. Need 2007 taxes Reporting tips to, Reporting Tips to Your Employer EmTRAC program, Tip Rate Determination and Education Program F Figures Form 4070A, sample filled-in, Form 1040 Schedule C, Self-employed persons. Need 2007 taxes Unreported tips, Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer. Need 2007 taxes Form 4070, What tips to report. Need 2007 taxes Sample filled-in, Form 4070A, How to keep a daily tip record. Need 2007 taxes Form 4137, Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer. Need 2007 taxes Form 8027, How to request an approved lower rate. Need 2007 taxes Form W-2 Uncollected taxes, Giving your employer money for taxes. Need 2007 taxes , Reporting uncollected social security, Medicare, Additional Medicare, or railroad retirement taxes on tips reported to your employer. Need 2007 taxes Free tax services, Free help with your tax return. Need 2007 taxes G Gaming Industry Tip Compliance Agreement Program, Tip Rate Determination and Education Program H Help (see Tax help) M Missing children, photographs of, Reminder N Noncash tips, How to keep a daily tip record. Need 2007 taxes P Penalties Failure to report tips to employer, Penalty for not reporting tips. Need 2007 taxes Underpayment of estimated taxes, Giving your employer money for taxes. Need 2007 taxes Publications (see Tax help) R Recordkeeping requirements Daily tip record, Keeping a Daily Tip Record Reporting Employee to report tips to employer, Reporting Tips to Your Employer Tip income, Introduction S Self-employed persons, Self-employed persons. Need 2007 taxes Service charge paid as wages, Service charges. Need 2007 taxes Social security and Medicare taxes Allocated tips, How to report allocated tips. Need 2007 taxes Reporting of earnings to Social Security Administration, Why report tips to your employer. Need 2007 taxes Tips not reported to employer, Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer. Need 2007 taxes Uncollected taxes on tips, Reporting uncollected social security, Medicare, Additional Medicare, or railroad retirement taxes on tips reported to your employer. Need 2007 taxes T Tax help, How To Get Tax Help Tax returns, Reporting Tips on Your Tax Return Tip pools, How to keep a daily tip record. Need 2007 taxes Tip Rate Determination and Education Program, Tip Rate Determination and Education Program Tip splitting, How to keep a daily tip record. Need 2007 taxes TTY/TDD information, How To Get Tax Help U Uncollected taxes, Giving your employer money for taxes. Need 2007 taxes , Reporting uncollected social security, Medicare, Additional Medicare, or railroad retirement taxes on tips reported to your employer. Need 2007 taxes W Withholding, Why report tips to your employer. Need 2007 taxes Prev  Up     Home   More Online Publications
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Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

Office of the Attorney General

Website: Office of the Attorney General

Address: Office of the Attorney General
Consumer Protection Division
PO Box 30213
Lansing, MI 48909-7713

Phone Number: 517-373-1140

Toll-free: 1-877-765-8388 (MI)

Michigan Department of Agriculture and Rural Development

Website: Michigan Department of Agriculture and Rural Development

Address: Michigan Department of Agriculture and Rural Development
Consumer Protection Section
Weights & Measures
PO Box 30017
Lansing, MI 48909

Toll-free: 1-800-292-3939

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County Consumer Protection Offices

Macomb County Consumer Protection Unit

Website: Macomb County Consumer Protection Unit

Address: Macomb County Consumer Protection Unit
Consumer Protection Unit
One S. Main St., 3rd Floor
Mt. Clemens, MI 48043

Phone Number: 586-469-5600

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

Department of Insurance and Financial Services

Website: Department of Insurance and Financial Services

Address: Department of Insurance and Financial Services
PO Box 30220
Lansing, MI 48909-7720

Phone Number: 517-373-0220

Toll-free: 1-877-999-6442 (MI)

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Department of Insurance and Financial Services

Website: Department of Insurance and Financial Services

Address: Department of Insurance and Financial Services
PO Box 30220
Lansing, MI 48909-7720

Phone Number: 517-373-0220

Toll-free: 1-877-999-6442

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Department of Licensing and Regulatory Affairs

Website: Department of Licensing and Regulatory Affairs

Address: Department of Licensing and Regulatory Affairs
Securities Division
PO Box 30018
Lansing, MI 48909

Phone Number: 517-241-9202

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Public Service Commission

Website: Public Service Commission

Address: Public Service Commission
Customer Intake Center
PO Box 30221
Lansing, MI 48909

Phone Number: 517-241-6180

Toll-free: 1-800-292-9555 (MI)

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The Need 2007 Taxes

Need 2007 taxes 4. Need 2007 taxes   Sales and Trades of Investment Property Table of Contents IntroductionNominees. Need 2007 taxes Topics - This chapter discusses: Useful Items - You may want to see: What Is a Sale or Trade?Dividend versus sale or trade. Need 2007 taxes Worthless Securities Constructive Sales of Appreciated Financial Positions Section 1256 Contracts Marked to Market Basis of Investment PropertyCost Basis Basis Other Than Cost Adjusted Basis Stocks and Bonds How To Figure Gain or LossFair market value. Need 2007 taxes Debt paid off. Need 2007 taxes Payment of cash. Need 2007 taxes Special Rules for Mutual Funds Nontaxable TradesLike-Kind Exchanges Corporate Stocks Exchange of Shares In One Mutual Fund For Shares In Another Mutual Fund Insurance Policies and Annuities U. Need 2007 taxes S. Need 2007 taxes Treasury Notes or Bonds Transfers Between Spouses Related Party TransactionsGain on Sale or Trade of Depreciable Property Capital Gains and LossesCapital or Ordinary Gain or Loss Holding Period Nonbusiness Bad Debts Short Sales Wash Sales Options Straddles Sales of Stock to ESOPs or Certain Cooperatives Rollover of Gain From Publicly Traded Securities Gains on Qualified Small Business Stock Exclusion of Gain From DC Zone Assets Reporting Capital Gains and LossesException 1. Need 2007 taxes Exception 2. Need 2007 taxes Section 1256 contracts and straddles. Need 2007 taxes Market discount bonds. Need 2007 taxes File Form 1099-B or Form 1099-S with the IRS. Need 2007 taxes Capital Losses Capital Gain Tax Rates Special Rules for Traders in SecuritiesHow To Report Introduction This chapter explains the tax treatment of sales and trades of investment property. Need 2007 taxes Investment property. Need 2007 taxes   This is property that produces investment income. Need 2007 taxes Examples include stocks, bonds, and Treasury bills and notes. Need 2007 taxes Property used in a trade or business is not investment property. Need 2007 taxes Form 1099-B. Need 2007 taxes   If you sold property such as stocks, bonds, mutual funds, 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. Need 2007 taxes You should receive the statement by February 15 of the next year. Need 2007 taxes It will show the gross proceeds from the sale. Need 2007 taxes The IRS will also get a copy of Form 1099-B from the broker. Need 2007 taxes   Use Form 1099-B (or substitute statement received from your broker) to complete Form 8949. Need 2007 taxes If you sold a covered security in 2013, your broker will send you a Form 1099-B (or substitute statement) that shows your basis. Need 2007 taxes This will help you complete Form 8949. Need 2007 taxes Generally, a covered security is a security you acquired after 2010, with certain exceptions explained in the Instructions for Form 8949. Need 2007 taxes    For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in this chapter. Need 2007 taxes Also see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). Need 2007 taxes Nominees. Need 2007 taxes   If someone receives gross proceeds as a nominee for you, that person will give you a Form 1099-B, which will show gross proceeds received on your behalf. Need 2007 taxes   If you receive a Form 1099-B that includes gross proceeds belonging to another person, see Nominees , later under Reporting Capital Gains and Losses for more information. Need 2007 taxes Other property transactions. Need 2007 taxes   Certain transfers of property are discussed in other IRS publications. Need 2007 taxes These include: Sale of your main home, discussed in Publication 523, Selling Your Home; Installment sales, covered in Publication 537; Various types of transactions involving business property, discussed in Publication 544, Sales and Other Dispositions of Assets; Transfers of property at death, covered in Publication 559; and Disposition of an interest in a passive activity, discussed in Publication 925. Need 2007 taxes Topics - This chapter discusses: What Is a Sale or Trade? , Basis of Investment Property , Adjusted Basis , How To Figure Gain or Loss , Nontaxable trades , Transfers Between Spouses , Related Party Transactions , Capital Gains and Losses , Reporting Capital Gains and Losses , and Special Rules for Traders in Securities . Need 2007 taxes Useful Items - You may want to see: Publication 551 Basis of Assets Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 6781 Gains and Losses From Section 1256 Contracts and Straddles 8582 Passive Activity Loss Limitations 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets See chapter 5, How To Get Tax Help , for information about getting these publications and forms. Need 2007 taxes What Is a Sale or Trade? This section explains what is a sale or trade. Need 2007 taxes It also explains certain transactions and events that are treated as sales or trades. Need 2007 taxes A sale is generally a transfer of property for money or a mortgage, note, or other promise to pay money. Need 2007 taxes A trade is a transfer of property for other property or services, and may be taxed in the same way as a sale. Need 2007 taxes Sale and purchase. Need 2007 taxes   Ordinarily, a transaction is not a trade when you voluntarily sell property for cash and immediately buy similar property to replace it. Need 2007 taxes The sale and purchase are two separate transactions. Need 2007 taxes But see Like-Kind Exchanges under Nontaxable Trades, later. Need 2007 taxes Redemption of stock. Need 2007 taxes   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. Need 2007 taxes Dividend versus sale or trade. Need 2007 taxes   Whether a redemption is treated as a sale, trade, dividend, or other distribution depends on the circumstances in each case. Need 2007 taxes Both direct and indirect ownership of stock will be considered. Need 2007 taxes The redemption is treated as a sale or trade of stock if: The redemption is not essentially equivalent to a dividend — see Dividends and Other Distributions in chapter 1, 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. Need 2007 taxes Redemption or retirement of bonds. Need 2007 taxes   A redemption or retirement of bonds or notes at their maturity generally is treated as a sale or trade. Need 2007 taxes See Stocks, stock rights, and bonds and Discounted Debt Instruments under Capital or Ordinary Gain or Loss, later. Need 2007 taxes   In addition, a significant modification of a bond is treated as a trade of the original bond for a new bond. Need 2007 taxes For details, see Regulations section 1. Need 2007 taxes 1001-3. Need 2007 taxes Surrender of stock. Need 2007 taxes   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. Need 2007 taxes The surrendering shareholder must reallocate his or her basis in the surrendered shares to the shares he or she retains. Need 2007 taxes Trade of investment property for an annuity. Need 2007 taxes   The transfer of investment property to a corporation, trust, fund, foundation, or other organization, in exchange for a fixed annuity contract that will make guaranteed annual payments to you for life, is a taxable trade. Need 2007 taxes If the present value of the annuity is more than your basis in the property traded, you have a taxable gain in the year of the trade. Need 2007 taxes Figure the present value of the annuity according to factors used by commercial insurance companies issuing annuities. Need 2007 taxes Transfer by inheritance. Need 2007 taxes   The transfer of property of a decedent to the executor or administrator of the estate, or to the heirs or beneficiaries, is not a sale or other disposition. Need 2007 taxes No taxable gain or deductible loss results from the transfer. Need 2007 taxes Termination of certain rights and obligations. Need 2007 taxes   The cancellation, lapse, expiration, or other termination of a right or obligation (other than a securities futures contract) with respect to property that is a capital asset (or that would be a capital asset if you acquired it) is treated as a sale. Need 2007 taxes Any gain or loss is treated as a capital gain or loss. Need 2007 taxes   This rule does not apply to the retirement of a debt instrument. Need 2007 taxes See Redemption or retirement of bonds , earlier. Need 2007 taxes Worthless Securities 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. Need 2007 taxes This affects whether your capital loss is long term or short term. Need 2007 taxes See Holding Period , later. Need 2007 taxes Worthless securities also include securities that you abandon after March 12, 2008. Need 2007 taxes To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. Need 2007 taxes 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. Need 2007 taxes 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. Need 2007 taxes Do not deduct them in the year the stock became worthless. Need 2007 taxes How to report loss. Need 2007 taxes   Report worthless securities in Form 8949, Part I or Part II, whichever applies. Need 2007 taxes    Report your worthless securities transactions on Form 8949 with the correct box checked for these transactions. Need 2007 taxes See Form 8949 and the Instructions for Form 8949. Need 2007 taxes Filing a claim for refund. Need 2007 taxes   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. Need 2007 taxes You must use Form 1040X, Amended U. Need 2007 taxes S. Need 2007 taxes Individual Income Tax Return, to amend your return for the year the security became worthless. Need 2007 taxes 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. Need 2007 taxes (Claims not due to worthless securities or bad debts generally must be filed within 3 years from the date a return is filed, or 2 years from the date the tax is paid, whichever is later. Need 2007 taxes ) For more information about filing a claim, see Publication 556. Need 2007 taxes Constructive Sales of Appreciated Financial Positions You are treated as having made a constructive sale when you enter into certain transactions involving an appreciated financial position (defined later) in stock, a partnership interest, or certain debt instruments. Need 2007 taxes You must recognize gain as if the position were disposed of at its fair market value on the date of the constructive sale. Need 2007 taxes This gives you a new holding period for the position that begins on the date of the constructive sale. Need 2007 taxes Then, when you close the transaction, you reduce your gain (or increase your loss) by the gain recognized on the constructive sale. Need 2007 taxes Constructive sale. Need 2007 taxes   You are treated as having made a constructive sale of an appreciated financial position if you: Enter into a short sale of the same or substantially identical property, Enter into an offsetting notional principal contract relating to the same or substantially identical property, Enter into a futures or forward contract to deliver the same or substantially identical property (including a forward contract that provides for cash settlement), or Acquire the same or substantially identical property (if the appreciated financial position is a short sale, an offsetting notional principal contract, or a futures or forward contract). Need 2007 taxes   You are also treated as having made a constructive sale of an appreciated financial position if a person related to you enters into a transaction described above with a view toward avoiding the constructive sale treatment. Need 2007 taxes For this purpose, a related person is any related party described under Related Party Transactions , later in this chapter. Need 2007 taxes Exception for nonmarketable securities. Need 2007 taxes   You are not treated as having made a constructive sale solely because you entered into a contract for sale of any stock, debt instrument, or partnership interest that is not a marketable security if it settles within 1 year of the date you enter into it. Need 2007 taxes Exception for certain closed transactions. Need 2007 taxes   Do not treat a transaction as a constructive sale if all of the following are true. Need 2007 taxes You closed the transaction on or before the 30th day after the end of your tax year. Need 2007 taxes You held the appreciated financial position throughout the 60-day period beginning on the date you closed the transaction. Need 2007 taxes Your risk of loss was not reduced at any time during that 60-day period by holding certain other positions. Need 2007 taxes   If a closed transaction is reestablished in a substantially similar position during the 60-day period beginning on the date the first transaction was closed, this exception still applies if the reestablished position is closed before the 30th day after the end of your tax year in which the first transaction was closed and, after that closing, (2) and (3) above are true. Need 2007 taxes   This exception also applies to successive short sales of an entire appreciated financial position. Need 2007 taxes For more information, see Revenue Ruling 2003-1 in Internal Revenue Bulletin 2003-3. Need 2007 taxes This bulletin is available at www. Need 2007 taxes irs. Need 2007 taxes gov/pub/irs-irbs/irb03-03. Need 2007 taxes pdf. Need 2007 taxes Appreciated financial position. Need 2007 taxes   This is any interest in stock, a partnership interest, or a debt instrument (including a futures or forward contract, a short sale, or an option) if disposing of the interest would result in a gain. Need 2007 taxes Exceptions. Need 2007 taxes   An appreciated financial position does not include the following. Need 2007 taxes Any position from which all of the appreciation is accounted for under marked-to-market rules, including section 1256 contracts (described later under Section 1256 Contracts Marked to Market ). Need 2007 taxes Any position in a debt instrument if: The position unconditionally entitles the holder to receive a specified principal amount, The interest payments (or other similar amounts) with respect to the position are payable at a fixed rate or a variable rate described in Regulations section 1. Need 2007 taxes 860G-1(a)(3), and The position is not convertible, either directly or indirectly, into stock of the issuer (or any related person). Need 2007 taxes Any hedge with respect to a position described in (2). Need 2007 taxes Certain trust instruments treated as stock. Need 2007 taxes   For the constructive sale rules, an interest in an actively traded trust is treated as stock unless substantially all of the value of the property held by the trust is debt that qualifies for the exception to the definition of an appreciated financial position (explained in (2) above). Need 2007 taxes Sale of appreciated financial position. Need 2007 taxes   A transaction treated as a constructive sale of an appreciated financial position is not treated as a constructive sale of any other appreciated financial position, as long as you continue to hold the original position. Need 2007 taxes However, if you hold another appreciated financial position and dispose of the original position before closing the transaction that resulted in the constructive sale, you are treated as if, at the same time, you constructively sold the other appreciated financial position. Need 2007 taxes Section 1256 Contracts Marked to Market If you hold a section 1256 contract at the end of the tax year, you generally must treat it as sold at its fair market value on the last business day of the tax year. Need 2007 taxes Section 1256 Contract A section 1256 contract is any: Regulated futures contract, Foreign currency contract, Nonequity option, Dealer equity option, or Dealer securities futures contract. Need 2007 taxes Exceptions. Need 2007 taxes   A section 1256 contract does not include: Interest rate swaps, Currency swaps, Basis swaps, Interest rate caps, Interest rate floors, Commodity swaps, Equity swaps, Equity index swaps, Credit default swaps, or Similar agreements. Need 2007 taxes For more details, including definitions of these terms, see section 1256. Need 2007 taxes Regulated futures contract. Need 2007 taxes   This is a contract that: Provides that amounts which must be deposited to, or can be withdrawn from, your margin account depend on daily market conditions (a system of marking to market), and Is traded on, or subject to the rules of, a qualified board of exchange. Need 2007 taxes A qualified board of exchange is a domestic board of trade designated as a contract market by the Commodity Futures Trading Commission, any board of trade or exchange approved by the Secretary of the Treasury, or a national securities exchange registered with the Securities and Exchange Commission. Need 2007 taxes Foreign currency contract. Need 2007 taxes   This is a contract that: Requires delivery of a foreign currency that has positions traded through regulated futures contracts (or settlement of which depends on the value of that type of foreign currency), Is traded in the interbank market, and Is entered into at arm's length at a price determined by reference to the price in the interbank market. Need 2007 taxes   Bank forward contracts with maturity dates longer than the maturities ordinarily available for regulated futures contracts are considered to meet the definition of a foreign currency contract if the above three conditions are satisfied. Need 2007 taxes   Special rules apply to certain foreign currency transactions. Need 2007 taxes These transactions may result in ordinary gain or loss treatment. Need 2007 taxes For details, see Internal Revenue Code section 988 and Regulations sections 1. Need 2007 taxes 988-1(a)(7) and 1. Need 2007 taxes 988-3. Need 2007 taxes Nonequity option. Need 2007 taxes   This is any listed option (defined later) that is not an equity option. Need 2007 taxes Nonequity options include debt options, commodity futures options, currency options, and broad-based stock index options. Need 2007 taxes A broad-based stock index is based on the value of a group of diversified stocks or securities (such as the Standard and Poor's 500 index). Need 2007 taxes Warrants based on a stock index that are economically, substantially identical in all material respects to options based on a stock index are treated as options based on a stock index. Need 2007 taxes Cash-settled options. Need 2007 taxes   Cash-settled options based on a stock index and either traded on or subject to the rules of a qualified board of exchange are nonequity options if the Securities and Exchange Commission (SEC) determines that the stock index is broad based. Need 2007 taxes   This rule does not apply to options established before the SEC determines that the stock index is broad based. Need 2007 taxes Listed option. Need 2007 taxes   This is any option traded on, or subject to the rules of, a qualified board or exchange (as discussed earlier under Regulated futures contract). Need 2007 taxes A listed option, however, does not include an option that is a right to acquire stock from the issuer. Need 2007 taxes Dealer equity option. Need 2007 taxes   This is any listed option that, for an options dealer: Is an equity option, Is bought or granted by that dealer in the normal course of the dealer's business activity of dealing in options, and Is listed on the qualified board of exchange where that dealer is registered. Need 2007 taxes   An “options dealer” is any person registered with an appropriate national securities exchange as a market maker or specialist in listed options. Need 2007 taxes Equity option. Need 2007 taxes   This is any option: To buy or sell stock, or That is valued directly or indirectly by reference to any stock or narrow-based security index. Need 2007 taxes  Equity options include options on a group of stocks only if the group is a narrow-based stock index. Need 2007 taxes Dealer securities futures contract. Need 2007 taxes   For any dealer in securities futures contracts or options on those contracts, this is a securities futures contract (or option on such a contract) that: Is entered into by the dealer (or, in the case of an option, is purchased or granted by the dealer) in the normal course of the dealer's activity of dealing in this type of contract (or option), and Is traded on a qualified board or exchange (as defined under Regulated futures contract , earlier). Need 2007 taxes A securities futures contract that is not a dealer securities futures contract is treated as described later under Securities Futures Contracts . Need 2007 taxes Marked-to-Market Rules A section 1256 contract that you hold at the end of the tax year will generally be treated as sold at its fair market value on the last business day of the tax year, and you must recognize any gain or loss that results. Need 2007 taxes That gain or loss is taken into account in figuring your gain or loss when you later dispose of the contract, as shown in the example under 60/40 rule, below. Need 2007 taxes Hedging exception. Need 2007 taxes   The marked-to-market rules do not apply to hedging transactions. Need 2007 taxes See Hedging Transactions , later. Need 2007 taxes 60/40 rule. Need 2007 taxes   Under the marked-to-market system, 60% of your capital gain or loss will be treated as a long-term capital gain or loss, and 40% will be treated as a short-term capital gain or loss. Need 2007 taxes This is true regardless of how long you actually held the property. Need 2007 taxes Example. Need 2007 taxes On June 22, 2012, you bought a regulated futures contract for $50,000. Need 2007 taxes On December 31, 2012 (the last business day of your tax year), the fair market value of the contract was $57,000. Need 2007 taxes You recognized a $7,000 gain on your 2012 tax return, treated as 60% long-term and 40% short-term capital gain. Need 2007 taxes On February 1, 2013, you sold the contract for $56,000. Need 2007 taxes Because you recognized a $7,000 gain on your 2012 return, you recognize a $1,000 loss ($57,000 − $56,000) on your 2013 tax return, treated as 60% long-term and 40% short-term capital loss. Need 2007 taxes Limited partners or entrepreneurs. Need 2007 taxes   The 60/40 rule does not apply to dealer equity options or dealer securities futures contracts that result in capital gain or loss allocable to limited partners or limited entrepreneurs (defined later under Hedging Transactions ). Need 2007 taxes Instead, these gains or losses are treated as short term. Need 2007 taxes Terminations and transfers. Need 2007 taxes   The marked-to-market rules also apply if your obligation or rights under section 1256 contracts are terminated or transferred during the tax year. Need 2007 taxes In this case, use the fair market value of each section 1256 contract at the time of termination or transfer to determine the gain or loss. Need 2007 taxes Terminations or transfers may result from any offsetting, delivery, exercise, assignment, or lapse of your obligation or rights under section 1256 contracts. Need 2007 taxes Loss carryback election. Need 2007 taxes   An individual having a net section 1256 contracts loss (defined later), generally can elect to carry this loss back 3 years instead of carrying it over to the next year. Need 2007 taxes See How To Report , later, for information about reporting this election on your return. Need 2007 taxes   The loss carried back to any year under this election cannot be more than the net section 1256 contracts gain in that year. Need 2007 taxes In addition, the amount of loss carried back to an earlier tax year cannot increase or produce a net operating loss for that year. Need 2007 taxes   The loss is carried to the earliest carryback year first, and any unabsorbed loss amount can then be carried to each of the next 2 tax years. Need 2007 taxes In each carryback year, treat 60% of the carryback amount as a long-term capital loss and 40% as a short-term capital loss from section 1256 contracts. Need 2007 taxes   If only a portion of the net section 1256 contracts loss is absorbed by carrying the loss back, the unabsorbed portion can be carried forward, under the capital loss carryover rules, to the year following the loss. Need 2007 taxes (See Capital Losses under Reporting Capital Gains and Losses, later. Need 2007 taxes ) Figure your capital loss carryover as if, for the loss year, you had an additional short-term capital gain of 40% of the amount of net section 1256 contracts loss absorbed in the carryback years and an additional long-term capital gain of 60% of the absorbed loss. Need 2007 taxes In the carryover year, treat any capital loss carryover from losses on section 1256 contracts as if it were a loss from section 1256 contracts for that year. Need 2007 taxes Net section 1256 contracts loss. Need 2007 taxes   This loss is the lesser of: The net capital loss for your tax year determined by taking into account only the gains and losses from section 1256 contracts, or The capital loss carryover to the next tax year determined without this election. Need 2007 taxes Net section 1256 contracts gain. Need 2007 taxes   This gain is the lesser of: The capital gain net income for the carryback year determined by taking into account only gains and losses from section 1256 contracts, or The capital gain net income for that year. Need 2007 taxes  Figure your net section 1256 contracts gain for any carryback year without regard to the net section 1256 contracts loss for the loss year or any later tax year. Need 2007 taxes Traders in section 1256 contracts. Need 2007 taxes   Gain or loss from the trading of section 1256 contracts is capital gain or loss subject to the marked-to-market rules. Need 2007 taxes However, this does not apply to contracts held for purposes of hedging property if any loss from the property would be an ordinary loss. Need 2007 taxes Treatment of underlying property. Need 2007 taxes   The determination of whether an individual's gain or loss from any property is ordinary or capital gain or loss is made without regard to the fact that the individual is actively engaged in dealing in or trading section 1256 contracts related to that property. Need 2007 taxes How To Report If you disposed of regulated futures or foreign currency contracts in 2013 (or had unrealized profit or loss on these contracts that were open at the end of 2012 or 2013), you should receive Form 1099-B, or substitute statement, from your broker. Need 2007 taxes Form 6781. Need 2007 taxes   Use Part I of Form 6781 to report your gains and losses from all section 1256 contracts that are open at the end of the year or that were closed out during the year. Need 2007 taxes This includes the amount shown in box 10 of Form 1099-B. Need 2007 taxes Then enter the net amount of these gains and losses on Schedule D (Form 1040), line 4 or line 11, as appropriate. Need 2007 taxes Include a copy of Form 6781 with your income tax return. Need 2007 taxes   If the Form 1099-B you receive includes a straddle or hedging transaction, defined later, it may be necessary to show certain adjustments on Form 6781. Need 2007 taxes Follow the Form 6781 instructions for completing Part I. Need 2007 taxes Loss carryback election. Need 2007 taxes   To carry back your loss under the election procedures described earlier, file Form 1040X or Form 1045, Application for Tentative Refund, for the year to which you are carrying the loss with an amended Form 6781 and an amended Schedule D (Form 1040) attached. Need 2007 taxes Follow the instructions for completing Form 6781 for the loss year to make this election. Need 2007 taxes Hedging Transactions The marked-to-market rules, described earlier, do not apply to hedging transactions. Need 2007 taxes A transaction is a hedging transaction if both of the following conditions are met. Need 2007 taxes You entered into the transaction in the normal course of your trade or business primarily to manage the risk of: Price changes or currency fluctuations on ordinary property you hold (or will hold), or Interest rate or price changes, or currency fluctuations, on your current or future borrowings or ordinary obligations. Need 2007 taxes You clearly identified the transaction as being a hedging transaction before the close of the day on which you entered into it. Need 2007 taxes This hedging transaction exception does not apply to transactions entered into by or for any syndicate. Need 2007 taxes A syndicate is a partnership, S corporation, or other entity (other than a regular corporation) that allocates more than 35% of its losses to limited partners or limited entrepreneurs. Need 2007 taxes A limited entrepreneur is a person who has an interest in an enterprise (but not as a limited partner) and who does not actively participate in its management. Need 2007 taxes However, an interest is not considered held by a limited partner or entrepreneur if the interest holder actively participates (or did so for at least 5 full years) in the management of the entity, or is the spouse, child (including a legally adopted child), grandchild, or parent of an individual who actively participates in the management of the entity. Need 2007 taxes Hedging loss limit. Need 2007 taxes   If you are a limited partner or entrepreneur in a syndicate, the amount of a hedging loss you can claim is limited. Need 2007 taxes A “hedging loss” is the amount by which the allowable deductions in a tax year that resulted from a hedging transaction (determined without regard to the limit) are more than the income received or accrued during the tax year from this transaction. Need 2007 taxes   Any hedging loss allocated to you for the tax year is limited to your taxable income for that year from the trade or business in which the hedging transaction occurred. Need 2007 taxes Ignore any hedging transaction items in determining this taxable income. Need 2007 taxes If you have a hedging loss that is disallowed because of this limit, you can carry it over to the next tax year as a deduction resulting from a hedging transaction. Need 2007 taxes   If the hedging transaction relates to property other than stock or securities, the limit on hedging losses applies if the limited partner or entrepreneur is an individual. Need 2007 taxes   The limit on hedging losses does not apply to any hedging loss to the extent that it is more than all your unrecognized gains from hedging transactions at the end of the tax year that are from the trade or business in which the hedging transaction occurred. Need 2007 taxes The term “unrecognized gain” has the same meaning as defined under Loss Deferral Rules in Straddles, later. Need 2007 taxes Sale of property used in a hedge. Need 2007 taxes   Once you identify personal property as being part of a hedging transaction, you must treat gain from its sale or exchange as ordinary income, not capital gain. Need 2007 taxes Self-Employment Income Gains and losses derived in the ordinary course of a commodity or option dealer's trading in section 1256 contracts and property related to these contracts are included in net earnings from self-employment. Need 2007 taxes See the Instructions for Schedule SE (Form 1040). Need 2007 taxes In addition, the rules relating to contributions to self-employment retirement plans apply. Need 2007 taxes For information on retirement plan contributions, see Publication 560 and Publication 590. Need 2007 taxes Basis of Investment Property Basis is a way of measuring your investment in property for tax purposes. Need 2007 taxes You must know the basis of your property to determine whether you have a gain or loss on its sale or other disposition. Need 2007 taxes Investment property you buy normally has an original basis equal to its cost. Need 2007 taxes If you get property in some way other than buying it, such as by gift or inheritance, its fair market value may be important in figuring the basis. Need 2007 taxes Cost Basis The basis of property you buy is usually its cost. Need 2007 taxes The cost is the amount you pay in cash, debt obligations, or other property or services. Need 2007 taxes Unstated interest. Need 2007 taxes   If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price, minus the amount considered to be unstated interest. Need 2007 taxes You generally have unstated interest if your interest rate is less than the applicable federal rate. Need 2007 taxes For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. Need 2007 taxes Basis Other Than Cost There are times when you must use a basis other than cost. Need 2007 taxes In these cases, you may need to know the property's fair market value or the adjusted basis of the previous owner. Need 2007 taxes Fair market value. Need 2007 taxes   This 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. Need 2007 taxes Sales of similar property, around the same date, may be helpful in figuring fair market value. Need 2007 taxes Property Received for Services If you receive investment property for services, you must include the property's fair market value in income. Need 2007 taxes The amount you include in income then becomes your basis in the property. Need 2007 taxes If the services were performed for a price that was agreed to beforehand, this price will be accepted as the fair market value of the property if there is no evidence to the contrary. Need 2007 taxes Restricted property. Need 2007 taxes   If you receive, as payment for services, property that is subject to certain restrictions, your basis in the property generally is its fair market value when it becomes substantially vested. Need 2007 taxes Property becomes substantially vested when it is transferable or is no longer subject to substantial risk of forfeiture, whichever happens first. Need 2007 taxes See Restricted Property in Publication 525 for more information. Need 2007 taxes Bargain purchases. Need 2007 taxes   If you buy investment property at less than fair market value, as payment for services, you must include the difference in income. Need 2007 taxes Your basis in the property is the price you pay plus the amount you include in income. Need 2007 taxes Property Received in Taxable Trades If you received investment property in trade for other property, the basis of the new property is its fair market value at the time of the trade unless you received the property in a nontaxable trade. Need 2007 taxes Example. Need 2007 taxes You trade A Company stock for B Company stock having a fair market value of $1,200. Need 2007 taxes If the adjusted basis of the A Company stock is less than $1,200, you have a taxable gain on the trade. Need 2007 taxes If the adjusted basis of the A Company stock is more than $1,200, you have a deductible loss on the trade. Need 2007 taxes The basis of your B Company stock is $1,200. Need 2007 taxes If you later sell the B Company stock for $1,300, you will have a gain of $100. Need 2007 taxes Property Received in Nontaxable Trades If you have a nontaxable trade, you do not recognize gain or loss until you dispose of the property you received in the trade. Need 2007 taxes See Nontaxable Trades , later. Need 2007 taxes The basis of property you received in a nontaxable or partly nontaxable trade is generally the same as the adjusted basis of the property you gave up. Need 2007 taxes Increase this amount by any cash you paid, additional costs you had, and any gain recognized. Need 2007 taxes Reduce this amount by any cash or unlike property you received, any loss recognized, and any liability of yours that was assumed or treated as assumed. Need 2007 taxes Property Received From Your Spouse If property is transferred to you from your spouse (or former spouse, if the transfer is incident to your divorce), your basis is the same as your spouse's or former spouse's adjusted basis just before the transfer. Need 2007 taxes See Transfers Between Spouses , later. Need 2007 taxes Recordkeeping. Need 2007 taxes The transferor must give you the records necessary to determine the adjusted basis and holding period of the property as of the date of the transfer. Need 2007 taxes Property Received as a Gift To figure your basis in property that you received as a gift, you must know its adjusted basis to the donor just before it was given to you, its fair market value at the time it was given to you, the amount of any gift tax paid on it, and the date it was given to you. Need 2007 taxes Fair market value less than donor's adjusted basis. Need 2007 taxes   If the fair market value of the property at the time of the gift was less than the donor's adjusted basis just before the gift, your basis for gain on its sale or other disposition is the same as the donor's adjusted basis plus or minus any required adjustments to basis during the period you hold the property. Need 2007 taxes Your basis for loss is its fair market value at the time of the gift plus or minus any required adjustments to basis during the period you hold the property. Need 2007 taxes No gain or loss. Need 2007 taxes   If you use the basis for figuring a gain and the result is a loss, and then use the basis for figuring a loss and the result is a gain, you will have neither a gain nor a loss. Need 2007 taxes Example. Need 2007 taxes You receive a gift of investment property having an adjusted basis of $10,000 at the time of the gift. Need 2007 taxes The fair market value at the time of the gift is $9,000. Need 2007 taxes You later sell the property for $9,500. Need 2007 taxes You have neither gain nor loss. Need 2007 taxes Your basis for figuring gain is $10,000, and $9,500 minus $10,000 results in a $500 loss. Need 2007 taxes Your basis for figuring loss is $9,000, and $9,500 minus $9,000 results in a $500 gain. Need 2007 taxes Fair market value equal to or more than donor's adjusted basis. Need 2007 taxes   If the fair market value of the property at the time of the gift was equal to or more than the donor's adjusted basis just before the gift, your basis for gain or loss on its sale or other disposition is the donor's adjusted basis plus or minus any required adjustments to basis during the period you hold the property. Need 2007 taxes Also, you may be allowed to add to the donor's adjusted basis all or part of any gift tax paid, depending on the date of the gift. Need 2007 taxes Gift received before 1977. Need 2007 taxes   If you received property as a gift before 1977, your basis in the property is the donor's adjusted basis increased by the total gift tax paid on the gift. Need 2007 taxes However, your basis cannot be more than the fair market value of the gift at the time it was given to you. Need 2007 taxes Example 1. Need 2007 taxes You were given XYZ Company stock in 1976. Need 2007 taxes At the time of the gift, the stock had a fair market value of $21,000. Need 2007 taxes The donor's adjusted basis was $20,000. Need 2007 taxes The donor paid a gift tax of $500 on the gift. Need 2007 taxes Your basis for gain or loss is $20,500, the donor's adjusted basis plus the amount of gift tax paid. Need 2007 taxes Example 2. Need 2007 taxes The facts are the same as in Example 1 except that the gift tax paid was $1,500. Need 2007 taxes Your basis is $21,000, the donor's adjusted basis plus the gift tax paid, but limited to the fair market value of the stock at the time of the gift. Need 2007 taxes Gift received after 1976. Need 2007 taxes   If you received property as a gift after 1976, your basis is the donor's adjusted basis increased by the part of the gift tax paid that was for the net increase in value of the gift. Need 2007 taxes You figure this part by multiplying the gift tax paid on the gift by a fraction. Need 2007 taxes The numerator (top part) is the net increase in value of the gift and the denominator (bottom part) is the amount of the gift. Need 2007 taxes   The net increase in value of the gift is the fair market value of the gift minus the donor's adjusted basis. Need 2007 taxes The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Need 2007 taxes Example. Need 2007 taxes In 2013, you received a gift of property from your mother. Need 2007 taxes At the time of the gift, the property had a fair market value of $101,000 and an adjusted basis to her of $40,000. Need 2007 taxes The amount of the gift for gift tax purposes was $87,000 ($101,000 minus the $14,000 annual exclusion), and your mother paid a gift tax of $21,000. Need 2007 taxes You figure your basis in the following way: Fair market value $101,000 Minus: Adjusted basis 40,000 Net increase in value of gift $61,000 Gift tax paid $21,000 Multiplied by . Need 2007 taxes 701 ($61,000 ÷ $87,000) . Need 2007 taxes 701 Gift tax due to net increase in value $14,721 Plus: Adjusted basis of property to  your mother 40,000 Your basis in the property $54,721 Part sale, part gift. Need 2007 taxes   If you get property in a transfer that is partly a sale and partly a gift, your basis is the larger of the amount you paid for the property or the transferor's adjusted basis in the property at the time of the transfer. Need 2007 taxes Add to that amount the amount of any gift tax paid on the gift, as described in the preceding discussion. Need 2007 taxes For figuring loss, your basis is limited to the property's fair market value at the time of the transfer. Need 2007 taxes Gift tax information. Need 2007 taxes   For information on gift tax, see Publication 950, Introduction to Estate and Gift Taxes. Need 2007 taxes For information on figuring the amount of gift tax to add to your basis, see Property Received as a Gift in Publication 551. Need 2007 taxes Property Received as Inheritance Before or after 2010. Need 2007 taxes   If you inherited property from a decedent who died before or after 2010, or who died in 2010 and the executor of the decedent's estate elected not to file Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent, your basis in that property generally is its fair market value (its appraised value on Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return) on: The date of the decedent's death, or The later alternate valuation date if the estate qualifies for, and elects to use, alternate valuation. Need 2007 taxes If no Form 706 was filed, use the appraised value on the date of death for state inheritance or transmission taxes. Need 2007 taxes For stocks and bonds, if no Form 706 was filed and there are no state inheritance or transmission taxes, see the Form 706 instructions for figuring the fair market value of the stocks and bonds on the date of the decedent's death. Need 2007 taxes Appreciated property you gave the decedent. Need 2007 taxes   Your basis in certain appreciated property that you inherited is the decedent's adjusted basis in the property immediately before death rather than its fair market value. Need 2007 taxes This applies to appreciated property that you or your spouse gave the decedent as a gift during the 1-year period ending on the date of death. Need 2007 taxes Appreciated property is any property whose fair market value on the day you gave it to the decedent was more than its adjusted basis. Need 2007 taxes More information. Need 2007 taxes   See Publication 551 for more information on the basis of inherited property, including community property, property held by a surviving tenant in a joint tenancy or tenancy by the entirety, a qualified joint interest, and a farm or closely held business. Need 2007 taxes Inherited in 2010 and executor elected to file Form 8939. Need 2007 taxes   If you inherited property from a decedent who died in 2010 and the executor made the election to file Form 8939, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to figure your basis. Need 2007 taxes Adjusted Basis Before you can figure any gain or loss on a sale, exchange, or other disposition of property or figure allowable depreciation, depletion, or amortization, you usually must make certain adjustments (increases and decreases) to the basis of the property. Need 2007 taxes The result of these adjustments to the basis is the adjusted basis. Need 2007 taxes Adjustments to the basis of stocks and bonds are explained in the following discussion. Need 2007 taxes For information about other adjustments to basis, see Publication 551. Need 2007 taxes Stocks and Bonds The basis of stocks or bonds you own generally is the purchase price plus the costs of purchase, such as commissions and recording or transfer fees. Need 2007 taxes If you acquired stock or bonds other than by purchase, your basis is usually determined by fair market value or the previous owner's adjusted basis as discussed earlier under Basis Other Than Cost . Need 2007 taxes The basis of stock must be adjusted for certain events that occur after purchase. Need 2007 taxes For example, if you receive more stock from nontaxable stock dividends or stock splits, you must reduce the basis of your original stock. Need 2007 taxes You must also reduce your basis when you receive nondividend distributions (discussed in chapter 1). Need 2007 taxes These distributions, up to the amount of your basis, are a nontaxable return of capital. Need 2007 taxes The IRS partners with companies that offer Form 8949 and Schedule D (Form 1040) software that can import trades from many brokerage firms and accounting software to help you keep track of your adjusted basis in securities. Need 2007 taxes To find out more, go to www. Need 2007 taxes irs. Need 2007 taxes gov/Filing/Filing-Options. Need 2007 taxes Identifying stock or bonds sold. Need 2007 taxes   If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stock or bonds. Need 2007 taxes Adequate identification. Need 2007 taxes   You will make an adequate identification if you show that certificates representing shares of stock from a lot that you bought on a certain date or for a certain price were delivered to your broker or other agent. Need 2007 taxes Broker holds stock. Need 2007 taxes   If you have left the stock certificates with your broker or other agent, you will make an adequate identification if you: Tell your broker or other agent the particular stock to be sold or transferred at the time of the sale or transfer, and Receive a written confirmation of this from your broker or other agent within a reasonable time. Need 2007 taxes  Stock identified this way is the stock sold or transferred even if stock certificates from a different lot are delivered to the broker or other agent. Need 2007 taxes Single stock certificate. Need 2007 taxes   If you bought stock in different lots at different times and you hold a single stock certificate for this stock, you will make an adequate identification if you: Tell your broker or other agent the particular stock to be sold or transferred when you deliver the certificate to your broker or other agent, and Receive a written confirmation of this from your broker or other agent within a reasonable time. Need 2007 taxes   If you sell part of the stock represented by a single certificate directly to the buyer instead of through a broker, you will make an adequate identification if you keep a written record of the particular stock that you intend to sell. Need 2007 taxes Bonds. Need 2007 taxes   These methods of identification also apply to bonds sold or transferred. Need 2007 taxes Identification not possible. Need 2007 taxes   If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. Need 2007 taxes Except for certain mutual fund shares, discussed later, you cannot use the average price per share to figure gain or loss on the sale of the shares. Need 2007 taxes Example. Need 2007 taxes You bought 100 shares of stock of XYZ Corporation in 1998 for $10 a share. Need 2007 taxes In January 1999 you bought another 200 shares for $11 a share. Need 2007 taxes In July 1999 you gave your son 50 shares. Need 2007 taxes In December 2001 you bought 100 shares for $9 a share. Need 2007 taxes In April 2013 you sold 130 shares. Need 2007 taxes You cannot identify the shares you disposed of, so you must use the stock you acquired first to figure the basis. Need 2007 taxes The shares of stock you gave your son had a basis of $500 (50 × $10). Need 2007 taxes You figure the basis of the 130 shares of stock you sold in 2013 as follows: 50 shares (50 × $10) balance of stock bought in 1998 $ 500 80 shares (80 × $11) stock bought in January 1999 880 Total basis of stock sold in 2013 $1,380 Shares in a mutual fund or REIT. Need 2007 taxes    The basis of shares in a mutual fund (or other regulated investment company) or a real estate investment trust (REIT) is generally figured in the same way as the basis of other stock and usually includes any commissions or load charges paid for the purchase. Need 2007 taxes Example. Need 2007 taxes You bought 100 shares of Fund A for $10 a share. Need 2007 taxes You paid a $50 commission to the broker for the purchase. Need 2007 taxes Your cost basis for each share is $10. Need 2007 taxes 50 ($1,050 ÷ 100). Need 2007 taxes Commissions and load charges. Need 2007 taxes   The fees and charges you pay to acquire or redeem shares of a mutual fund are not deductible. Need 2007 taxes You can usually add acquisition fees and charges to your cost of the shares and thereby increase your basis. Need 2007 taxes A fee paid to redeem the shares is usually a reduction in the redemption price (sales price). Need 2007 taxes   You cannot add your entire acquisition fee or load charge to the cost of the mutual fund shares acquired if all of the following conditions apply. Need 2007 taxes You get a reinvestment right because of the purchase of the shares or the payment of the fee or charge. Need 2007 taxes You dispose of the shares within 90 days of the purchase date. Need 2007 taxes You acquire new shares in the same mutual fund or another mutual fund, for which the fee or charge is reduced or waived because of the reinvestment right you got when you acquired the original shares. Need 2007 taxes   The amount of the original fee or charge in excess of the reduction in (3) is added to the cost of the original shares. Need 2007 taxes The rest of the original fee or charge is added to the cost basis of the new shares (unless all three conditions above also apply to the purchase of the new shares). Need 2007 taxes Choosing average basis for mutual fund shares. Need 2007 taxes   You can choose to use the average basis of mutual fund shares if you acquired the identical shares at various times and prices, or you acquired the shares after 2010 in connection with a dividend reinvestment plan, and left them on deposit in an account kept by a custodian or agent. Need 2007 taxes The methods you can use to figure average basis are explained later. Need 2007 taxes Undistributed capital gains. Need 2007 taxes   If you had to include in your income any undistributed capital gains of the mutual fund or REIT, increase your basis in the stock by the difference between the amount you included and the amount of tax paid for you by the fund or REIT. Need 2007 taxes See Undistributed capital gains of mutual funds and REITs under Capital Gain Distributions in chapter 1. Need 2007 taxes Reinvestment right. Need 2007 taxes   This is the right to acquire mutual fund shares in the same or another mutual fund without paying a fee or load charge, or by paying a reduced fee or load charge. Need 2007 taxes      The original cost basis of mutual fund shares you acquire by reinvesting your distributions is the amount of the distributions used to purchase each full or fractional share. Need 2007 taxes This rule applies even if the distribution is an exempt-interest dividend that you do not report as income. Need 2007 taxes Table 4-1. Need 2007 taxes This is a worksheet you can use to keep track of the adjusted basis of your mutual fund shares. Need 2007 taxes Enter the cost per share when you acquire new shares and any adjustments to their basis when the adjustment occurs. Need 2007 taxes This worksheet will help you figure the adjusted basis when you sell or redeem shares. Need 2007 taxes Table 4-1. Need 2007 taxes Mutual Fund Record Mutual Fund Acquired1 Adjustment to Basis Per Share Adjusted2 Basis Per Share Sold or redeemed Date Number of Shares Cost Per Share Date Number of Shares                                                                                                                                                                                                                                                                         1 Include share received from reinvestment of distributions. Need 2007 taxes 2 Cost plus or minus adjustments. Need 2007 taxes Automatic investment service. Need 2007 taxes   If you participate in an automatic investment service, your basis for each share of stock, including fractional shares, bought by the bank or other agent is the purchase price plus a share of the broker's commission. Need 2007 taxes Dividend reinvestment plans. Need 2007 taxes   If you participate in a dividend reinvestment plan and receive stock from the corporation at a discount, your basis is the full fair market value of the stock on the dividend payment date. Need 2007 taxes You must include the amount of the discount in your income. Need 2007 taxes Public utilities. Need 2007 taxes   If, before 1986, you excluded from income the value of stock you had received under a qualified public utility reinvestment plan, your basis in that stock is zero. Need 2007 taxes Stock dividends. Need 2007 taxes   Stock dividends are distributions made by a corporation of its own stock. Need 2007 taxes Generally, stock dividends are not taxable to you. Need 2007 taxes However, see Distributions of Stock and Stock Rights under Dividends and Other Distributions in chapter 1 for some exceptions. Need 2007 taxes If the stock dividends are not taxable, you must divide your basis for the old stock between the old and new stock. Need 2007 taxes New and old stock identical. Need 2007 taxes   If the new stock you received as a nontaxable dividend is identical to the old stock on which the dividend was declared, divide the adjusted basis of the old stock by the number of shares of old and new stock. Need 2007 taxes The result is your basis for each share of stock. Need 2007 taxes Example 1. Need 2007 taxes You owned one share of common stock that you bought for $45. Need 2007 taxes The corporation distributed two new shares of common stock for each share held. Need 2007 taxes You then had three shares of common stock. Need 2007 taxes Your basis in each share is $15 ($45 ÷ 3). Need 2007 taxes Example 2. Need 2007 taxes You owned two shares of common stock. Need 2007 taxes You bought one for $30 and the other for $45. Need 2007 taxes The corporation distributed two new shares of common stock for each share held. Need 2007 taxes You had six shares after the distribution—three with a basis of $10 each ($30 ÷ 3) and three with a basis of $15 each ($45 ÷ 3). Need 2007 taxes New and old stock not identical. Need 2007 taxes   If the new stock you received as a nontaxable dividend is not identical to the old stock on which it was declared, the basis of the new stock is calculated differently. Need 2007 taxes Divide the adjusted basis of the old stock between the old and the new stock in the ratio of the fair market value of each lot of stock to the total fair market value of both lots on the date of distribution of the new stock. Need 2007 taxes Example. Need 2007 taxes You bought a share of common stock for $100. Need 2007 taxes Later, the corporation distributed a share of preferred stock for each share of common stock held. Need 2007 taxes At the date of distribution, your common stock had a fair market value of $150 and the preferred stock had a fair market value of $50. Need 2007 taxes You figure the basis of the old and new stock by dividing your $100 basis between them. Need 2007 taxes The basis of your common stock is $75 (($150 ÷ $200) × $100), and the basis of the new preferred stock is $25 (($50 ÷ $200) × $100). Need 2007 taxes Stock bought at various times. Need 2007 taxes   Figure the basis of stock dividends received on stock you bought at various times and at different prices by allocating to each lot of stock the share of the stock dividends due to it. Need 2007 taxes Taxable stock dividends. Need 2007 taxes   If your stock dividend is taxable when you receive it, the basis of your new stock is its fair market value on the date of distribution. Need 2007 taxes The basis of your old stock does not change. Need 2007 taxes Stock splits. Need 2007 taxes   Figure the basis of stock splits in the same way as stock dividends if identical stock is distributed on the stock held. Need 2007 taxes Stock rights. Need 2007 taxes   A stock right is a right to acquire a corporation's stock. Need 2007 taxes It may be exercised, it may be sold if it has a market value, or it may expire. Need 2007 taxes Stock rights are rarely taxable when you receive them. Need 2007 taxes See Distributions of Stock and Stock Rights under Dividends and Other Distributions in chapter 1. Need 2007 taxes Taxable stock rights. Need 2007 taxes   If you receive stock rights that are taxable, the basis of the rights is their fair market value at the time of distribution. Need 2007 taxes The basis of the old stock does not change. Need 2007 taxes Nontaxable stock rights. Need 2007 taxes   If you receive nontaxable stock rights and allow them to expire, they have no basis. Need 2007 taxes   If you exercise or sell the nontaxable stock rights and if, at the time of distribution, the stock rights had a fair market value of 15% or more of the fair market value of the old stock, you must divide the adjusted basis of the old stock between the old stock and the stock rights. Need 2007 taxes Use a ratio of the fair market value of each to the total fair market value of both at the time of distribution. Need 2007 taxes   If the fair market value of the stock rights was less than 15%, their basis is zero. Need 2007 taxes However, you can choose to divide the basis of the old stock between the old stock and the stock rights. Need 2007 taxes To make the choice, attach a statement to your return for the year in which you received the rights, stating that you choose to divide the basis of the stock. Need 2007 taxes Basis of new stock. Need 2007 taxes   If you exercise the stock rights, the basis of the new stock is its cost plus the basis of the stock rights exercised. Need 2007 taxes Example. Need 2007 taxes You own 100 shares of ABC Company stock, which cost you $22 per share. Need 2007 taxes The ABC Company gave you 10 nontaxable stock rights that would allow you to buy 10 more shares at $26 per share. Need 2007 taxes At the time the stock rights were distributed, the stock had a market value of $30, not including the stock rights. Need 2007 taxes Each stock right had a market value of $3. Need 2007 taxes The market value of the stock rights was less than 15% of the market value of the stock, but you chose to divide the basis of your stock between the stock and the rights. Need 2007 taxes You figure the basis of the rights and the basis of the old stock as follows: 100 shares × $22 = $2,200, basis of old stock   100 shares × $30 = $3,000, market value of old stock   10 rights × $3 = $30, market value of rights   ($3,000 ÷ $3,030) × $2,200 = $2,178. Need 2007 taxes 22, new basis of old stock   ($30 ÷ $3,030) × $2,200 = $21. Need 2007 taxes 78, basis of rights   If you sell the rights, the basis for figuring gain or loss is $2. Need 2007 taxes 18 ($21. Need 2007 taxes 78 ÷ 10) per right. Need 2007 taxes If you exercise the rights, the basis of the stock you acquire is the price you pay ($26) plus the basis of the right exercised ($2. Need 2007 taxes 18), or $28. Need 2007 taxes 18 per share. Need 2007 taxes The remaining basis of the old stock is $21. Need 2007 taxes 78 per share. Need 2007 taxes Investment property received in liquidation. Need 2007 taxes   In general, if you receive investment property as a distribution in partial or complete liquidation of a corporation and if you recognize gain or loss when you acquire the property, your basis in the property is its fair market value at the time of the distribution. Need 2007 taxes S corporation stock. Need 2007 taxes   You must increase your basis in stock of an S corporation by your pro rata share of the following items. Need 2007 taxes All income items of the S corporation, including tax-exempt income, that are separately stated and passed through to you as a shareholder. Need 2007 taxes The nonseparately stated income of the S corporation. Need 2007 taxes The amount of the deduction for depletion (other than oil and gas depletion) that is more than the basis of the property being depleted. Need 2007 taxes   You must decrease your basis in stock of an S corporation by your pro rata share of the following items. Need 2007 taxes Distributions by the S corporation that were not included in your income. Need 2007 taxes All loss and deduction items of the S corporation that are separately stated and passed through to you. Need 2007 taxes Any nonseparately stated loss of the S corporation. Need 2007 taxes Any expense of the S corporation that is not deductible in figuring its taxable income and not properly chargeable to a capital account. Need 2007 taxes The amount of your deduction for depletion of oil and gas wells to the extent the deduction is not more than your share of the adjusted basis of the wells. Need 2007 taxes However, your basis in the stock cannot be reduced below zero. Need 2007 taxes Specialized small business investment company stock or partnership interest. Need 2007 taxes   If you bought this stock or interest as replacement property for publicly traded securities you sold at a gain, you must reduce the basis of the stock or interest by the amount of any postponed gain on that sale. Need 2007 taxes See Rollover of Gain From Publicly Traded Securities , later. Need 2007 taxes Qualified small business stock. Need 2007 taxes   If you bought this stock as replacement property for other qualified small business stock you sold at a gain, you must reduce the basis of this replacement stock by the amount of any postponed gain on the earlier sale. Need 2007 taxes See Gains on Qualified Small Business Stock , later. Need 2007 taxes Short sales. Need 2007 taxes   If you cannot deduct payments you make to a lender in lieu of dividends on stock used in a short sale, the amount you pay to the lender is a capital expense, and you must add it to the basis of the stock used to close the short sale. Need 2007 taxes   See Payments in lieu of dividends , later, for information about deducting payments in lieu of dividends. Need 2007 taxes Premiums on bonds. Need 2007 taxes   If you buy a bond at a premium, the premium is treated as part of your basis in the bond. Need 2007 taxes If you choose to amortize the premium paid on a taxable bond, you must reduce the basis of the bond by the amortized part of the premium each year over the life of the bond. Need 2007 taxes   Although you cannot deduct the premium on a tax-exempt bond, you must amortize it to determine your adjusted basis in the bond. Need 2007 taxes You must reduce the basis of the bond by the premium you amortized for the period you held the bond. Need 2007 taxes   See Bond Premium Amortization in chapter 3 for more information. Need 2007 taxes Market discount on bonds. Need 2007 taxes   If you include market discount on a bond in income currently, increase the basis of your bond by the amount of market discount you include in your income. Need 2007 taxes See Market Discount Bonds in chapter 1 for more information. Need 2007 taxes Bonds purchased at par value. Need 2007 taxes   A bond purchased at par value (face amount) has no premium or discount. Need 2007 taxes When you sell or otherwise dispose of the bond, you figure the gain or loss by comparing the bond proceeds to the purchase price of the bond. Need 2007 taxes Example. Need 2007 taxes You purchased a bond several years ago for its par value of $10,000. Need 2007 taxes You sold the bond this year for $10,100. Need 2007 taxes You have a gain of $100. Need 2007 taxes However, if you had sold the bond for $9,900, you would have a loss of $100. Need 2007 taxes Acquisition discount on short-term obligations. Need 2007 taxes   If you include acquisition discount on a short-term obligation in your income currently, increase the basis of the obligation by the amount of acquisition discount you include in your income. Need 2007 taxes See Discount on Short-Term Obligations in chapter 1 for more information. Need 2007 taxes Original issue discount (OID) on debt instruments. Need 2007 taxes   Increase the basis of a debt instrument by the OID you include in your income. Need 2007 taxes See Original Issue Discount (OID) in chapter 1. Need 2007 taxes Discounted tax-exempt obligations. Need 2007 taxes   OID on tax-exempt obligations is generally not taxable. Need 2007 taxes However, when you dispose of a tax-exempt obligation issued after September 3, 1982, that you acquired after March 1, 1984, you must accrue OID on the obligation to determine its adjusted basis. Need 2007 taxes The accrued OID is added to the basis of the obligation to determine your gain or loss. Need 2007 taxes   For information on determining OID on a long-term obligation, see Debt Instruments Issued After July 1, 1982, and Before 1985 or Debt Instruments Issued After 1984, whichever applies, in Publication 1212 under Figuring OID on Long-Term Debt Instruments. Need 2007 taxes   If the tax-exempt obligation has a maturity of 1 year or less, accrue OID under the rules for acquisition discount on short-term obligations. Need 2007 taxes See Discount on Short-Term Obligations in chapter 1. Need 2007 taxes Stripped tax-exempt obligation. Need 2007 taxes   If you acquired a stripped tax-exempt bond or coupon after October 22, 1986, you must accrue OID on it to determine its adjusted basis when you dispose of it. Need 2007 taxes For stripped tax-exempt bonds or coupons acquired after June 10, 1987, part of this OID may be taxable. Need 2007 taxes You accrue the OID on these obligations in the manner described in chapter 1 under Stripped Bonds and Coupons . Need 2007 taxes   Increase your basis in the stripped tax-exempt bond or coupon by the taxable and nontaxable accrued OID. Need 2007 taxes Also increase your basis by the interest that accrued (but was not paid and was not previously reflected in your basis) before the date you sold the bond or coupon. Need 2007 taxes In addition, for bonds acquired after June 10, 1987, add to your basis any accrued market discount not previously reflected in basis. Need 2007 taxes 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. Need 2007 taxes Gain. Need 2007 taxes   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. Need 2007 taxes Loss. Need 2007 taxes   If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. Need 2007 taxes Amount realized. Need 2007 taxes   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). Need 2007 taxes Amount realized includes the money you receive plus the fair market value of any property or services you receive. Need 2007 taxes   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. Need 2007 taxes For more information, see Publication 537. Need 2007 taxes   If a buyer of property issues a debt instrument to the seller of the property, the amount realized is determined by reference to the issue price of the debt instrument, which may or may not be the fair market value of the debt instrument. Need 2007 taxes See Regulations section 1. Need 2007 taxes 1001-1(g). Need 2007 taxes However, if the debt instrument was previously issued by a third party (one not part of the sale transaction), the fair market value of the debt instrument is used to determine the amount realized. Need 2007 taxes Fair market value. Need 2007 taxes   Fair market value is the price at which 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. Need 2007 taxes Example. Need 2007 taxes 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. Need 2007 taxes Your gain is $3,000 ($10,000 – $7,000). Need 2007 taxes If you also receive a note for $6,000 that has an issue price of $6,000, your gain is $9,000 ($10,000 + $6,000 – $7,000). Need 2007 taxes Debt paid off. Need 2007 taxes   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. Need 2007 taxes This is true even if neither you nor the buyer is personally liable for the debt. Need 2007 taxes 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. Need 2007 taxes Example. Need 2007 taxes You sell stock that you had pledged as security for a bank loan of $8,000. Need 2007 taxes Your basis in the stock is $6,000. Need 2007 taxes The buyer pays off your bank loan and pays you $20,000 in cash. Need 2007 taxes The amount realized is $28,000 ($20,000 + $8,000). Need 2007 taxes Your gain is $22,000 ($28,000 – $6,000). Need 2007 taxes Payment of cash. Need 2007 taxes   If you trade property and cash for other property, the amount you realize is the fair market value of the property you receive. Need 2007 taxes Determine your gain or loss by subtracting the cash you pay and the adjusted basis of the property you trade in from the amount you realize. Need 2007 taxes If the result is a positive number, it is a gain. Need 2007 taxes If the result is a negative number, it is a loss. Need 2007 taxes No gain or loss. Need 2007 taxes   You may have to use a basis for figuring gain that is different from the basis used for figuring loss. Need 2007 taxes In this case, you may have neither a gain nor a loss. Need 2007 taxes See No gain or loss in the discussion on the basis of property you received as a gift under Basis Other Than Cost, earlier. Need 2007 taxes Special Rules for Mutual Funds To figure your gain or loss when you dispose of mutual fund shares, you need to determine which shares were sold and the basis of those shares. Need 2007 taxes If your shares in a mutual fund were acquired all on the same day and for the same price, figuring their basis is not difficu